GST on Job Work: Registration, Return and Tax Rates

Meaning of Job Work Under GST

According to section 2(68) of CGST Act 2017, job work means any treatment or process undertaken by a person on goods belonging to another registered person.

A person undertaking the job work is known as Job Worker and the person on whose behalf job work is undertaken is known as the principal.

These job works can make an input/RM either finish good or intermediary goods for the principal.

Example: In case of Plastic bottle industry, bottle caps and bodies are manufactured by small manufactures known as job worker. The principal manufacturer sends raw material to the job worker and after processing job worker sends the finish goods to the principal manufacturer.

Registration of Job Worker

A job worker is required to register under GST only if its turnover exceeds 20 lakh (10 lakh in special cases) in a financial year. In case job worker is not required to register, the principal manufacturer (registered) should declare job worker premises as its own additional place of business. Also Read: Person Who Must Get GST registration

Relevant FAQ’s

Q: Should Job worker pay GST?

  A: If job worker is registered under GST, he has to pay GST on job work (service) charges only.

Q: What is the rate of tax for Job work ?

A: Job work is defined as service and its tax rate varies from Nil to 12%. You can check GST rate of job work – HERE.

Q: Can a job worker take registration under Composite Scheme?

A: No, Composite scheme is not available to any service service provider except restaurant.  Recommended to Read : Composite Scheme Under GST 

Steps involved under Job Work: For Principal

Step 1: Send goods to Job workers 

Intimate jurisdictional officer and sends input/capital goods (directly or indirectly) to job worker without paying GST and again to another job worker, if required, under cover of a challan.

ITC of goods sent to job worker will be allowed to principle.

It is preferable to intimate through a physical letter and gets the acknowledgement of the same.

The letter should include- (i) Name of the material; (ii) HSN code; (iii) Job worker’s address and premises; and (iv) the end product and it’s return or export or to other party for further processing from direct Job worker’s premises

Step 2: Bring back the same goods either as processed or unprocessed

After completion of job work brings back input within 1 year and capital goods within 3 years.

However this time limit is not applicable in case of moulds and dies, jigs and fixtures or tools supplied by the principal to job-worker.

Q: What will happen if goods are not received back in time?

A: If goods are not received within prescribed time limit ( 1 or 3 years), it shall be deemed that such goods had been supplied by the principal to the job worker on the day when the said goods were sent out. Therefore principle shall reverse the ITC already claimed and declare such supplies in GSTR 1 and pay GST on supplies made to job worker with interest and penalty, if any.

You can remove goods from job worker’s premises without paying GST while transporting it:

❗ In other cases, the principal should pay GST while removing goods from job worker.

Treatment of Waste generated in job work

If job worker is registered under GST, waste generated while undertaking job work can be sold/supplied directly by the job worker on payment of tax. In other cases, the principle should supply waste and pay tax.

Return to be filled by Principle

Return Form- GST ITC- 04

Periodicity- every quarter

Time Limit- Within 25^th day of the month succeeding the said quarter (for April-June Quarter file within 25th July). The time limit can be extended by Commissioner by a notification in this behalf.

The content of Return- Details of challans in respect of goods dispatched to a job worker or received from a job worker or sent from one job worker to another during a quarter.

GST Tax Rates on Job Works

Source: Tax Rates From CBEC

Download: E-book on Job Work by ICAI