Section 19 of CGST Act 2017: Taking ITC in respect of inputs and capital goods sent for job work

What does Section 19 say?

Section 19 of the CGST ACT 2017 talks about the availability of input tax credit by the principal in respect of goods sent to the job worker. Job work is a business mechanism where the job worker works under the direction of principal and inputs are sent by the principal.

Now let us understand the GST Law as described below:

(1) The principal shall, subject to such conditions and restrictions as may be prescribed, be allowed input tax credit on inputs sent to a job worker for job work.

(2) Notwithstanding anything contained in clause (b) of sub-section (2) of section 16, the principal shall be entitled to take credit of input tax on inputs even if the inputs are directly sent to a job worker for job work without being first brought to his place of business.

(3) Where the inputs sent for job work are not received back by the principal after completion of job work or otherwise or are not supplied from the place of business of the job worker in accordance with clause (a) or clause (b) of sub-section (1) of section 143 within one year of being sent out, it shall be deemed that such inputs had been supplied by the principal to the job worker on the day when the said inputs were sent out: Provided that where the inputs are sent directly to a job worker, the period of one year shall be counted from the date of receipt of inputs by the jobworker.

(4) The principal shall, subject to such conditions and restrictions as may be prescribed, be allowed input tax credit on capital goods sent to a job worker for job work.

(5) Notwithstanding anything contained in clause (b) of sub-section (2) of section 16, the principal shall be entitled to take credit of input tax on capital goods even if the capital goods are directly sent to a job worker for job work without being first brought to his place of business.

(6) Where the capital goods sent for job work are not received back by the principal within a period of three years of being sent out, it shall be deemed that such capital goods had been supplied by the principal to the job worker on the day when the said capital goods were sent out: Provided that where the capital goods are sent directly to a job worker, the period of three years shall be counted from the date of receipt of capital goods by the job worker.

(7) Nothing contained in sub-section (3) or sub-section (6) shall apply to moulds and dies, jigs and fixtures, or tools sent out to a job worker for job work.Explanation.––For the purpose of this section, ―principal‖ means the person referred to in section 143.

FAQs ON INPUT TAX CREDIT IN CASE OF JOBWORKER AND PRINCIPAL

Q1 Definition of Principal?

Ans Principal means a person on whose behalf an agent carries on the business of supply or receipt of goods or services or both. As per section 143 of the CGST ACT 2017 Principal means a person who sends the inputs or capital goods to the job worker without any payment of tax for job work.

Q2 Definition of Job work?

Ans Job work means any treatment or process undertaken by a person on goods belonging to another registered person and the expression job worker shall be construed accordingly.

Q3 Definition of Job worker?

Ans Job worker means a person who carries out the Job work process on the goods belonging to another registered person.

Q4 Whether Registration under GST is mandatory for Job worker?

Ans No unless turnover exceeds the permissible limit required for registration under GST.

Q5 Whether Registration under GST is mandatory for Principal?

Ans Yes as per section 143 the word registered person has been used.

Q6 Whether the ITC on the Goods can be taken by Principal where goods are being directly sent to job worker?

Ans Yes the ITC can be taken as per section 19(2).

Q7 When the Goods be sent to job worker directly treated as supplied goods?

Ans Where the Goods not be sent back within one year from the date of input being sent or where the goods send directly then the date of receipt of goods.

Q8 Can principal sent the goods directly to the place of business of job worker?

Ans Only when the principal declares the place of business of job worker as additional place of business under his GST registration.

Q9 What is the time limit for Capital goods to be sent by Job worker to the principal?

Ans Three Years.

Q10 Can Intermediate goods be sent for job work?

Ans Yes the Input includes the intermediate goods arising from any treatment or process carried out on inputs by the principal or job worker .

Q11 What is the treatment of waste or scrap generated during job work?

Ans Such Waste or Scrap shall by supplied by job worker directly from his place of business upon payment of tax, where the job worker is not registered then the principal will do.

Q12 On which Goods time period of One or Three Years not applicable?

Ans Moulds, Dies, Jigs and Fixtures or Tools.

Can a Job worker uses his own material in job work

Job workers can use their own material in the job work and recover charges from the principal. Such usage of material will not amount to manufacture of different goods.

Judicial Decision

1. Processing of natural gas and other inputs supplied by customers into manufactured industrial gas is a job work. (RE PRODAIR AIR PRODUCTS INDIA (P) LTD, AAR-KERALA).
2. Repairing and Servicing of transformers owner by another person is not job work.(ALOK BHANUKA,AAR-WEST BENGAL).
3. Consumables can be sent for Job work and need not to be returned.(RATAN PROJECTS & ENGINEERING CO.(P) LTD, AAR-WEST BENGAL).

Disclaimer: The above-said article is the author's viewpoint only, please refer to respective sections, rules framed under GST.