GST on Job Work: Under the GST, the term ‘Job Work’ is significant. Even though there is no GST on commodities delivered to the Job Worker for the purpose of job work and returned to the Principal once the Job Worker has completed the job work, the Legislature has enacted full-fledged GST laws in regard to transactions between the Principal and the Job Worker. In this article, let’s understand everything about the Impact of Goods and Services Tax Rate on Job Works.
- What is Job Work?
- Input Tax Credit on Goods Sent for Job Work
- List of Documents Required for Job Work
- Transitional Provisions on Job Work
- Job Work – Form GST TRAN-1
- GST Rates on Job Work
- FAQ’s on GST Job Work Under GST
Processing or working on raw materials or semi-finished items provided by the principal manufacturer to the job worker is referred to as job work. This is to finish a part (or) the entire process that leads to the creation or finishing of an item, or any other critical operation. For example, large shoe manufacturers (principals) send half-finished shoes (upper part) to smaller shoemakers (job employees) to finish. The workers return the shoes to the main maker.
Thus Job worked is any treatment or process performed by a person on goods owned by another registered person. The person who performs the job work is referred to as a job worker.
Note: The value of items sent by the principal will not be included in the registered job worker’s total turnover.
The principal manufacturer will be able to deduct tax paid on items sent on job work. There are, however, some restrictions which are listed below:
Goods Can Be Sent To A Worker On The Job
- From the principal’s workplace
- Directly from the supplier of such goods’ place of supply
In both situations, ITC will be permitted.
The effective date for items shipped is determined by the location of the business:
- Date of products sent out: Sent from the principal’s place of business
- Send straight from the seller of such items’ place of supply: date of receipt by the job worker
The effective date is significant because it will aid in determining the point at which the products will be taxed if they are not returned within the prescribed time frame (see point C below)
The major manufacturer must receive the goods within the following time frame:
- 3 years for capital goods
- 1 year’s worth of input goods
If goods are not returned within the above-mentioned time frame, they will be recognised as a supply from the effective date forward, and the principal will be responsible for the tax.
- Accounts & Records: The principal will be responsible for keeping adequate accounts for the inputs or capital items.
- Challans Required:
- A challan must accompany all products sent for job work.
- The principal will be the one to issue the challan.
- Even for inputs or capital products sent straight to the job-worker, it will be provided.
- In Form GSTR-1, the information of challans must be supplied.
- Form GST ITC – 04 must also be filled out with challan information.
- Form ITC-04: Every quarter, the principal must submit FORM GST ITC-04. He/She must include information about challans such as Goods that are delivered to a job worker, received from a job worker, or sent from one job worker to another.
Note: The following information must be included on the challan:
- The delivery challan’s date and number
- Consigner and consignee’s names, addresses, and GSTIN
- HSN code, item description, and quantity
- CGST, SGST, IGST, and UTGST each have their own taxable value, tax rate, and tax amount.
- location and signature
This applies to things removed for job work before the application of GST and returned on or after the implementation of GST. If the following requirements are met, no tax will be due:
- The goods must be returned to the factory within 6 months of the 1st of July (that is, by December 31, 2017). (extendable for a maximum period of 2 months).
- Form TRAN-1 is used to declare goods held by job workers.
- Only after paying the applicable taxes (Excise and VAT if before GST) can the major manufacturer sell the items under job work. GST is applicable if he sells after July 1, 2017. This law does not apply to commodities that are exported out of India within six months of the designated date (extendable by not more than 2 months).
ITC will be collected from the major manufacturer if the goods are not returned within the time frame.
Both the job worker and the principal manufacturer must file FORM GST TRAN-1, detailing the stock held by the job worker for the principal/with the job worker/by the job worker. They must state the number of inputs, semi-finished items, and final goods they had for further information, see our TRAN-1 guide.
The GST rates of job work for different categories are tabulated below:
|Job Work on||GST Rate|
|GST on Job Work for Agriculture, forestry, fishing, animal husbandry||0%|
|GST on Job Work for Intermediary services related to cultivation and animal rearing||0%|
Is GST applicable on printing?
Yes, 12% GST applicable to Printing and Supply of Trade Advertisements.
What is the frequency to file ITC-04?
ITC-04 is filed once in every quarter.
What is the GST rate on job work on shawls like embroidery and hand work?
The job work rate for shawls with embroidery work is 18%.
What are the mandatory documents in GST when material has been sent for job work and sold to customer from job worker’s place?
In accordance with GST provisions on e-way bill, each registered person who causes the movement, even in cases where such movement is for reasons not relevant to supply of goods with a value of more than Rs.50,000 must generate an electronic bill. Therefore, e-way bills should be generated even when goods are moved for work. In case of movement, either the principal manufacturer or the registered employee would generate an e-way bill, irrespective of the shipment value in the event of interstate movement.