Job Work Vis-à-Vis Manufacture Under GST: Supply of Goods or Supply of Services? The definition of job-work is already in Central Excise, and the job worker plays a major part in the Indian economy due to participation in the processing of input or unfinished goods. GST makes the Principal (the proprietor of the goods) take care of compliance on behalf of the job worker. While seeing the fact that job work is often an MSME sector, besides the same, it is not able to comply with the assembly of the tax. So, in this blog, we will discuss Job Work in Vis-à-Vis manufacturing under GST.
What is Job Work Under GST? The definition of Work under GST is under section 2(68) of the CGST Act, 2017, which states, "Any action or process undertaken by a person on goods fitting to another registered person." Therefore, a job worker is a person (recorded or unregistered) who is processing or treating the goods of an extra registered person, and the owner of the goods is called the Principal in this context. Section 19 of the CGST Act 2017 elucidates the definition of the Principal using a person supplying properties to the job worker. The Responsibilities Lie With The Principal The Principal issues the Challan (by means specified in rule 10 of Invoices Rules under GST) to the job hand for the inputs or capital goods.
Maintaining the books of input and capital goods Intimate the jurisdictional captain for the detailing of the intended input goods in addition to the nature of the goods being delivered by the job worker
Time Constraint for Returning the Processed Goods to the Owner The supply of the efforts to the job work shall be returned to the Principal in a year; the date is counted from the date of receipt. In the case of dispensing capital goods, the time limit for returning the handled goods within the proprietor's premises is three years.
Section 19 of the CGST Act, 2017, but for the supply of capital goods or inputs, all the tools, fixtures, jigs, moulds, and dies completed by the Principal to the job worker are not covered under the returning norms.
GST Rate on Job Work 1. The GST council further reduced the GST rate on engineering jobs from 18% to 12%, while diamond supply jobs are now under the 1.5% GST rate from 5%.
2. Also, in the latest GST round 126/45/2019, it has been clarified that all the registered taxpayers under job work are to be imposed with 12% GST, and hence, the unregistered taxpayers under the GST job work will take 18% GST rate.
Suggested Read: Location of Supply in the GST Framework
Credit On Input Tax Paid On Goods Supplied To Job-worker Under the CGST Act, the principal materials, capital goods or inputs to the job worker for meeting out are responsible for paying the input tax on such goods. So, the primary is meant to take the credit for input tax on such goods. The law compensates the landlord for applying for the credit without coming till the inputs come to the premises if the goods are sent unswervingly to the job worker without taking it to the grounds of the business.
Rules and Restrictions to Claim Input Tax Credit under Job Work 1. Inputs, semi-finished goods, or money sent out on job work
2. Goods sent out from the main place of business
3. Goods sent out right from the place of supply of the supplier
4. B It is necessary to send out goods laterally with a challan
5. The Challan should comprise the particular points
6. Date, in addition to the number of the delivery challan
7. Name, address, besides GSTIN of the consignor and consignee
8. HSN code, description, then quantity of goods
9. Taxable value, tax rate, tax amount- CGST, SGST, IGST, UTGST unconnectedly
10. Place of supply and signature
11. C The information details of the Challan should be shown in the GSTR- 1 Form
12. Detailed information details of input/ capital goods sent out to the job worker needs to be claimed through GST ITC – 4
Transitional Provisions for Job Work Under CGST Transitional requirements are meant to decide whether the goods and amenities being processed or under-processed beforehand or on the appointed day of GST are answerable to be covered under GST or not. The cases which excused the Principal from paying the tax:
1. Under the Central Excise law, inputs or incompletely worked inputs are sent to workers for dispensation before the introduction of GST, and the goods are refunded to the premises of the Principal within 6 months from the selected day of GST. No tax is applicable on such goods.
2. If the goods are not refunded before 31st December, it is liable to be covered by the input tax credit.
3. In case the Principal has to abound the goods or inputs to the job worker beside the goods are removed within 6 months since 1st July, all such supplies need not pay tax but mandatory to furnish the GST TRAN-1 form within 90 days of the operation of GST.
Conclusion There have been instances wherein the Department has raised stresses on services Job work conducted Job The argument of the Department is that the Job worker, mainly the Job worker who is providing services of Job work on clothes, is not a supply of service rather it is a stock of goods and hence the rate of 5% would not be applicable. Hereafter, such activity will not be considered Job work, and HSN 9988 shall not be applicable. Thus, a refund cannot be claimed under section 54 of the CGST Act, 2017.
Suggested Read: Understanding Mixed Supply & Composite Supply under GST
FAQs 1. Is job work a supply under GST? The GST Act makes special requirements with regard to the removal of goods for job work and then the receipt of the goods after the job worker meets them without payment of GST.
2. Is job work a service or manufacturing? Since 'job work' is a taxable service, the job hand would be required to obtain registration if his total turnover in the F.Y.
3. What is the GST rate for manufacturing services for job work? Job Work for Other Industries For all other trades, including the food and beverage, electronics, and business industries, the GST rate for job work is 12%. Job Work on Handicraft Goods The GST rate for job work on handicraft goods is 5%.
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