Movement of goods to job workers is an essential business situation which occurs frequently. Many times a manufacturer send goods to a job worker for getting further work done on them, and receive the goods back from job worker or sell the goods directly from the place of job worker. The tax position along with this movement of goods needs specific attention because the availability of input credit depends on use of goods for the manufacture of final product, and once goods are removed from the factory, it is significant to ensure that these goods either come back to the factory of manufacturer or otherwise are incorporated in the final goods sold by the manufacturer. In the existing regime, the value addition by the job worker is either taxable as manufacture or as taxable service, and in both cases, an exemption is granted to job worker in case, the principal manufacturer pays duty on the goods received after job work including the value addition. Presently the concept of taxation of the goods sent to a job worker is used in central laws, namely central excise and service tax. It is not used in VAT laws. In GST Act, the same concept has been adopted more or less.
Section 143 of the CGST Act, 201 7contains the provisions for job work procedure. Section 19 and Input Tax credit rules contains the provisions and procedure for taking input tax credit in respect of inputs and capital goods sent for job work. The provisions contained in CGST Act pertaining to Job work are also applicable to UT-GST as provided in section 21 of the UTGST Act, 2017.
CONCEPT OF JOB WORK
Section 2(68) of the CGST Act, 2017 provides that “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.
This definition is much wider than the one given in Notification No.214/86- CE dated 23rd March, 1986 as amended, wherein job work has been defined in such a manner so as to ensure that the activity of j oh work must amount to manufacture. The present definition is as follows:
“job work” means processing or working upon raw material or semi finished goods supplied to the job worker, so as to complete a part or whole of the process resulting in the manufacture or finishing an article or any operation which is essential for aforesaid process and the expression “job worker” shall be construed accordingly.
Thus, the definition of job work itself reflects the change in basic scheme of taxation relating to job work in the proposed regime.
Further schedule U of the CGST Act, 2017 specifies that any treatment or process which is applied to another.
JOB WORK PROCEDURE
Section 143 of the CGST Act, 2017 provides that the registered taxable person (principal) can send the taxable goods to a job worker for job work without payment of tax. Following are features for goods sent for Job work:
(1) Permission of Commissioner is required to send the goods to Job worker and taking benefit related provisions. Only intimation will be required to be given for sending any inputs or capital goods, without payment of tax, to a job-worker for job work and from there to another job worker and likewise.
(2) As per 1TC rules inputs or capital goods shall be sent to job worker under the cover of challan issued by the principal.
(3) The details of challan in respect of goods dispatched to a Job worker or received from a job worker during a tax period shall be included in return form GSTR-1 furnished for that period.
(4) The goods may be brought back to the principal’s place without payment of tax.
(5) The goods may be sent to the customer’s premises on payment of taxes.
(6) The time limit for bringing back or sending the goods to the customer from the job workers premises is 1 year and 3 years for inputs and capital goods respectively.
(7) In case inputs and capital goods (except moulds, dies, jigs and fixtures or tools) are not brought back or sent to the customer with in abovementioned time limit the original movements of goods from the principal to the job worker will be treated as supply of goods.
(8) The responsibility for accountability of the goods sent for job work including payment of tax thereon shall always lie on the principal.
(9) The premises of the job worker must be declared as an additional place of business by the principal. However, such declaration is not required if:
• Job worker is registered on his own or
• Supply of such goods as may be notified by the Commissioner.
INPUT TAX CREDIT IN RESPECT OF THE GOODS SENT TO JOB WORKER
In CGST Act, 2017 aspects relating to taking input tax credit in respect of inputs/capital goods sent for job-work have been specifically dealt in S Section 19, which provides that the credit of taxes paid on inputs or capital goods can be taken in the following manner:
1. Principal shall be entitled to take credit of inputs sent to a job-worker if the said inputs, after completion of job-work are received back in 1 year. In case the inputs are sent directly to the job-worker, the date shall be counted from the date of receipt of inputs by job-worker.
2. Principal shall be entitled to take credit of capital goods sent to a job-worker if the said capital goods, after completion of job-work are received back in 3 years from the date of being sent out. In case the capital goods are sent directly to the job-worker, the date shall be counted from the date of receipt of capital goods by job-worker.