Complete guide on job work under GST India

Job work is the process or treatment undertaken on goods belonging to another registered taxable person. One who is treating or processing goods of the other person is called a job worker and the one to whom goods belong is called principal. Principal manufacturer or registered person avails input tax credit in respect of goods. 18% is the rate of the GST on the work contract and 12% is the rate of the GST on building and construction. Proper GST Registration is essential for both the principal and the job worker to ensure compliance.

Job work has many rules and regulations which prove to be complicated. Get help from the Profesional Utilities to make the job work easily.

Table Of Content

What is Job work under GST?

Job work is defined as where raw material or semi-finished goods are sent by the contractor or principal manufacturer to a third party in form of the subcontracting or form of outsourcing. The third party known as the Job worker performs specific processes or tasks on material and returns to the principal the finished products back.

Job work under GST Example

Common Examples of the job work are powder coating, sitting, welding, painting, electroplating, assembly, machining etc.

Job work procedure under GST

The procedure for Job Work under GST involves several steps, including documentation, invoicing, and the transfer of goods. Here is a step-by-step guide to the process:

There is a Step-by-step guide in the procedure for Job Work under GST as mentioned below - 

• For job work goods are sent - Raw material or semi-finished goods are sent to the principal by preparing delivery challan.
• Update Delivery Challan - Once the job work is completed, the job worker must update the delivery challan to include the details of the processed goods. The updated delivery challan must be sent back to the principal.
• Delivery challan needs updation - After the completion of the job work. The updated delivery challan is sent back to the principal.
• Receiving the processed goods  - Processed goods are received by the principal on the updated delivery challan. The quality and quantity of the goods are verified.
• Tax invoices are issued  -  Processed goods are sent back to the principal then the tax invoice is issued by the job worker to the principal. Name, address of the recipient or supplier, GST identification number, description of goods value quantity, and GST rate which are applicable are mentioned.
• GST is paid  - If goods are directly supplied by the job workers to a third party then a tax invoice is issued by the job worker and GST is paid on the value of the goods. Otherwise, GST is paid by the principal at the GST rate which is applicable on the processed goods value.
• Input tax credit - Input Tax Credit can be claimed by the principal on the semi-finished or raw material sent on job work. Job workers can not take the input tax credit.
• Records need to be maintained - Even thought records need to be maintained by both supplier and principal. Records related to the processed goods received, goods sent for job work, and any tax invoice that is issued.

Timeframe for Job Work

There are certain timeframes for the job work in which work needs to be completed as mentioned below - 

• The time frame for the completion of the work depends on the agreement between the job worker and principal and the nature of the goods.
• The time frame for job work is the date from the delivery of goods to the job worker which is one year.
• The date of the delivery of the goods can be extended to another year.
• It can be extended to a further period of one year and this extension can be communicated in writing to the job worker before the original time limit expires. 

Job Work challan under GST

• The Principle issues the challan.
• All goods need to be sent with challan for the job work.
• FORM GSTR-1, shows the detail about the challan.
• Capital goods or input need to be sent on the challan.

Detail includes in the challan 

• Number and date of the delivery challan.
• Name, address, and GSTIN of the consignee and consignor.
• Description, HSN Code, and quantity of goods
• Tax amount, tax rate, and taxable value are mentioned separately in IGST, CGST, SGST, and UTGST.
• Signature and Place of supply 

Every three months, the principal submits the GST ITC-04 form.

Job Work GST Rate

The GST Rate on mechanical job work is 12% like the engineering industry only bus body construction is exempted which is 18%.

Job Work GST Return

Both the parties in the job have to file GST Return mandatorily. Form GSTR 1, and GSTR 3B are filled in the process. ITC-4 also needs to be filed related to all details of the supply/receiving of goods from job workers. 

• Having an Annual aggregate turnover of more than 5 crores - need to file the return on 25th October for April to September and 25 April for October to March.
• Having an annual aggregate turnover equal to 5 Crores - a yearly return needs to be filed on 25th April.

Details contain in ITC-04

• Goods received back from the job worker 
• Goods sent to job worker

Process of filling Job work GST Return 

• Visit GST Portal
• Click services-return- ITC Form
• Prepare offline upload invoices
• After uploading of invoices - initiate the filling
• Select Tax Period
• See taxable amount and other detail
• As applicable file DSC or EVS Return.

What are the Consequences of Non-Compliance with Job Work?

There are many Consequences for Non-Compliance with Job Work requirements under GST including penalties and interest charges- 

• Interest - Businesses have to pay an interest rate of 18% per annum on the amount due from the due date of payment till the actual date of payment. 
• Penalty - If the requirement of the job work is not fulfilled by the business then they have to pay a penalty. The nature and severity of non-compliance decide the penalty. The penalty can be Rs 10000 or 10% of the tax payable whichever is higher.
• Goods Seizure - Goods can be seized by the tax authorities due to failure by the businesses to comply with job work. 
• Prosecution: Prosecution can be faced by the business. If they intentionally or fraudulently indulge in the non-compliance. Prosecution can be imprisonment, fines, or both.

Conclusion 

Job work is a process that is process taken on behalf of the principal by the job worker throughout the job work process ownership of the goods remains with the owner. GST Return includes filling of the GSTR1, GSTR 3B along with the ITC-4. ITC-4 is where you fill out all the information on the supply and receipt of items from the job worker.

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Which GST return is submitted by job workers?

As a result, while sending products to another job worker, the job worker might endorse the challan issued by the principal to specify the quantity and description of the commodities. Like all taxpayers, the job worker must submit GSTR-1 and GSTR-3B forms.

Does GST apply to employment work?

Section 2(68) of the CGST Act, 2017 states that "the definition of 'Job-work' under GST is covered." "Any treatment or process performed by an individual on goods owned by another registered person."

What is the GST limit for job work?

Job employees must register under GST if their combined yearly revenue exceeds the threshold of Rs. 20 lakhs (or Rs. 10 lakhs for companies based in the special category states).

Is TDS relevant to Job Work?

Section 194C of the Income Tax Act of 1961 mandates the deduction of TDS on employment work at the rate of 1% or 2% (depending on the circumstance) for payments made to residents.

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