Job Work can be defined as any activity (treatment or process) undertaken by any individual on goods that belong to other (registered) individual. The individual undertaking the job is considered as ‘Job Worker’ and the individual supplying goods to the job worker is considered as ‘Principal’. On behalf of a Principal, a job worker carries out the business involving supply/ receipt of goods, services or both.
Below is a pictorial illustration of job work, worker and principal:
A ‘Job Work’ is considered as a service and therefore, a job worker will have to go through registration process and obtain registration. This is application in cases when the aggregate turnover of the job worker is more that the given threshold (which is Rs. 10 lacs/ Rs. 20 lacs). Goods supply after completing the job work will be considered as goods supply by principal and not by job worker. The total value of these goods will be included in the total turnover of the principal and not of the job worker.
Job work Basis
The goods can be sent a job worker for a job work by the manufacturer for many processes such as initial process, intermediary process, assembly process, packaging process or any completion process. The goods will later be supplied by the manufacturers to its consumers or to any other production or manufacturing process requiring the finished goods. These goods sent to the job worker can be component parts, raw materials, finished goods, or semi-finished goods. The final goods coming out from a job work can have similar features as of the goods sent for the job work or can be different with variations.
As per the Section- 19 of the 2017 CGST Act, Inputs once processed should be returned its principal within one year and & Capitals goods once processed should be returned to its principal within three years of sending them out. In case of dies & moulds, jigs & fixtures or tools & equipment supplied to job worker by principal, there is no provision for goods return
Transitional provision- For goods under the GST
With respect to the goods supplied to the job worker
As per the GST Model, if any job worker had received semi-furnished goods or raw materials before GST bill was introduced with the job worker; both the manufacturer and the job worker will have to submit a declaration within the specified time. Job Worker can send the goods back to principal manufacturer’s location within six months of a time period without tax payment.
With respect to finished goods given for testing purpose
As per the new GST Model, if final goods were forwarded for testing purpose before the model law was introduced and were kept outside, then the goods can be accepted back within six months from date of beginning of the law. Final goods will also be eligible for supply directly on GST payment or eligible for export without GST payment.
Job Work Procedures and compliances under GST
- Goods sent for any job work should always have a challan attached to it
- Goods sent to the job worker must be taken back by principal within one year (for input, semi-finished or finished goods) or three years (for capital goods) of sending them
- In cases when the goods shared to job worker are not taken back within period mentioned as per the law, it will be considered as goods supplied by principal to the job worker
- All waste and scrap materials general during various stages of job work (initial process, intermediary process, assembly process, packaging process or any completion process) can be sell or traded on tax payment by the job work (if he/she has a registration) or by the principal in case the job worker is not having the registration.
Taxability of the job work under GST
No tax shall be liable if removal of the goods takes place within six months of the enactment or six months before the date of enactment
Once the goods are given back after six months or after an extended period of two more months, tax is liable.
The following depiction is for ITC eligibility for capital goods or input
Recent Amendment of Job Work Procedure
The amendment is made on second proviso to section 143(1) of Job work procedure as follow:
[Provided further that the period of one year and three years may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding one year and two years respectively.]
 Inserted by the Central Goods and Services Tax (Amendment) Act, 2018 – Date of Amendment : 29-08-2018, Effective from : 29-08-2018, Retrospective Effect : No
Explanation: The amendment is made that the time limit of 1 year for inputs and 3 years for capital goods can be extended on a sufficient cause for a further period of 1 year in case of inputs and 2 years for capital goods.