Often in business processes, goods are sent directly to the job-worker. There could be many reasons behind sending goods to job-worker directly, like saving cost of transport, time saving, expedient output etc.
Section 143 & Rule 45 provides for the rules & procedure movement of goods between job-worker. Section 19 deals with the ITC on goods sent to job-worker.
Rules relating to movement of goods between Job-worker & Principal
Section 143 of CGST Act allows a taxpayer to send any inputs and capital goods to job-worker without the payment of tax. The said inputs or capital goods may be further sent from one job-worker to another job-worker for processing and so on.
The inputs, that are been sent to job-worker, shall either be brought back to the Principal or shall be supplied within the period of 1 year from 1st movement to job-worker.
Likewise, the capital goods, that are been sent to job-worker, shall either be brought back to the Principal or shall be supplied within the period of 3 year from 1st movement to job-worker.
Where the inputs or the capital goods, that were sent for job-work, are not received back by the principal:
- Either after completion of job work or
- Within the time mentioned above or
- Are not supplied (final sale) from the place of the job worker within above mentioned period
from the receipt inputs or capital goods by 1st job-worker, it shall be considered that such inputs or capital goods had been supplied commercially (final sale) by the principal to the job-worker on the day when the said inputs were originally sent out. The period of one year/three years shall be counted from the date of receipt of inputs by the 1st job-worker. This limitation of time shall not apply to the capital goods like moulds and dies, jigs and fixtures, or tools. The said deemed supply shall be declared in FORM GSTR-1 and the principal shall be liable to pay the tax along with applicable interest.
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.
Issuance of Challan for supply of goods to Job-worker
The inputs or capital goods shall be sent to the job-worker under the cover of a challan. The Principal shall issue the challan even where such goods are sent directly to a job-worker. Where the goods are sent from one job-worker to another job-worker, the challan may be issued either by the principal or the job-worker sending the goods to another job-worker. In case if job-worker is not intending the issue challan in his own name then job-worker may endorse the challan originally issue by the Principal, indicating therein the quantity and description of goods where the goods are sent by one job-worker to another or in case goods are returned to the principal.
Prior – Intimation to Department
Prior to sending the inputs or capital goods to job-worker, the taxpayer shall file an intimation to the department intimating name and address of job-worker, process involved etc. Generally, such intimation is valid for a financial year but it is not explicitly written in the act. As the format of such intimation has not been given in the act, format of intimation from Excise laws may be adopted after making necessary changes.
Supply (Commercially) from the place of Job-worker
Principal shall be able to supply the said inputs or capital goods from the place of job-worker if:
- Either Principal has declared the place of job-worker as his additional place of business or
- Job-worker itself is registered under the act.
It is advisable for the Principal to declare the place of job-worker as his additional place of business in either of the case avoid complication in future times.
Books & Records and Returns
It shall be the responsibility of the Principal to maintain proper books and records in respect of inputs and capital goods sent to the job-worker and its disposal from place of job-worker.
The Principal shall file return in Form GST ITC – 04 in respect of goods dispatched to a job-worker or received from a job-worker or sent from one job-worker to another. Periodicity of such return is quarterly. Such return shall be filed within 25 days from the end of the quarter, i.e. for example for the month of September 2018, last date for filing of GST ITC – 04 shall be 25th October 2018.
But currently vide Notification # 59/2018 – Central Tax dated 26th October, 2018, last date for filing GST ITC – 04 return for the period from July, 2017 to September, 2018 has been extended till the 31st day of December, 2018.
ITC On inputs sent to Job-worker
Section 16 prohibits availability of ITC to the taxpayer for goods or services procured unless 2 conditions are fulfilled:
- He is in possession of a tax invoice or such other tax paying documents pertaining to goods or services procured and
- He has actually received such the goods or services.
But Section 19 is an exception to Section 16 which states that the principal shall be allowed input tax credit on inputs sent directly to a job-worker. Therefore the principal shall be allowed to take credit of input tax on inputs or capital goods even if the inputs or capital goods are directly sent to a job-worker without being first brought to his place of business.
Reference To Definitions:
Section 2 – (59): “input” means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business.
Section 2 – (19). “capital goods” means goods, the value of which is capitalised in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business.
Section 2 – (68). “job-work” means any treatment or process undertaken by a person on goods belonging to another registered person and the expression ” worker” shall be construed accordingly.
Section 2 – (88). “principal” means a person on whose behalf an agent carries on the business of supply or receipt of goods or services or both.
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