GST rules and returns for principal and job worker

The term job work is defined under section 2(68) of the CGST Act, 2017. It simply means carrying out any treatment/ process by a person on the goods belonging to another registered person. Accordingly, the person carrying out such treatment/ process is known as ‘job worker’ and the person sending the goods is known as ‘principal’.

The present article tries to cover all the provisions with regard to job work under GST.

Things to be done/ kept in mind by the principal-

Generally, when the goods are sent for job work, the principal is the person who has to carry out all the necessary procedures like issuing challan, generating e-way bill etc. However, in case the job worker is registered under GST, then, he can voluntarily carry out some of the procedures on behalf of the principal.

Provisions of section 143(2) of the CGST Act clearly states that the principal will be responsible for keeping proper accounts of inputs/ capital goods sent for job work.

Accordingly, the things to be done or kept in mind by the principal is listed down here-

1. The principal needs to prepare a challan for sending any inputs/ capital goods, without payment of tax,to the jobworker.
2. After completion of jobwork, the principal can undertake any of the following [Section 143(1) of the CGST Act]-

• Bring back the inputs/ capital goods, without payment of tax, within the following time limit-

It is important to note that the time limit of three years doesn’t apply to capital goods like moulds and dies, jigs and fixtures or tools.

• Supply the inputs/ capital goods in any of the following manners-
  • On payment of tax when supplied within India; or
  • With/ without payment of tax when exported out of India.

Notably, the supply is to be done within a period of one year in the case of inputs and within a period of three years in the case of capital goods. Additionally, in such a case, under GST registration, the principal will have to add the jobworker’s place of business as his additional place of business.

3. Non-receipt of goods within prescribed time limit[Section 143(3) and Section 143(4) of the CGST Act]-

In case the inputs/ capital goods sent by the principal is not received back within a prescribed time limit, the principal will have to face the below-mentioned consequences-

4. Treatment of waste and scrap generated during the process of job work [Section 143(5) of the CGST Act]-

Many times, waste and scrap are generated during the process of job work. The waste and scrap so generated can be treated in the following manner-

Details to be covered in job work challan [rule 45(2) of the CGST Rules]-

As seen above, for sending the goods for job work, the principal needs to prepare a challan.

Rule 45(2) simply states that the job work challan issued by the principal should contain details as specified under rule 55. Accordingly, the following details is to be covered-

1. Date and number of the challan;
2. Following details of the principal-

• Name,
• Address, and
• GSTIN.

3. Following details of the job-worker-

• Name,
• Address, and
• GSTIN or Unique Identity Number.

4. HSN code and description of the goods sent;
5. Quantity;
6. Taxable value;
7. Place of supply (only in case of inter-state movement of goods); and
8. Signature of the principal.

Furnishing of returns [rule 45(3) and rule 45(4) of the CGST Rules]-

The principal is required to submit a quarterly return in Form GST ITC-04 summarizing details of challans regarding goods dispatched to or received from the job worker. The return in Form GST ITC-04 is to be submitted within a period of 25 days of the month succeeding the end of the respective quarter.

While filing return in Form GSTR-1, in Table 13 at sr. no. 9 basic details like serial no. of challans issued to and from the job work; total number; cancelled challan numbers and net issued is to be mentioned.

Further, in cases, wherein, inputs/ capital goods are not returned back within the prescribed time limit and accordingly the principal is liable to pay the tax. The same is to be declared as supply while filing a return in Form GSTR-1.

Some of the important points-

• As per proviso to rule 138 of the CGST Rules, an e-way bill is to be mandatorily generated (either by the principal or the registered job worker) when the goods are sent by the principal located in one State/ Union territory to a job worker located in another State/ Union territory.
• Section 19 of the CGST Act deals with the provisions of input tax credit with respect to inputs/ capital goods sent for job work. Accordingly, the following can be summarized-
  • The principal is eligible to avail input tax credit in respect of inputs/ capital goods sent to the job worker.
  • The input tax credit is available also when the inputs/ capital goods are directly sent to the job worker without prior receiving them at the place of business of the principal.

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