GST- Job work

Job work

Section 2(61) defines Job work as an undertaking of any treatment or process by a person on goods belonging to another registered taxable person.

Since the definition of job work implies that the goods should be belonging to another registered taxable person, goods sent by an unregistered person or non-taxable person shall not qualify as goods sent for job work.

For instance, a person whose turnover is less than the threshold limit of ten lakh rupees or a person who is engaged exclusively in the supply of non –taxable goods shall come under the category of other than registered taxable person.

Liability to pay tax on supply of goods

In the GST regime, the taxable activity is not manufacture but it is the supply of goods.

On supply of the goods, the liability to pay the tax arises with the principal. For example, if the principal sends the goods to job worker and the principal supplies the goods to the customer from the premises of the job worker, the liability to discharge the GST liability arises with the principal.
The principal can send the goods to the job worker without payment of tax.

The principal can’t supply the goods from the premises of the job worker, unless he declares the place of business of the job worker as his additional place of business.                        

However, a principal can supply can goods from the place of business of job worker, even without a declaring the place of business of the job worker as additional place of business if:

·   the job worker is registered under section 23

·   the goods the principal supplies are notified by the commissioner

Availing of credit

Section 20 of the act specifies that the principal can take credit of the input goods sent to job worker on the condition that the goods shall be received back within one year of their being sent out.

Similarly with respect to capital goods, the principal can take credit of capital goods other than moulds and dies, jigs and fixtures, or tools on the condition that the goods shall be received back within three years of their being sent out.

If the goods are not received within the specified time period, it shall be deemed that the goods are supplied to the job worker on the date of their being sent out i.e., the principal shall pay tax along with interest for the period of one year or three years, as the case may be.

Whenever the goods are brought back to the place of business of principal after the period of one year or three years, the principal can take credit of the tax along with interest paid earlier.

Transitional provision

The goods already removed and lying with the job worker should be returned to the principal within six months from the appointed day. If sufficient cause is shown, the period can be extended by another two months by the competent authority.

If not returned the input tax credit shall be recovered from the manufacturer.

The job worker and the manufacturer shall furnish details of inputs lying in stock on the appointed day