“Job Work” has been defined by the revised Draft Model GST Law (the Draft Act) to mean an undertaking of any treatment or process by a person on goods belonging to another registered ‘taxable person’ (with the expression “job-worker” construed accordingly).
Chapter XIII and section 55 of the Draft Act deals exclusively with the concept of ‘job work’ and the ‘special procedure’ for removal of goods for such purposes. Under this provision, a registered ‘taxable person’ (referred to in the said section as the “principal”) may (under intimation and subject to prescribed conditions, if any) send any inputs and/or capital goods, without the payment of (GST) tax, to a job worker for job-work (from there subsequently may be sent to another job worker etc).
The responsibility under the Draft Act for accountability of the said inputs and/or capital goods lies with the “principal” concerned.
“Input” means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business.
“Capital goods” means goods, the value of which is capitalised 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.
“Removal’’, in relation to goods, means —
(a) Despatch of the goods for delivery by the supplier thereof or by any other person acting on behalf of such supplier, or
(b) Collection of the goods by the recipient thereof or by any other person acting on behalf of such recipient.
“Place of business” includes —
(a) a place from where the business is ordinarily carried on, and includes a warehouse, a godown or any other place where a taxable person stores his goods, provides or receives goods and/or services; or
(b) a place where a taxable person maintains his books of account; or
(c) a place where a taxable person is engaged in business through an agent, by whatever name called.
“Principal” means a person on whose behalf an agent carries on the business of supply or receipt of goods and/or services.
“Agent” means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services on behalf of another, whether disclosed or not.
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Bringing back Inputs
To avoid payment of GST tax above, such principal must bring back the said inputs and/or capital goods (other than moulds and dies, jigs and fixtures, or tools) after completion of job-work or otherwise, within 1 year/3 years (respectively) of them being sent out to any of his/her/its ‘place of business’ without payment of tax.
Supply after Job Work within Time Limit
To continue such exemption from payment of GST under Job Work, the above said inputs/capital goods, after completion of job work or otherwise, must be supplied within 1 year/3 years (respectively) of them being sent out from the place of business of a job-worker on payment of tax within India, or with/without payment of tax for export (as the case may be).
However, to so supply the goods from the place of business of a job worker, the said “principal” must declare the same as his/her/its ‘additional’ place of business, unless —
- The job-worker is registered for GST
- “Principal” is engaged in the supply of goods ‘notified’ by the Commissioner in that respect.
Failure to ‘receive back’ or ‘non-supply’
Where the inputs/capital goods sent for job work are not received back or are not supplied from the place of business of the job worker in the aforesaid manner, it would be ‘deemed’ that such inputs had been supplied by the concerned principal to the job-worker on the day when the said inputs were sent out.
The period of 1/3 year(s) shall be counted from the date of receipt of inputs/capital goods (as the case may be) by the job-worker.
‘Input Tax Credit’ for Inputs/Capital Goods
The Draft Act allows the “principal” (subject to prescribed conditions and restrictions) ‘input tax credit‘ (ITC) on inputs/capital goods sent to a job-worker for job-work.
The “principal” is entitled to take ITC on inputs even if the said inputs/capital goods are directly sent to a job-worker for job-work without their being first brought to the concerned principal’s place of business.
Waste and Scrap Treatment
Any waste and scrap generated during the job work may be supplied by the job-worker directly from his/her/its place of business on payment of (GST) tax, if such job worker is registered under GST, or by the principal, if the job worker is not so registered.
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