Under GST, job work is considered as a supply of service. Job work is a process where a principal manufacturer sends raw materials or partially finished goods to another person (job worker) to process or further work upon it to manufacture the final product on behalf of the principal manufacturer. The job worker may or may not be a registered person under GST.
The classification of job work related to alcoholic liquor is important because of the different rates of GST applicable to supply of goods and supply of services. The GST rate for alcoholic liquor for human consumption is 18%.
As per the GST law, job work related to alcoholic liquor is classified as supply of services. This is because the process of job work does not result in a new product being created. Instead, the job worker processes the raw materials or semi-finished goods supplied by the principal manufacturer and returns the finished goods to the principal manufacturer. The final product, i.e., alcoholic liquor, is manufactured by the principal manufacturer, not the job worker. Therefore, GST on job work related to alcoholic liquor will be levied at the rate of 18% as applicable for services.
Job work and manufacturing are two distinct processes that have different legal implications under the GST regime in India.
Job work refers to the process of performing certain processes or activities on goods owned by another registered person, where the goods are supplied to the job worker on a principal-to-principal basis. The job worker uses his or her own material and labour to process or complete the job work and returns the finished goods to the principal. The principal is responsible for supplying the raw materials and receiving the finished goods from the job worker. Job work is classified as a service under GST, and the job worker is required to pay GST on the job work charges.
On the other hand, manufacturing refers to the process of producing or creating a new product by using raw materials or inputs. In manufacturing, the producer owns the raw materials and inputs, uses his or her own labour and machinery to transform them into a new product, and is responsible for the final product. Manufacturing is classified as a supply of goods under GST, and the manufacturer is required to pay GST on the final product.
In summary, the key difference between job work and manufacturing is that in job work, the goods belong to the principal, and the job worker only performs a service, while in manufacturing, the producer owns the raw materials and produces a new product.
Under the GST regime, the following documents are required for job work:
1. Challan: A challan is required to be issued by the supplier to the job worker under GST for sending the goods to the job worker's premises. This document must contain the details of the goods being sent for job work.
2. Delivery Challan: A delivery challan is issued by the job worker to the supplier when the goods are returned after processing or job work. This document should contain the details of the goods received from the supplier and the goods supplied after job work.
3. Job Work Order: A job work order is required to be issued by the supplier to the job worker specifying the details of the goods to be processed or job work to be done.
4. Invoice: An invoice is required to be issued by the job worker to the supplier for the job work done on the goods.
In addition to the above, the supplier must also maintain the records of the goods sent for job work, the goods received after job work, and the stock of goods held at the job worker's premises. The job worker must maintain records of the goods received for job work, the goods supplied after job work, and the stock of goods held at the job worker's premises.
Certainly! Here are some FAQs on the topic:
A: Job work under GST means any treatment or process undertaken by a person on goods belonging to another registered person. It may include processes such as testing, assembly, repair, or any other similar activity.
A: Yes, job work is considered a supply of service under GST.
A: Job work involves carrying out certain processes or treatment on goods belonging to another person, whereas manufacturing involves the creation of new goods from raw materials.
A: Yes, job workers are required to register under GST if their aggregate turnover exceeds the threshold limit of Rs. 20 lakhs (Rs. 10 lakhs for special category states).
A: GST is calculated on job work based on the value of the job work services provided. If the job work involves the transfer of goods from the principal to the job worker, the value of the goods must also be taken into consideration.
A: Yes, the principal can claim input tax credit on the inputs or capital goods sent for job work and received back from the job worker.
A: The following documents are required for job work under GST:
1. Delivery challan
2. Job work challan
3. Invoice (if any)
4. Material transfer document (in case of inputs or capital goods transferred to the job worker)
A: Yes, there are special provisions for job work related to textiles and gems and jewelry. Under these provisions, the job worker is not required to register under GST if the principal declares the job worker's premises as his own and maintains proper accounts of the inputs, semi-finished goods, and finished goods sent to the job worker. Additionally, the principal can take input tax credit on the tax paid on inputs or capital goods sent for job work even if the inputs or capital goods are not received back within one year.
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