As per Circular No. 38/12/2018 issued as on dated 26-03-2018 in that mention Procedures to be followed for sending goods for job work and the related compliance requirements for the principal and the job worker.
Job Work:
As per Section 2(68) of the CGST Act, 2017, 'Job work' means any treatment or process undertaken by a person on goods belonging to another registered person.
The registered person on whose goods (inputs or capital goods) job work is performed is called Principal as per section 143 of CGST Act.
The registered principal may without payment of tax send inputs or capital goods to a Job worker for job work and if required from there subsequently to another job worker. Once completion of the job work principal shall either bring back the goods to the place of business or supply the same directly form the place of business/premises of the Job worker. If Inputs within 1 year and Capital goods within 3 years.
Responsibility of keeping proper accounts of inputs and capital goods sent for job work lies with the principal. If Inputs and capital goods are not written back within the period than it shall be deemed to be supply by the principal on the day when the said inputs/capital goods were sent out by principal. Responsibility for sending the goods for job work as well as bringing them back or supplying them has been on the principal.
Job worker in addition to the goods received from the principal, can use his own goods for providing the services of job work.
Section 143 of the CGST Act are applicable to a registered person but it is optional for him to avail benefit or not for registration. Only a registered person who can send the goods for job work are registered.
Job worker is required to obtain registration only if his aggregate turnover to be computed on all India basis in a financial year exceeds the limit (Rs. 20 lakh or Rs. 10 lakh in case of special category states except Jammu & Kashmir) in case both the principal and the job worker are located in the same state.
If Principal and the job worker are located in different states which provides for compulsory registration of suppliers making any inter state supply of services. However, exemption from registration has been granted in case of aggregate turnover of the inter state supply of taxable services does not exceeds Rs. 20 lakh or Rs. 10 lakhs in a financial year as per vide notification no. 10/2017 dated 13.10.2017
Job worker is required to obtain registration only in cases where his aggregate turnover to be computed on all India basis in financial year exceeds the limit regardless of whether the principal and the job worker are located in the same state or in different states.
Supply of goods by the principal from the place of business/ premises of the Job worker to its end customer will be regarded as supply by the Principal and not by the job worker as per section 143(1) (a) of CGST Act.
Section 143 of the CGST Act provides that the principal may send or bring back inputs/capital goods for job work without payment of tax under intimation to the proper officer and subject to the conditions.
Rule 45 of the CGST Rules provides that Inputs, Semi finished goods or capital goods shall be sent to the job worker under the cover of a challan issued by the principal including where such goods are sent directly to job worker. The challan issued by the principal to the job worker shall contain the details specified in rule 55. Rule has been amended vide notification no. 14/2018 – central tax dated 23-03-2018 to provide that a job worker may endorse the challan issued by the principal. The principal is also required to file FORM GST ITC – 04 every quarter stating the said details.
1. Where goods are sent by principal to only one job worker :
- The principal shall issue prepare in triplicate challan in terms of rules 45 and 55 of CGST Rules for sending the goods to a job worker.
- 2 copy of challan may be sent to the job worker along with the goods.
- The job worker should send one copy of the said endorsed challan along with the goods, while returning them to the principal.
- FORM GST ITC – 04 will serve as the intimation as under section 143 of the CGST Act 2017.
2. Where goods are send from one Job worker to another Job worker:
- Goods may move under the cover of challan issued either by the principal or the job worker.
- Challan issued by the principal may be endorsed by the job worker sending the goods to another job worker indicating therein the quantity and description of goods being sent.
3. Where the goods are returned to the principal by the Job worker: The Job worker should send one copy of the challan received by him from the principal while returning the goods to the principal after carrying out of Job work.
4. Where the goods are send directly by the supplier to the job worker:
- Goods may move from the place of business of the supplier to the place of business/premises of job worker with a copy of invoice issued by the supplier in the name of buyer (principal) where in job workers name and address should also be mentioned as the consignee, in terms of rule 46(a) of CGST Rules.
- The Buyer (i.e. principal) shall issue the challan under rule 45 of the CGST Rules and send the same to the job worker.
- In case of Import of goods by the principal which are then supplied directly from the custom station of import, the goods may move from the customs station of import to the place of business/ premises of the job worker with a copy of Bill of Entry and principal shall issue the challan under rule 45 of CGST Rules and send the same to the job worker directly.
5. Where goods are returned in piecemeal by the job worker:
- Goods after carrying out the job work, are send in piecemeal quantities by a job worker to another job worker or to the principal, the challan issued originally by principal cannot be endorsed and a fresh challan is required to be issued by the job worker.
6. Submission of Intimation:
- Rule 45(3) of the CGST Rules provides that the principal is required to furnish the details of challans in respect of goods send to a job worker or received from a job worker or sent from one job worker or received from a job worker or sent from one job worker to another job worker during a quarter in FORM GST ITC – 04 by the 25th day of the month succeeding the quarter or which such period may be extended by the Commissioner.
- It is clarified that it is the responsibility of the principal to include the details of all challans relating to goods send by him one or more job worker or from one job worker to another and its return therefrom.
As per Rule 138 of CGST Rules, an e-way bill is required to be generated by every registered person who causes movement of goods of consignment value exceeding value Rs. 50,000 in case of movement of goods for job work.
As per Rule 138(1) of CGST Rules provides that e-way bill shall be generated either by the principal or by a registered job worker irrespective of the value of the consignment, where goods are sent by a principal located in one state to a job worker located in any other state.
As per Rule 138(3) of the CGST Rules, where the goods are supplied by an unregistered supplier to a registered recipient, the movement shall be said to be caused by such recipient if the recipient is known at the time of commencement of movement of the goods. In this case, e-way bill shall be generated by the principal wherever required in case the job worker is an unregistered.
Time of Supply are contained in Sections 12 and 13 of CGST Act
Value of Supply are contained in Section 15 of CGST Act
Place of Supply contained in Section 10 of IGST Act
Issuance of an Invoice are contained in section 31 of CGST Act and Rule 46 of CGST Rules
Supply of Job work Services:
Job worker as supplier of services is liable to pay GST if he is liable to be registered. He issues an invoice at the time of supply of the services. Value of service mention in section 15 of CGST act and would include not only the service charges but also the value of any goods or services used by him for supply the job work services, if recovered form the principal.
Value of moulds and dies, jigs and fixtures or tools which have been provided by the principal to the Job worker and have been used by later for providing job worker services would be included in the value of job work services?
Ans: As per section 15(2)(b) of the CGST Act provides that any amount that the supplier is liable to pay in relation to the supply but which has been incurred by the recipient will form part of the valuation for that particular supply provided it has not been included in the price for such supply. Value of such moulds and dies, jigs and fixtures or tools may not be included in the value of job work services provided by the job worker.
IF job worker is not registered, GST would be payable by the Principal on reverse charges basis as per section 9(4) of CGST Act. However, this provision abeyance till June 2018.
Supply of goods by the principal from the place of business/ premises of job worker:
Section 143 of CGST Act provides that the principal may supply from the place of business/ premises of job worker, inputs after completion of job work or capital goods within 1 year or 3 years respectively of their being sent out on payment of tax within India or with or without payment of tax for exports. This facility is available to the principal only if he declares the job workers place of business/premises as his additional place of business or if the job worker is registered.
If supply is made by the principal than time, value and place of supply have to be determined in the hands of principal irrespective of the location of job workers place of business/ premises. Invoice would have to be issued by the principal.
In case of exports directly from job workers place of business/ premises, the LUT or bond may be shall be executed by the principal.
Input Tax Credit (ITC)
For Principal (Manufacturer):
Input Tax Credit would be available to the principal irrespective of the fact whether the inputs or capital goods are received by the principal and then send to the job worker for processing, etc or whether they are directly received at the job workers place of business/premises, without being brought to the premises of the principal.
For Job Worker:
Job worker is also eligible to avail ITC credit on inputs used by him in supplying the job work services if he is registered.
The author can also be reached at dharmesh@equalsphereindia.com, dharmeshmistry100@gmail.com
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