Job Work Under GST (Complete Detail 2023)
Job work under GST is the processing of goods supplied by the principal. The concept of job work already exists in Central Excise, where major manufacturers can send inputs or semi-finished goods to job workers for further processing.
The Goods and Services Tax (GST) Act provides special provisions for the receipt of goods for job work and receipt of goods after processing by job workers without paying GST. The merit of these provisions is accessible both to the principal and the job worker.
What Means Job Work?
According to Section 2(68):
Job work is defined as any treatment or process performed by one person on the goods of another registered person, and the term job worker has been interpreted accordingly.
Job work means the processing or handling by a person of goods belonging to another registered taxable entity. The person who handles other people’s goods is a job worker, and the person who owns the goods is the principal.
Key factors of job work under GST are as below:
- Ownership of goods does not transfer to the job worker but it remains with the principal.
- Job workers must carry out the processes specified by principal of goods.
- The principal must be a registered taxpayer. If principal is not registered, no job-worker relation can be pioneered under GTS Act.
- Goods sent for job work must be taxable goods, as tax liability will only arise if the goods in question are taxable.
What Is GST Rate on Job Work Charges?
The GST rate on job work services was changed at the GST council meeting held on September 20th, 2019. The details of the revised GST rate on job work services are as follows:
The GST rate for the provision of job work services related to diamonds is reduced from 5% to 1.5%.
Reduced rate of GST from 18% to 12% on supply of mechanical job work such as in engineering industry, except for the supply of job work about bus body construction, which remains at 18%.
|Job Worker||Principal Manufacturer||GST Rate|
What Is Procedure under GST?
- Goods sent for job work must be accompanied by a challan.
- Goods must be received back by the principal within the following timeframes:
- Input, semi-finished or finished goods – 1 year
- Capital goods – 3 years
- If we do not receive the returned goods within the above period, these goods will likely be supplied to job worker by the principal.
- Waste and scrap generated from initial, intermediate, assembly, packaging, and other finishing processes can be sold and paid for tax in the following ways:
- Job work- if holds a registration.
- Principal – if job worker does not have the registration.
What Is GST Registration Requirement for Job Workers?
A job worker must obtain GST registration only if the total sales for a particular financial year exceed the threshold limit. This applies regardless of whether the principal and job worker reside in the same state or different states.
However, workers involved in providing services related to jewellery, gold, silverware, and other items must obtain compulsory registration if they provide interstate services.
What Is Tax Liability of Job Work?
No tax: If the goods are removed six months before the effective date or within six months after the effective date.
Tax: After 6 months, tax will be paid and can be extended for up to 2 months.
What is ITC provision on inputs and Capital Goods for Job Work?
Principals are entitled to claim the credit of input tax paid on inputs and capital goods sent to the job worker for the job work.
Further, the provision also provides that the principal can claim the credit even if the goods are supplied to the job worker without bringing it into the premise of the principal.
The principal does not have to wait until the inputs/ capital goods are first brought into their place of business.
What Is the Difference between Work Contract and Job Work?
Works Contract in GST
Where the transfer of title to goods involves the performance of a contract, including contracts for the construction, manufacture, completion, construction, installation, installation, improvement, alteration, repair, maintenance, and refurbishment of any immovable property.
Goods do not have to be transferred in the same form. They can be transferred in different ways, but the contract is still a GST job works contract.
A process undertaken by one person on goods belonging to another registered taxpayer. Goods supplied by a registered taxable owner (Principal) to job workers are not liable to GST (Section 43A). Goods can also be sent from one worker to another. 43A does not apply to exempted or non-taxable goods, or unregistered persons.
Avail ITC if the goods (non-capital goods) are returned within one year after completion of job work (within three years for capital goods sent in job work from the date of shipment.
If the inputs were sent directly, the days are counted from the date the job worker received the inputs.
How to Create GST Invoice for Job Work?
The primary manufacturer must create a ‘Delivery Challan’ in the required format in order to transmit inputs or semi-finished goods to a job worker without paying duty or having the credit for input tax reversed.
The following information should be included in the Challan:
- Date and delivery challan number;
- Name, address, and GSTIN of the sender and recipient;
- HSN code, product details, and product quantities;
- CGST, SGST, IGST, and UTGST separately, as well as the taxable value, tax rate, and tax amount;
- Place of supply and signature.
- Form GSTR-1 must include the challan information.
- Form GST ITC – 04 must also be used to submit challan information.
On a quarterly basis, Form GST ITC – 04 must be submitted by the 25th day of the month after the quarter.
FAQs: Job Work Under GST
What is the HSN code for job work?
The HSN code for job work is 9988.
Is E-invoice mandatory for job work?
Yes, electronic invoicing by a specially notified person is mandatory for supply of goods and/or services to a registered [person.
Is job work a service?
Job work is a type of outsourcing service.
Is job work a manufacturing activity?
The job work sector is an important industry in the Indian economy. This includes outsourcing activities that may or may not flow into manufacturing.
Is job work taxable under service tax?
No, job work provision applies only when a registered taxpayer ships taxable goods.
What is rate for job work from unregistered person under GST?
The GST rate for unregistered principal suppliers is 18% GST from registered job workers.
The GST rules applicable to job work are same as those applicable to other taxable services. To claim input tax credit, all employees must register with the GST department.
The job worker must issue invoices to the principal stating the details of the job work carried out. Both the principal and the job worker have to pay taxes at the prevailing rate of GST.
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