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GST

Job work under GST

Prior to Circular No. 38/12/2018 dated 26th March, 2018, there were so many confusions/doubts regarding  Job work under GST, but the recent circular came up with clarities which were raising in every head.

Explanation of the related provisions, compliances under job work under GST.

First of all we need to understand the meaning of Job work. Job work is a process or treatment which is undertaken by a person on goods (inputs or capital goods) and those goods actually belongs to some other registered person. From this definition, two things can be concluded:

  1. There are two parties involved. The one who undertakes the process/treatment of goods called the “job worker” and other who actually is the goods called “principal”.
  2. The principal has to be registered under GST.

Let’s understand further with the help of FAQs:

  1. Whether the goods which are being sent to the job worker by the principal, is to be treated as supply or not?

Answer. The Principal may send goods to job worker without the payment of tax, but on the completion of the Job work, the principal shall either bring back the goods to his place of business or supply (including export) the same directly from the place of business/premises of the job worker within:
One year- in case of inputs
Three years- in case of capital goods (except moulds and dies, jigs and fixtures or tools)
Though sending goods for job work is not a supply as such, but it acquires the character of supply only when the inputs/capital goods sent for job work are neither received back  by the principal nor supplied further by the principal from the place of business / premises of the job worker within one/three years of being sent out.

T he responsibility for sending the goods for job work as well as bringing them back or supplying them has been cast on the principal.

In a layman language, if on the completion of job work, the goods are not returned back to principal within stipulated time frame (1 year/3 years), then it shall be treated as supply.

2. Whether Principal is required to be registered or not??

Answer. It is only a registered person who can send the goods for job work. Hence, the Principal is required to be registered.

3. Whether Job worker is required to obtain registration under GST??

Answer. There are following two cases:

Cases

Registration is required if

Where both the parties i.e. principal and Job worker are located in the same state

If the aggregate turnover (to be computed on all India basis) in a financial year exceeds the specified threshold limit ( i.e. Rs. 20 Lakhs or Rs. 10 Lakhs in case of special category states except J&K)

Where both the parties i.e. principal and job worker are located in different state

As per clause (i) of section 24 of CGST Act, it comes under compulsory registration. However exemption from registration has been granted in case the aggregate turnover of the inter state supply of taxable services does not exceed Rs. 20 lakhs or 10 lakhs in case of special category states except Jammu & Kashmir in a financial year.

In nutshell, from above discussion, it is clarified that a job worker has to be compulsorily registered, where his aggregate turnover, in a financial year exceeds the threshold limit (20lakhs/ 10lakhs)
Legal Provisions:
Issuance/Endorsement of challan- Principal may send and/or bring back inputs/capital goods for job work without payment of tax, under intimation to the proper officer and subject to the prescribed conditions, under the cover of a challan issued by the principal, containing the details. This rule has been amended and now a job worker may endorse the challan issued by the principal.
Furnishing Form GST ITC-04- The principal is also required to file form GST ITC-04 every quarter.
Further clarification on issuance of challan, furnishing of intimation and other documentary requirements:

Cases

Requirements- issuance of challan, furnishing of intimation and other documentary requirements

Where goods are sent by principal to only one job worker

3 copies of challan shall be prepared.
Bifurcation of these copies is:
1 copy- with principal only,
2 copies – sent to job worker, from which 1 copy should be sent to principal while returning.
The FORM GST ITC-04 will serve as the intimation.

Where goods are sent from one job worker to another job worker

The 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.

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 the job work.

Where goods are returned in piecemeal by the job worker

In case the goods after carrying out the job work, are sent in piecemeal quantities by a job worker to another job worker or to the principal, the challan issued originally by the principal cannot be endorsed and a fresh challan is required to be issued by the job worker.
FORM GST ITC-04 to be submitted by the 25th day of the month succeeding the quarter or within such period as may be extended by the Commissioner.