Job Work under GST | All about Job Work | Complete Guide to Job Work under GST | Digi Accounto
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Friends, you definitely heard about the process of job work. But in practical life of an accountant and businessman, the compliances of the job work process, are not so easy. It involves, preparation of various documents, compliance of pre-set procedures, management of prescribed time limits etc.
So, friends today we will discuss the topic “Job work under GST”, or what would be “the impact of Goods and Service Tax on Job Work. We will try to provide you, “Complete guide to Job Work under GST in India.
There are so many businesses like engineering, textiles, jewelry etc, who requires to obtain outsider’s services to make their product final or ready to sell into the market.
The business who used these services called “principal”,
The outsider, who performs such services over the goods belonging to another person, called “job worker” and
The services, process or treatment in itself called “job work”
For example:
M/s A Ltd, a garment manufacturing company sends semi-finished garments for printing and designing work to M/s B Ltd
– In the given case M/s A Ltd will be called “Principal”
– M/s B Ltd will be called “Job worker” and,
– The process of printing and designing over the semi-finished garments will be called “Job Work”
Job Work under GST | All about Job Work | Complete Guide to Job Work under GST | Digi Accounto | Terms Under Job Work
Friends, as per rules or law framed under GST, there will no GST liability on sending the goods by principal to job worker or on retuning the goods from job worker to principal after completion of job work process.
Under GST law, there are complete set of provisions which covers complete process of job work. GST law divide the job work process into three steps,
– Sending Input or Capital Goods from principal to job worker
– Treatment or processing by job worker, on the goods belonging to the principal
– Returning the goods by the Job worker to the principal
Job Work under GST | All about Job Work | Complete Guide to Job Work under GST | Digi Accounto | Job Work Process Under GST Law
So, friends, we will cover all the above said step in details… so, be with us till the end
1. Sending Input or Capital Goods from Principal to Job Worker
Friends, Input or Capital goods sent by principal to Job worker will not attract GST liability. As per GST in the process of Job work, Principal need to issue various documents or need to follow a pre-set procedure for complete compliance.
Job Work under GST | All about Job Work | Complete Guide to Job Work under GST | Digi Accounto | Job Work Process Under GST Law | Sending Input or Capital Goods from Principal to Job Worker
Requirement for issuance of documents depends on the situations, under which goods are going to sent to the Job worker…
Where goods are sent by Principal to the Job worker
In this case Principal need to prepare and issue delivery challan in triplicate. As mentioned under GST law, out of these three, two copy of delivery challan, may be sent to the Job worker along with the goods.
Now, where goods are sent directly by third person to the job worker
Friends, In some cases, Principal can direct the third person, to send the goods directly to the job worker under bill to ship to invoice model.
In that case, that thirds person will send an invoice along with goods. Invoice will be issued in the name of principal buyer and under ship to column it will show the details of job worker.
As per GST law, in the given case, Principal will issue a delivery challan and send the same to the job worker directly.
Now situation, where principal imports the goods and directly sent to the job worker
Sometime, Principal imports the goods and send the goods to the job worker directly from the custom station. In that case principal will be required to issue the delivery challan and copy of bill of entry to the job worker along with goods.
Format of delivery challan
Friend, as we discussed, principal will be required to issue delivery challan, but do you know, what would be the format, or what would be the contents of this delivery challan?
So, friends delivery challan must include the following particulars
– Date of the challan
– Number of the challan
– Name, address and GSTIN of the supplier
– Name, address and GSTIN of the job worker (GSTIN if he is registered)
– HSN code, description and quanity of the goods
– Taxable value and tax rate and tax amount
– Place of supply
– Signature of supplier or his authorized representative
Friends you know every challan must be shown in form GSTR-1 as well as form GST ITC-04
Form GST ITC – 04
Principal is liable to submit records of goods under job work, in form GST ITC- 04 on yearly or half yearly basis, according to turnover limit. GST ITC-04, required the information for
– Goods dispatched to a job worker
– Received from a job worker or
– Sent from one job worker to another
Friends, for the person whose annual aggregate turnover is more than Rs 5 Crore, frequency for filing form GST ITC -04, will be half yearly, mean due date for the period from April to September will be 25th October, while due date for the period from October to March, will be 25th April
Now for the person whose annual aggregate turnover is upto Rs 5 crores, frequency for filing form GST ITC 04, will be yearly. Meaning by yearly form for FY 2022-23 due on 25th April 2023.
Issuance of E-way bill, when goods sent by principal to job worker
Friends, you all know, for every movement of goods, a person will be required to issue e-way bill, so is there any requirement for issuance of e-way bill, when goods sent by principal to job worker?
So let see…
Friends yes, in case of movement of goods, mean goods sent by principal to job worker, provision of issuance of e-way bill will also be applicable. In this case either principal or registered job worker shall be required to issue e-way bill for every movement of goods on delivery challan.
Now, Can Principal claim Input tax credit on the goods sent to the job worker?
So, friends as per GST law there is no restriction for claiming Input Tax Credit by the principal for the goods sent to the job worker. The principal can claim full ITC on these goods.
2. Treatment or processing by job worker, on the goods belonging to the principal
Friends, as you all know, treatment or processing undertaken by job worker over the goods belonging to principal, called job work.
As per GST law, Job work is qualified as a supply of services.
For the job work services, job worker will charge its service charges from the principal by issuance of job work invoice. In that case, Job worker would be liable to charge GST as per prescribed rate.
Friends Job work service charge also includes the value of any goods or services used by job worker, used by him in provisioning of job work services.
For Example
Job Work under GST | All about Job Work | Complete Guide to Job Work under GST | Digi Accounto | Job Work Process Under GST Law | Format of Delivery Challan | Delivery Challan under Job Work | Valuation of Job Work Charges
M/s ABC Ltd, sent goods worth Rs 10,00,000/- to M/s DEF Ltd for job work. M/s DEF Ltd, being a job worker charged Job work charges for Rs 1,00,000/-. Apart from these job work charges M/s DEF Ltd also used goods worth Rs 20,000/- for provisioning of job work services.
In that case M/s DEF Ltd will issue an invoice of Rs 1,20,000/- as its job work charges to M/s ABC Ltd. M/s DEF Ltd will charge the GST at applicable tax rate.
3. Returning the goods by the Job worker to the principal
After completion of Job Work process, goods will be required to return back to principal. As per GST law goods need to return back to principal, with in prescribed time limit.
Now we will discuss, the procedure for returning the goods and prescribed time limit:
Where the goods are returned to the principal by the job worker
In the case where, goods returned by the job worker directly to the principal, Job worker will be required to send one copy of delivery challan (which he was received from principal at the time of receiving of goods) along with the goods returned.
Supply of goods by the principal from job worker’s place of business
Friends, Principal can also supply goods directly from job worker’s place of business to recipient. Such supplies will be treated as supply made by principal, it will not be treated as made by job worker.
This can be done only if job worker is a registered person under GST, otherwise, principal would be required to get register job worker’s premises as its additional place of business, under GST.
Friends in case, principal supply goods directly from job worker’s premises, under an export transaction, the LUT or bond shall be executed by the principal.
Treatment of waste or scrap generated during the job work
Friends, waste or scrap generated during the job work process, can be directly sold or supplied by the job worker from its place of business. But in case job worker is not a registered person under GST, principal would be required to supply the same.
Now friends come to…
The time limit for returning the goods from Job Worker to Principal
Friends as per provision mentioned under GST,
– Inputs, after completion of job work, shall be returned back to the principal or supplied by principal from the place of job worker, with in a period of one year from the date of receiving by job worker, and
– Capital goods, after completion of job work, shall be returned back to the principal with in a period of three year from the date of receiving by job worker.
Friends but, if commissioner have sufficient cause, then this time limit can be extended further for a period not exceeding one/three year.
Treatment where goods are not received within prescribed time period
If the input/ capital goods are neither received back by the principal nor supplied from the job worker’s place of business within the prescribed time period, it shall be deemed that such inputs/ capital goods had been sold or supplied by the principal to job worker on the day when the said inputs or capital goods were sent to the job worker.
In such case,
– Principal would issue an invoice for the inputs/ capital goods to job worker
– Principal would require to show this supply in his return for that particular month in which the time period of one year or three years has expired.
– Date of supply shall be the date on which such input or capital goods were initially sent to the job worker
– As per CBIC clarification, the interest for the period shall also be charged
When, such inputs/ capital goods returned by the job worker to the principal after the prescribed time period, it would be treated as supply made by the job worker to principal. In that case, job worker will issue an invoice for the same in the name of principal, and job worker would require to pay GST thereon, and if job worker is not a registered person under GST, then job worker will apply the registration and thereafter would be required to follow the prescribed procedure.
For Example:
Job Work under GST | All about Job Work | Complete Guide to Job Work under GST | Digi Accounto | Job Work Process Under GST Law | Format of Delivery Challan | Delivery Challan under Job Work | Time limit for returning the goods from Job Worker to Principal | Treatment where goods are not received witin prescribed time period
M/s A Ltd, sent semi-finished begs for printing logo to M/s B Ltd on 01-05-2021. Please suggest treatment under GST in following cases:
a) If M/s B Ltd return the begs after completion of Job work process on 10-12-2021
b) If M/s B Ltd returns the begs after completion of Job work process on 31-08-2022
Ans
In the given case in case
a) M/s B Ltd returns the begs to M/s A Ltd on 10-12-2021 i.e., within prescribed time period of one year, so in that case M/s B Ltd will send the goods to M/s A Ltd along with copy of delivery challan received by him from M/s A Ltd, at the time of receiving the goods.
M/s B Ltd, will issue an invoice for its job work charges including any goods used in provisioning of job work services with applicable GST rate.
b) In the second case, goods have not been returned within prescribed time period of one year so,
M/s A Ltd, would be required to issue an invoice to M/s B Ltd dated on 01-05-2022 ie date at which time limit of one year expired. M/s A Ltd would be required to show this supply under its GSTR-1 for the month of May 2022, and required to pay calculated GST with interest for the period from 01-05-2021 to 01-05-2022.
M/s B Ltd would be required to issue an invoice to M/s A Ltd on 31-08-2022, and would also be required to pay calculated GST thereon. If M/s B Ltd is not registered under GST, then first M/s B Ltd would be required to get registration under GST.
So, friends that’s all about Job work procedure under GST Act, we tried to cover all the provisions in detail, we hope it will equip you with a complete knowledge of the topic.
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