How has GST Impacted Job Work?
Are you sending raw materials or semi-finished goods to another person for further processing? Or are you a job-worker wanting to know how does GST impact you?
If yes, today’s blog will answer your queries. It’ll highlight the provisions related to GST implications on job work in detail. Keep reading till the end to understand and comply with the provisions hassle-free:
What is Job Work?
As per Section 2(68) of the CGST Act – ‘Any treatment or process undertaken by a person on goods belonging to another registered person.’
Thus, where a person does any further process or treatment on the goods belonging to another registered person, it will be termed as job-work under GST.
The person doing the further process is called “Job Worker,” while the registered taxpayer, to whom the goods belong, is referred to as “Principal.” Here, the ownership of the goods remains with the Principal only.
Further process or treatment on the goods include packing, labeling, testing, re-conditioning, re-packing, inspection, etc.
Job worker will be considered a service provider under the GST act. He is going to include the job work charges in his aggregate turnover, and not the value of goods transferred by the Principal.
What is the process of sending goods on job work?
The Principal will send the goods and capital goods to the Job Worker without charging GST. The goods can also be sent to Job Worker directly from the place of the supplier of those goods.
The Principal will issue a challan and send it along with the goods. Even when goods are sent directly from the supplier’s place, the Principal has to issue a challan.
How is Input tax credit availed for Goods sent for Job Work?
The Principal can avail input tax credit of goods and capital goods sent to the job worker for further processing. Here’re the conditions that should be fulfilled –
- ITC is available in both the cases – where goods are sent from the Principal’s place of business or directly from the place of the supplier of the goods.
- After due processing, the goods must be received back by the Principal within 1 year (Capital Goods should be received back within 3 years).
If the goods are not received back in the said duration, it will be treated as supply from the effective date, and the Principal will have to pay GST and interest.
The clause of 1 year/ 3 years will not apply to molds and dies, jigs and fixtures, or tools sent to a job worker for job work.
What is the effective date for sending the goods to Job Worker?
- If sent from the Principal’s place of business – Date on which goods are sent out
- If sent from the place of supplier – Date on which Job Worker receives goods
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Can the Principal directly supply goods from the job worker’s place?
The Principal can supply the goods if he declares the job worker’s place as an additional place of business.
However, he can do so without showing it as an additional place if the job worker is registered under GST, or the commissioner has notified that the goods have to be supplied from the Job Worker’s place.
What will the Challan include?
The Principal has to issue Challan in the triplicate copy. He will retain one copy, and send rest two copies along with goods. While sending the goods back to the Principal after processing, the job worker has to enclose one copy of Challan with the goods. Following details have to be mentioned in the Challan –
- Challan number and date of issue,
- Name, address, and GSTIN of the Principal and agent (if the agent is registered),
- HSN code, details and quantity of goods,
- Taxable value, tax rate and tax amount (bifurcated in CGST, SGST or IGST),
- Place of supply, and
What are the documents and GST return forms to be filed?
The Principal is responsible for maintaining the proper records for goods and capital goods sent to the job worker.
Also, the Principal has to file GST ITC–04 every quarter, in which he will mention details of challans issued to the job workers, such as goods dispatched to a job worker or received back or transferred from one job worker to another.
The due date for filing GST ITC-04 is 25th day of the month succeeding the quarter. For July – Sep quarter, GST ITC-04 has to be submitted until 25th October.
What will happen to waste and scrap?
Waste and scrap arising out of processing can be dealt with in the following way:
- If Job Worker is registered under GST – He can supply waste and scrap by paying GST,
- If Job Worker is unregistered – He should send waste and scrap back to the Principal.
When is the Job Worker required to register himself under GST?
A job worker has to register under GST if his aggregate turnover crosses ₹ 20 lakhs (₹ 10 lakhs for special category states) in a financial year.
What are the provisions related to e-way bills?
For the interstate movement of goods, the Principal or registered Job Worker has to issue an e-way bill irrespective of the consignment value.
In the case of intra-state movement, the e-way bill has to be issued if consignment value is more than ₹ 50,000.
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