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    Treatment of job work in GST

    JOB WORK

    Have you ever thought what are the GST implications when the person (owner) decided to get job work done from outside?

    This page will help you to understand the following topics:

    1. What are the sections of the GST Act that apply to Job work?
    2. Meaning of Job-work?
    3. Does job worker require to take registration under the GST Act or not?
    4. What are the pre-conditions to be satisfied before dispatching goods to the job worker?
    5. What is the time limit for bringing back of the goods from the job worker?
    6. What will happen if goods are not returned back to the owner in the stipulated time by the job worker?
    7. Whether the time period for bringing back of goods from the job worker can be increased or not?
    8. Who can claim the ITC available on goods?
    9. What will happen if goods destroyed?
    10. Can the owner of the goods avail ITC on the waste or destroyed goods?
    11. Can existing job-worker can transfer the goods (whether input or capital or both) to another job-worker?

    Let’s roll in!!!

    1. What are the sections of the GST Act that apply to Job work?

    Section 143 gives the provision for the understanding of Job work in GST.

    1. Meaning of Job-work?

    As per section 2(68), Job work means any treatment or process undertaken by a person (commonly known as job worker) on goods belonging to another registered person (owner of the goods).

    1. Does job worker require to take registration under the GST Act or not?

    Yes, the job worker is required to take GST registration under the GST Act only if his aggregate turnover** (on all INDIA basis) in a financial year exceeds ₹ 40 lacs*.

    Note 1*: The job worker does not require to take the registration in the GST Act mere based on Inter-state or Intra-state supply, but he had to see that his aggregate turnover in a financial year is more than ₹ 40 lacs for whole India. (for some states limit is different for registration under GST)

    Note 2**: “Aggregate turnover” means aggregate turnover means the aggregate value of all taxable supplies (excluding the inward supplies on which reverse charge mechanism is active and CGST, SGST, IGST, UGST and Cess amount), exempt supplies, exports of goods and services and interstate supply with same PAN number.

    1. What are the pre-conditions to be satisfied by the registered person(owner) before dispatching taxable goods without payment of tax to the job worker?

    As per section 143 of the GST Act, every registered person who is sending the goods to the job worker for further work on goods or capital goods shall intimate to the department in writing or by the registered email id.

    1. What is the time limit for bringing back the goods from the job worker?

    The owner must bring back the goods from the job worker as below:

    Type of goods Period for bringing back
    Other than capital goods Within 1 year
    Capital goods Within 3 years
    1. What will happen if goods are not returned to the owner in the stipulated time by the job worker?

    If goods are not returned in the stipulated time (as discussed in Q5.), then it will be deemed as a supply of goods to the job worker by the owner from the date when such goods were sent to him.

    Consequences:

    The owner had to pay tax and interest on such goods which are not returned within the stipulated time.

    1. Whether the period for bringing back of goods from the job worker can be increased or not?

    Yes, the period can be increased only if the following conditions are satisfied:

    • the owner must show the Commissioner the reasonable cause,

    and

    • the Commissioner believes and grants the permission for an extension.

    The maximum time limit can be increased by the commissioner:

    Type of goods Maximum time limit increment
    Other than capital goods 1 year
    Capital goods 3 years
    1. Who can claim the ITC available on goods?

    The input available on the goods can be claimed by the owner from the very first day when the goods were dispatched to job worker, but if the goods are not returned from the job worker, then that input shall be reversed by the owner.

    1. What will happen if goods are destroyed at the job worker site?

    It can be answered under 2 circumstances:

    If goods (destroyed) do not have any market value If goods (destroyed) have a market value
    Job worker can dispose of owner behalf and further no action to be taken i. If Job-worker is registered-He can dispose of an owner’s behalf after paying taxes.

     

    ii. If Job-worker is unregistered-

    The owner had to dispose of and had to pay taxes.

    1. Can the owner of the goods avail ITC on the waste or destroyed goods?

    Yes, the owner can avail all ITC irrespective of the wastage of goods.

    1. Can existing job-worker can transfer the goods (whether input or capital or both) to another job-worker?

    Yes, under the GST Act one job-worker can transfer the goods to other job-worker only if the challan for sending goods must be endorsed by the job-worker or owner of the goods.

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