Job work under GST
What is Job work under GST?
As per section 2(68) of the CGST Act, 2017, Job work in GST refers to any treatment or process performed by one registered person on goods owned by another.
The person carrying out the work is known as the “job worker,” and the ownership of the goods remains with the principal. Common job work activities include tasks like painting, packing, and fitting.
The goods are returned to the principal after the specified process is completed. It’s important to note that the job worker does not become the owner of the goods.
This process ensures collaboration between businesses for specialized tasks without a transfer of ownership.
Who is “principal” for job work under GST?
The term “principal” in job work under GST refers to the person sending goods for job work, and they should be a registered person.
What is the treatment of Job work under GST?
According to section 143 of the CGST Act, a registered person, i.e., the principal, can send inputs or capital goods to a job worker for job work without paying tax.
Additionally, the principal can bring back these inputs within one year for inputs and three years for capital goods to any of their places of business after completing the job work without paying tax.
Which goods can be sent for job work?
Goods such as inputs and capital goods, including ‘moulds and dies, jigs and fixtures, or tools,’ can be sent for job work, and specific provisions exist for these items.
What if the goods are not received back within one / three years?
If the goods sent for job work are not received back by the principal within one year for inputs or within three years for capital goods, it is considered a supply to the job worker, and GST should be applied.
GST is also levied when the job worker sends the goods back to the principal, and interest may be charged for one or three years, depending on the case.
Does this time limit applies to moulds and dies, jigs and fixtures, or tools?
The time limit for returning goods within one/three years does not apply to moulds and dies, jigs and fixtures, or tools.
These items can be retained at the job worker’s place, and if the job worker is registered, they can be sold as scrap with GST payment.
If the job worker is not registered, the principal can pay GST on such scrap.
Any waste and scrap generated during the job work may be supplied by the job worker directly from his place of business on payment of tax if such job worker is registered, or by the principal, if the job worker is not registered.
Can the goods be directly sold from the job worker’s place by the principal?
Yes, it is allowed to sell the goods directly from the job worker’s place if the principal declares the job worker’s place as his additional place of business.
Can Input Tax credit be availed on goods sent for job work?
According to section 19 of the CGST Act, 2017, the “principal” is entitled to take credit of input tax on inputs and capital goods sent to a job-worker for job-work, subject to prescribed conditions and restrictions.
The “principal” can also take credit of input tax on inputs even if they are directly sent to a job worker for job-work without being first brought to his place of business.
Who is responsible for goods sent for job work?
The responsibility for the accountability of the goods, including payment of tax, lies with the “principal.”
Conclusion
In summary, Job work under GST allows collaboration between businesses, with the principal retaining ownership of goods sent for specific processes by the job worker.
The treatment is governed by section 143, enabling tax-free transfer of inputs or capital goods for a specified period. The principal is responsible for goods sent, their accountability, and tax payment.
These provisions aim to facilitate seamless operations and partnerships, defining clear roles in ownership and taxation.
