All industrial sectors are heavily dependent upon Job-working, it is so massive in the term of transaction that it is itself constitute a separate industry and all laws are required to be framed in accordance with the requirement of this sector. The principal usually sends the raw material or semi-finished goods or components which are processed by the job worker resulting in a further processed or finished product. The manufacturer may also send finished product to a job worker for assembling/packing.
Job-work has various synonyms in different industries –
The person undertaking the job work is called job worker. The job worker always works under the instructions of the principal manufacturer and exercises his labour over the inputs or material belonging to his principal.
The Basic philosophy under GST or existing laws is Job-worker
As per the definition under Section 2(61) of Model GST Law:
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.
1.1 Thus it is essential for a Job-work the transfer of ownership of goods is not transfer from the principal to Job-worker and job-worker has no independent authority to delegate its job to another person without the authority of principal.
1.2 Principal must be a registered person under GST Law. An unregistered person is not entitled to get benefit under GST Law and transfer of goods from principal to job-worker will constitute as Supply, thus will subject to GST.
1.3 Principal and Job worker
Person sending goods for job work is termed as Principal and the person who carry Job-work is called a Job-worker. The two terms are not defined under Model GST Act, the principal defined under Section 2(76) cannot be import to as for the term principal defined for the purpose of Job-working.
2. Supply and Sending for job-work:
The term Supply has given very wide meaning under the GST Law, as per the definition of supply for under Model GST Law, Supply covers all forms of supply where goods and services are supplied in return for a consideration or even for without consideration.
Thus without any saving, GST would be payable on material sent for job work under normal circumstances. To prevent such situation Model GST Law includes special provision under Chapter XIII which provides that no GST will be payable where the goods are sending for job work or from the premise of Job-worker to another Job-worker and so on.
3. Section 55 of Model GST Act, deals with the following issues related to JOB-WORK
3.1 Which Goods are qualified for Job-working?
3.2 What are the procedure for removal and bringing back of inputs of capital goods for Job Work?
3.3 Who has the responsibility of payment of GST?
3.4 Whether the goods can be sent from one job worker to another without bringing back the goods from the place of a Job Worker?
3.5 Is it any duration prescribed within which the Job-working required to complete?
3.6 What is the provision to deal with wastage and scrap arising out of job work?
3.7 Who will be entitled to take credit Input tax credit of Inputs and Capital Goods undergoes Job working?
Almost every goods can be send for job-working.
a. Inputs, Semi-finished or finished goods,
b. Capital Goods,
c. Moulds and Dies, Jigs and Fixtures or Tools
a. Inputs : Section 2(38) “Input” means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business. By this definition Inputs includes Semi-Finished and Finished Goods and can be send for job-wok by principal and all provisions related to the sending Inputs shall be equally applicable on Semi-Finished and Finished Goods.
b. Capital Goods: Section 2(19) “Capital Goods” means goods, the value of which is capitalized in the books of accounts of the person claiming the credit and which are used or intended to be used in the course or furtherance of business;
c. Moulds and Dies, Jigs and Fixtures or Tools: these terms are not defined under GST Act, these are commercial terms and interpreted accordingly. In several cases special moulds, dies, jigs, fixture or tools are designed or invented by principal and job-work shall require application of such moulds, dies, jigs and fixture or tools without such Moulds etc job work could not be done, generally these moulds etc are also dispatched by principals to the place of Job-workers are thus these goods are made eligible to be sent at the place of Job-workers.
Sending goods to job-work cannot be a event which are at par with sending goods for supply, thus there must be a separate procedure will require to be adopted while sending goods for job-work to ascertain there is no avoidance of GST.
Section 55(1) provides that, Principal may send any inputs and/or capital goods, without payment of tax, for job work subject to the following conditions.
a. Removal under Intimation: the provisions require that such goods can only removed under intimation to job worker’s place.
Sending goods for job-work is a regular nature of transaction, intimation on every such supply shall require intimation will not be practical, particularly where several goods are removed for different job-work to different place and for different purposes in routine. Thus this provision may require re-looking or simplified.
b.Subject to such conditions as may be prescribed: the section provides goods can be cleared to job worker subject to such condition as may be prescribed. Therefore, the procedure and conditions will be specified in the rules.
The responsibility for accountability of goods including payment of tax thereon shall lie with the principal.
3.4 Whether the goods can be sent from the place of job worker without bringing back the goods from the place of a Job Worker?
The job-worker can send goods from its place to another job-worker, for export or domestic supply without sending it back to the place of principal.
The finished goods can sent directly from place of job-worker, instead of bringing them back to place of business of principal, if such supply is in India, GST is payable. Such goods can also be exported directly from the place of job worker, either on payment of GST or without payment of GST.
The goods shall not be permitted to be supplied from the place of business of job worker unless the principal declares the place of business of the job worker as his additional place of business except in a case:
(i) where the job worker is registered under section 23; or
(ii) where the principal is engaged in the supply of such goods as may be notified by the commissioner in this behalf.
It is presumed that the entire job work shall be complete within a year from the goods send under intimation from the place of Principal. In the case of capital goods the time period is ‘Three Year’ from the date of sending under such intimation. However there is no time limit for bringing back moulds and dies, jigs and fixtures or tools.
The goods after processing shall be returned back to the place of principal within one year of their being sent out. Thus the entire process of job work from one job worker or more than one job worker shall be complete in one year. Otherwise as per provision of Section 20 of the Act, the credit availed by principal is required to be reversed. The reversed credit can be taken back when processed goods or taxable goods are returned back.
Any waste and scrap generated during the job work may be supplied by the job worker directly from his place of business on payment of tax if such job worker is registered, or by the principal, if the job worker is not registered.
The principal shall be entitled to take credit of input tax on inputs and capital goods sent to Job-worker(s) for job-work.
As per Section 20 (3) and (5), the principal shall be entitled to take credit of input tax on inputs even if the inputs or capital goods are directly sent to a job-worker for job work without their being first brought to his place of business.
The Provision under Section 55 and Section 20 have covered all aspect of Job-Work broadly, however a detail procedure and conditions are expected to be enacted under Rules and Regulations to be made under GST Act. Since Job-work industry is running in a very fragile environment, it is expected that the rules and regulation shall take care of all concerns of the industry.