29 March 2019 Update: GSTN brings relief to companies engaged in Job Work. The due date for filing ITC-04 for period from July 2017 to March 2019 hs been extended till the 30th June 2019. Notification
With the application and evolution of GST in India, every industry contributing to the economy is undergoing a massive change in how it works. One such industry is Job Work. While Job Work is not manufacturing in the sense that goods do not belong to the registered person who is performing job work on the goods, the GST treatment for the industry is also different from that of manufacturing.
Job-work constitutes a major industry in Indian economy and hence needs special attention. It includes outsourced activities that may or may not culminate into manufacture and can be simply stated as the processing of goods supplied by the principal to a job worker.
The job work sector primarily revolves around the following three elements:
While the job worker processes or treats the goods, the ownership of the goods sent for job work does not transfer to the job-worker but rests with the principal manufacturer. Which also implies that the job worker is only required to carry out the process specified by the principal manufacturer on the goods supplied by him and it is principal manufacturer’s responsibility to keep and maintain proper accounts of inputs or capital goods sent for job work.
Documents required to be Issued under Job Work Procedure
In order to send inputs or semi-finished goods, without payment of duty / without reversal of input tax credit to a job worker, the principal manufacturer has to prepare a ‘Delivery Challan’ in the prescribed format.
This Challan should contain:
Details of the challans must be reflected in Form GSTR-1 in document issued section.
Form ITC - 04
The details of the delivery challans must also be filed through Form GST ITC – 04 and should be submitted on quarterly basis by 25th day of the month succeeding the quarter. Under form GST ITC – 04, following details are to be provided:
E-way Bill for Job Work
As per GST provisions on E-way bill, E-way bill must be generated by every registered person who causes movement of goods of consignment with a value exceeding Rs. 50,000, even if the movement is for reasons other than for supply. Hence even in case of movement of goods for job work, the generation of e-way bill becomes mandatory.
In case of interstate movement of goods, e-way bill would be generated either by the principal manufacturer or by the registered job worker, irrespective of the value of the consignment. However, if a job worker is unregistered, then it is the responsibility of the Principal manufacturer to generate E-way bill.
Input Tax Credit for Material Supplied to Job Worker
The principal manufacturer will be allowed to take credit of tax paid on the purchase of goods sent on job work under the following conditions:
In case goods are not received within the period mentioned above, such goods will be treated as supply from the effective date and tax will be payable by the prinicpal.
Return of Goods to Principal
Return of goods to principal is a very important aspect under job work. Inputs and/or capital goods sent to a job worker are required to be returned to the principal within 1 year (in case of inputs) and 3 years (in case of capital goods) from the date of sending such goods to the job worker.
Provision of return of goods is not applicable in case of moulds and dies, jigs and fixtures or tools supplied by the principal manufacturer to job worker. However, when such moulds and dies, jigs and fixtures or tools are disposed off as scrap by the job worker, GST would be payable by the job worker (if job worker has GST registration), otherwise GST on sale of scrap would be payable by the principal manufacturer.
When input and/or capital goods are not returned within the specified time, such goods will be deemed as supply from effective date. The same is required to be disclosed in Form GSTR-1 and the principal manufacturer is liable to pay the tax along with applicable interest.
Waste Generated by Job Worker
Waste generated at the premises of the job-worker, and if said job worker is registered under GST and if he directly clears this waste from his place of business then in such case GST is payable by job-worker. However, if job-worker is not registered then such waste may be cleared by the principal manufacturer and GST endured would be payable by the principal manufacturer.
Can the principal sell directly from the job worker’s place?
The principal manufacturer can supply the goods from the place of business of a job worker, only if he (the principal) declares such place of business as his additional place of business.
This rule does not apply for the following-
(i) The job worker is registered
(ii) The principal supplies goods which are specifically notified by the Commissioner to be allowed to sell directly from job worker’s place.
Key points to Note
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