JOB WORK UNDER GST
Special provisions for job work
“Job work” means undertaking any treatment or process by a person on goods belonging to another registered taxable person and the expression “job worker” shall be construed accordingly – clause 2(62) of Model GST Law, 2016.
Clause 16A of Model GST Law, 2016 make provisions relating to taking input tax credit in respect of inputs sent for job work.
Clause 43A of Model GST Law, 2016 makes provisions for special procedure for removal of goods for job work without payment of tax.
Clauses 150, 151 and 152 of Model GST Law, 2016 make provisions in respect of inputs removed for job work before introduction of GST and returned after introduction of GST.
Principal – Person sending goods for job work is termed as ‘Principal’. He should be a registered person.
Meaning of ‘Principal’
The provisions relating to job work use the term ‘Principal’ at various places.
“Principal” means a person on whose behalf an agent carries on the business of supply or receipt of goods and/or services – clause 2(77) of GST Model Law, 2016.
Thus, person sending goods for job work is termed as ‘Principal’. He should be a registered person.
Special procedure for removal of goods for job work
The Commissioner may, by special order and subject to conditions as may be specified by him, permit Principal to send taxable goods, without payment of tax, to a job worker for job-work and from there subsequently send to another job worker and likewise.
After completion of job-work, Commissioner may allow Principal to-
(a) bring back such goods to any of his place of business, without payment of tax, for supply therefrom on payment of tax within India, or with or without payment of tax for export, as the case may be, or
(b) supply such goods from the place of business of a job-worker on payment of tax within India, or with or without payment of tax for export, as the case may be – clause 43A(1) of GST Model Law, 2016.
Direct dispatch from place of job worker
The goods shall not be permitted to be supplied from the place of business of a job worker in terms of clause (b) unless the “principal” declares the place of business of the job-worker as his additional place of business except in a case-
(i) where the job worker is registered under section 19; or
(ii) where the “principal” is engaged in the supply of such goods as may be notified in this behalf.
Responsibility of tax and goods is of Principal
The responsibility for accountability of the goods including payment of tax thereon shall lie with the “principal”.
Input Tax Credit of goods sent for job work
The “principal” shall, subject to such conditions and restrictions as may be prescribed, be entitled to take credit of input tax on inputs sent to a job-worker for job-work if the said inputs, after completion of job-work, are received back by him within one hundred and eighty days of their being sent out:
The “principal” shall be entitled to take credit of input tax on inputs even if the inputs are directly sent to a job worker for job-work without their being first brought to his place of business, and in such a case, the period of one hundred and eighty days shall be counted from the date of receipt of the inputs by the job worker – clause 16A(1) of GST Model Law, 2016.
ITC of capital goods sent to job worker – The “principal” shall, subject to such conditions and restrictions as may be prescribed, be entitled to take credit of input tax on capital goods sent to a job-worker for job-work if the said capital goods, after completion of job-work, are received back by him within two years of their being sent out.
The “principal” shall be entitled to take credit of input tax on capital goods even if the capital goods are directly sent to a job worker for job-work without their being first brought to his place of business, and in such a case, the period of two years shall be counted from the date of receipt of the capital goods by the job worker – clause 16A(2) of GST Model Law, 2016.
Paying ITC and interest if inputs and capital goods not received back in specified time – Where the inputs or capital goods, as the case may be, are not received back by the “principal” within the time specified, he shall pay an amount equivalent to the input tax credit availed of on the said inputs or capital goods, along with interest under section 36(1).
The “principal” may reclaim the input tax credit and interest paid earlier when the inputs or capital goods, as the case may be, are received back by him at his place of business – clause 16A(3) of GST Model Law, 2016.
Interest should be only after 180 days/two years, though not specifically mentioned in section.
Transitory provisions in respect of goods sent to job worker
As per clause 150 of GST Model Law, 2016, if inputs were sent for job work prior to introduction of GST law and were lying with the job worker, declaration shall be submitted by both manufacturer and job worker within specified period.
As per clause 151 of GST Model Law, 2016, if semi-finished goods were sent for job work prior to introduction of GST law and were lying with the job worker, declaration shall be submitted by both manufacturer and job worker within specified period.
The goods can be brought back to place of Principal (manufacturer) within six months without payment of tax.
The period of six months can be extended by Commissioner for period of two months.
If the material is not returned within six months (or further two months if extension is granted), tax will be payable by job worker or manufacturer.
Finished goods sent for test or further process – As per clause 152 of GST Model Law, 2016, if finished goods were sent out for test or further process prior to introduction of GST law and were lying outside, these can be brought back within six months from date of commencement of GST law.
The finished goods can be supplied directly on payment of GST or can be exported without payment of GST.