Job Work

Q 1. What is job work?

Ans. Job work means undertaking any treatment or
process by a person on goods belonging to another
registered taxable person. The person who is treating or
processing the goods belonging to other person is called
‘job worker’ and the person to whom the goods belongs is
called ‘principal’.

This definition is much wider than the one given in
Notification No. 214/86 – CE dated 23rd March, 1986. In
the said notification, job work has been defined in such a
manner so as to ensure that the activity of job work must
amount to manufacture. Thus the definition of job work
itself reflects the change in basic scheme of taxation
relating to job work in the proposed GST regime.

Q 2. Whether goods sent by a taxable person to a job worker will be treated as supply and liable to GST? Why?

Ans. It will be treated as a supply as supply includes all
forms of supply such as sale, transfer, etc. However, the
registered taxable person (the principal), under intimation
and subject to such conditions as may be prescribed send
any inputs and/or capital goods, without payment of tax, to
a job worker for job work and from there subsequently to
another job worker(s) and shall either bring back such
inputs/capital goods after completion of job work or
otherwise within 1 year/3years of their being sent out or
supply such inputs/capital goods after completion of job
work or otherwise within 1 year / 3 years of their being
sent out, from the place of business of a job worker on
payment of tax within India or with or without payment of
tax for export.

Q 3. Is a job worker required to take registration?

Ans. Yes, as job work is a service, the job worker would be
required to obtain registration if his aggregate turnover
exceeds the prescribed threshold.

Q 4. Whether the goods of principal directly supplied from the job worker’s premises will be included in the aggregate turnover of the job worker?

Ans. No. It will be included in the aggregate turnover of
the principal. However, the value of goods or services used
by the job worker for carrying out the job work will be
included in the value of services supplied by the job
worker.

Q 5. Can a principal send inputs and capital goods directly to the premises of job worker without bringing it to his premises?

Ans. Yes, the principal is allowed to do so. The input tax
credit of tax paid on inputs or capital goods can also be
availed by the principal in such a scenario. The inputs or
capital goods must be received back within one year or
three years respectively failing which the original
transaction would be treated as supply and the principal
would be liable to pay tax accordingly.

Q 6. Can the principal supply the goods directly from the premises of the job worker without bringing it back to his own premises?

Ans. Yes. But the principal should have declared the
premises of an unregistered job worker as his additional
place of business. If the job worker is a registered person
then goods can be supplied directly from the premises of
the job worker. The Commissioner may also notify goods
in which case goods sent for job work can be directly
supplied from the premises of the job worker.

Q 7. Under what circumstances can the principal directly supply goods from the premises of job worker without declaring the premises of job worker as his additional place of business?

Ans. The goods can be supplied directly from the place of
business of job worker without declaring it as additional
place of business in two circumstances namely where the
job worker is a registered taxable person or where the
principal is engaged in supply of such goods as may be
notified by the Commissioner.

Q 8. What are the provisions concerning taking of ITC in respect of inputs/capital goods sent to a job worker?

Ans. Principal shall be entitled to take credit of taxes paid
on inputs or capital goods sent to a job worker whether
sent after receiving them at his place of business or even
when such the inputs or capital goods are directly sent to
a job worker without their being first brought to his place
of business. However, the inputs or capital goods, after
completion of job work, are required to be received back
or supplied from job worker’s premises, as the case may
be, within a period of one year or three years of their
being sent out.

Q 9. What happens when the inputs or capital goods are not received back or supplied from the place of business of job worker within prescribed time period?

Ans. If the inputs or capital goods are not received back by
the principal or are not supplied from the place of
business of job worker within the prescribed time limit, it
would be deemed that such inputs or capital goods had
been supplied by the principal to the job worker on the
day when the said inputs or capital goods were sent out by
the principal (or on the date of receipt by the job worker
where the inputs or capital goods were sent directly to the
place of business of job worker). Thus the principal would
be liable to pay tax accordingly.

Q 10. Some capital goods like jigs and fixtures are non-usable after their use and normally sold as scrap. What is the treatment of such items in job work provisions?

Ans. The condition of bringing back capital goods within
three years is not applicable to moulds, dies, jigs and
fixtures or tools.

Q 11. What would be treatment of the waste and scrap generated during the job work?

Ans. The waste and scrap generated during the job work
can be supplied by the job worker directly from his place of
business, on payment of tax, if he is registered. If he is not
registered, the same would be supplied by the principal on
payment of tax.

Q 12. Whether intermediate goods can also be sent for job work?

Ans. Yes. The term inputs, for the purpose of job work,
includes intermediate goods arising from any treatment
or process carried out on the inputs by the principal or job
worker.

Q 13. Who is responsible for the maintenance of proper accounts related to job work?

Ans. It is completely the responsibility of the principal to
maintain proper accounts of job work related inputs and
capital goods.

Q 14. Are the provisions of job work applicable to all categories of goods?

Ans. No. The provisions relating to job work are applicable
only when registered taxable person intends to send taxable
goods. In other words, these provisions are not applicable
to exempted or non-taxable goods or when the sender is a
person other than registered taxable person.

Q 15. Is it compulsory that job work provisions should be followed by the principal?

Ans. No. The principal can send the inputs or capital
goods after payment of GST without following the special
procedure. In such a case, the job-worker would take the
input tax credit and supply back the processed goods (after
completion of job-work) on payment of GST.

Q 16. Should job worker and principal be located in same State or Union territory?

Ans. No this is not necessary as provisions relating to job
work have been adopted in the IGST Act as well as in UTGST
Act and therefore job-worker and principal can be located
either is same State or in same Union Territory or in
different States or Union Territories.