The Job work concept plays a very important role in the manufacturing industry in India. Since the services provided by the job worker come under the GST net, it becomes necessary for him to understand his taxation part. Therefore, let us see the concept of job work under GST in India. Also, we see how to find out the job work HSN code or SAC code for job work under GST. Let us understand the concept of job work first:
It is a common scenario in any industry to get certain processes pertaining to taxable goods carried out through job workers. It may be on account of the non-availability of a particular facility in the factory or due to cheaper costs involved in job work activities.
This, both the manufacturers and job workers carry out certain manufacturing activities. As per GST law, the liability to pay tax is on the manufacturer.
This indicates that even if the job worker completes the manufacturing of a taxable commodity at this end, the liability to pay tax shifts to the supplier of raw material subject to the conditions that proper documentation and given procedure shall be binding.
Further, you may read more about job work meaning under GST as per the GST Act to understand the whole concept.
What is job work?
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.
Job work procedure under GST
GST Registration for the principal or job worker
The Job worker shall take registration only if his aggregate turnover exceeds the specified threshold limit in any financial year. The threshold limit to be computed on an all-India basis. The specified threshold limit is Rs 20 lakhs or Rs. 10 lakhs in the case of special category States except for Jammu & Kashmir).
Secondly, the principal shall also take registration, only if his aggregate turnover excess as specified above. Earlier it was not allowed to make interstate supply for job work without registration. Therefore government issued notification No. 10/2017 – Integrated Tax dated 13.10.2017 and provided an exemption to this.
Therefore, it is clear that a job worker shall take registration only in cases where his aggregate turnover, equal or crosses on all India basis, in a financial year exceeds the threshold limit regardless of whether the principal and the job worker are located in the same State or in different States.
Who is the principal in the job work system under GST?
Every person who wants to send goods i.e inputs or capital goods shall take registration under GST if his aggregate turnover exceeds the given threshold limit. Therefore the GST taxpayer on whose goods, the job work process is done is the “Principal”. More details on this are available in section 143 of the CGST Act.
How goods can be sent for job work under GST?
The person registered under GST may send inputs(raw material), capital goods or semi-finished goods to a job worker for doing job work. The person sending material for job work may take these goods out by paying GST or without paying GST also.
Time limit clause to bring back processed goods under job work
On completion of the job work process, the principal who issued the material for job work may bring back the goods to his place after completion of a job work process. On the other hand, he may directly supply these goods from job worker premises to his end customer including exports.
One shall note that the goods must be supplied further or should bring back from job worker premises within 1 year in case of the inputs. In the case of capital goods excluding moulds and dies, jigs and fixtures or tools should be supplied or bring back within three years from the job worker’s premises.
Liability on the principal in respect of Goods sent for job work
According to the CGST rules maintaining records related to goods sent for job work and bringing them back lies on the principal. The Principal shall bring back goods within 1 year for inputs and three years for capital goods from job workers’ premises.
If the principal fails to do so then as per the rule it will be treated/deemed that goods are supplied at the time of issuing for job work. That means if a principal sends goods(inputs) for job work and does not bring them back within one year then he is liable to pay GST on said goods.
Supply of goods from job workers premises
Goods supplied from job worker’s premises to the end customer of principal will be treated as supplied by the principal and not by job worker as specified in section 143(1)(a) of the CGST Act.
Frequently Asked Questions
Question 1: Whether goods sent by a taxable person to a job worker will be treated as supply and liable to GST? Why?
Answer 1. 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.
Question 2: Is a job-worker required to take registration?
Answer 2. Yes, as job work is a service, the job worker would be required to obtain registration if his aggregate turnover exceeds the prescribed threshold.
Question 3: Whether the goods of the principal directly supplied from the job worker’s premises will be included in the aggregate turnover of the job worker?
Answer 3. 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.
Question 4: Can a principal send inputs and capital goods directly to the premises of job worker without bringing it to his premises?
Answer 4. 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.
Question 5: Can the principal supply goods directly from the premises of the job worker without bringing it back to his own premises?
Answer 5. 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.
Question 6: 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?
Answer 6. The goods can be supplied directly from the place of business of job worker without declaring it as an additional place of business in two circumstances namely where the job worker is a registered taxable person or where the principal is engaged in the supply of such goods as may be notified by the Commissioner.
Question 7: What are the provisions concerning taking of ITC in respect of inputs/capital goods sent to a job worker?
Answer 7. The 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 the job worker’s premises, as the case may be, within a period of one year or three years of their being sent out.
Question 8: What happens when the inputs or capital goods are not received back or supplied from the place of business of the job worker within a prescribed time period?
Answer 8. If the inputs or capital goods are not received back by the principal or are not supplied from the place of business of the 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.
Question 9: 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?
Answer 9. The condition of bringing back capital goods within three years is not applicable to moulds, dies, jigs, and fixtures or tools.
Question 10: What would be the treatment of the waste and scrap generated during the job work?
Answer 10. 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 the payment of tax.
Question 11: Whether intermediate goods can also be sent for job work?
Answer 11. 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.
Question 12: Who is responsible for the maintenance of proper accounts related to job work?
Answer 12. It is completely the responsibility of the principal to maintain proper accounts of job work-related inputs and capital goods.
Question 13: Are the provisions of job work applicable to all categories of goods?
Answer 13. No. The provisions relating to job work are applicable only when a registered taxable person intends to send taxable goods. In other words, these provisions are not applicable to exempted or non-taxable goods or when a sender is a person other than a registered taxable person.
Question 14: Is it compulsory that job work provisions should be followed by the principal?
Answer 14. 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.
Question 15: Should job workers and principals be located in the same State or Union territory?
Answer 15. 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 principals can be located either is the same State or in the same Union Territory or in different States or Union Territories.
Question 16: Is a job worker required to take registration?
Answer 16: Yes, as job work is a service, the job worker would be required to obtain registration if his aggregate turnover exceeds the prescribed threshold.
Job work HSN code or SAC
The job work is a service activity carried out on behalf of the manufacturer and the input is owned by the supplier. Therefore, the HSN code for job work will be a Service Accounting Code(SAC). Here are some of the services falls under 9988 SAC.
- Services provided by way of job work for Printing of newspapers
- Services by way of job work in relation to the manufacture of umbrella
- Bus body building Services.
You may refer to our GST rate for services table for various types of job work services under GST and their GST rates on the group level. Also, you need to check the GST HSN code list to find out the sub HSN code of your service. The GST rate of sub-HSN code will be as per the group heading i.e as per GST rate for services table.
Here you can find the list of 8 digit SAC codes of any service that exists under GST. This includes various services like installation, repair, support, etc. more
The table of services contains the GST rates of various services at the group level. For eg. 9954 SAC is for Construction services. more
Check out the GST rates of various goods under GST. Also, you can download the entire list in pdf and excel format for your reference. more
Download the delivery challan format under GST. Also, you can download the job work challans like an issue for job work and receipt after the job work challan. more