Section 143 Of Gst Job Work Procedure Under Gst Act

Section 143 of GST – Job work procedure under GST Act

Statutory Provisions (1) A registered person (hereafter in this section referred to as the “principal”) may under intimation and subject to such conditions as may be prescribed, send any inputs or capital goods, without payment of tax, to a job worker for job work and from there subsequently send to another job worker and likewise, and shall, ––

(a) bring back inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, jigs and fixtures, or tools, within one year and three years, respectively, of their being sent out, to any of his place of business, without payment of tax;(b) supply such inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, jigs and fixtures, or tools, within one year and three years, respectively, of their being sent out from the place of business of a job worker on payment of tax within India, or with or without payment of tax for export, as the case may be:

Provided that the principal shall not supply the goods from the place of business of a job worker in accordance with the provisions of this clause unless the said principal declares the place of business of the job worker as his additional place of business except in a case—

(i) where the job worker is registered under section 25; or(ii) where the principal is engaged in the supply of such goods as may be notified by the Commissioner.

(2) The responsibility for keeping proper accounts for the inputs or capital goods shall lie with the principal.(3) Where the inputs sent for job work are not received back by the principal after completion of job work or otherwise in accordance with the provisions of clause (a) of sub-section (1) or are not supplied from the place of business of the job worker in accordance with the provisions of clause (b) of sub-section (1) within a period of one year of their being sent out, it shall be deemed that such inputs had been supplied by the principal to the job worker on the day when the said inputs were sent out. (4) Where the capital goods, other than moulds and dies, jigs and fixtures, or tools, sent for job work are not received back by the principal in accordance with the provisions of clause (a) of sub-section (1) or are not supplied from the place of business of the job worker in accordance with the provisions of clause (b) of sub-section (1) within a period of three years of their being sent out, it shall be deemed that such capital goods had been supplied by the principal to the job worker on the day when the said capital goods were sent out. (5) Notwithstanding anything contained in sub-sections (1) and (2), 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.Explanation. ––For the purposes of job work, input includes intermediate goods arising from any treatment or process carried out on the inputs by the principal or the job worker.

Analysis and Updates

IntroductionThis section provides for a special procedure to exempt supplies from payment of GST by a principal to a job worker and return from a job worker to a principal subject to certain conditions and procedures.In a business scenario, it may not be possible for an industry to carry out all processes of manufacturing the product within its own premises. In such an eventuality, the manufacturing unit will have to get the work done i.e. processing of the raw materials or intermediate product from other businesses. The process performed by a person on the goods belonging to another registered person is commonly understood as Job Work.Meaning of job work and job worker: Section 2(68) of CGST Act, 2017 defines the meaning of the term ‘job work’. In terms of the said provision, it means a person undertaking any treatment or processing of goods belonging to another registered person. Any person who executes such job work will be considered as “Job worker”. As per the Section 2(68) the Job worker may or may not be registered but the principal is required to be registered.This definition is much wider than the one provided under Central Excise provisions (Notification No. 214/86 – CE dated 23rd March, 1986), wherein job-work has been defined in such a manner so as to ensure that the activity of job-work must amount to manufacture. However, the definition of job-work under GST laws reflects the change in basic scheme of taxation relating to job-work. Works such as fabrication, repair, etc which are not related to manufacture also gets included under the term “job work”.AnalysisDefinition of Job-workThe definition of job work contains three important phrases, namely:

treatment or process – there is no indication here that the result of the treatment or process must be manufacture; that is, the emergence of a distinct new product. This implies that whether or not the treatment or process results in manufacture, the treatment or process per se will always be treated as a supply of services when read along with paragraph 3, schedule II of the CGST Act viz., any treatment or process which is applied to another person’s goods is a supply of services. However, irrespective of whether the treatment or process amounts to manufacture resulting in a distinct new product the process would amount to job work. Therefore, the services provided by the job-worker will be classified under HSN 9988 and treated as supply of services;goods belonging to another person – The basic requirement that could be considered, is that, on the one hand this requirement ought not to be understood that 100% of the goods required for the treatment or process must necessarily be provided by the principal and on the other hand it cannot be satisfied where non-essential or ancillary goods alone are provided by the principal and yet attempt to operate under the job work model. A reasonable approach demands that at least one, if not more, of the primary material must be provided by the principal where the intention is to secure the services of – treatment or process – offered by the job worker to be expended on these primary materials of the principal. The transaction would not fail to be a job work when the job worker adds his own material, whether secondary or ancillary, but in addition to the primary material provided by the principal. And a case where all goods other than the primary material are provided by the principal, care needs to be taken in making the decision as to whether it qualifies for the facility under section 143 and no one-fits-all answer should be attempted in this case;such person being a registered person – this is very interesting that unless the principal is himself already registered, the entire transaction will fail to be job work. In other words, job work will be job work only if the principal is registered and if the principal is unregistered then, job work will merely be work. And the classification available for job work under HSN 9988 will not be available and other classification as appropriate to the processed goods will need to be followed.

Sending of inputs or capital goods to job workerThis provision enables a registered person to send inputs / capital goods under intimation and subject to such conditions as may be prescribed to a job worker without payment of tax. It is clarified vide Circular No. 38/2018 dated 26.03.2018 that the details of job-work challans filed in Form GST ITC – 04 will itself serve as an intimation as envisaged under Section 143(1). On this basis, it could be inferred that non-declaration of job-work challans erroneously could be termed as non-intimation and accordingly, the exemption claimed under Section 143(1) shall be denied. In such a scenario, the goods sent to job-worker will qualify as supply and the principal would be liable to pay GST along with interest. A provision is included vide CGST Amendment Act, 2018 for extension of the said time limit to further period of one and two years respectively for inputs/capital goods on sufficient cause being shown with approval of commissioner, hence relaxation given. Some genuine job workers were facing problems in situation such as hull construction, fabrication of vessels etc, where the time period was not sufficient and hence the amendment boughIt is further clarified that the principal shall issue the challan in triplicate in terms of Rule 45 and Rule 55 for sending the goods for job-work and send two copies of the challan with the goods to a job-worker. The goods can be returned by the job-worker along with one challan and the job worker will retain the other. In case goods are sent from one job-worker to another, either the job-worker or the principal may issue a separate challan or alternatively, the original challan issued by the principal can be endorsed. It shall be noted here that the goods if sent in piecemeal, the job-worker shall issue a separate challan for returning the goods or to send it to another job-work.Rule 55 of CGST Rules provides that transaction of goods sent for job work can be without an invoice, but a proper delivery challan containing specific details must be issued while sending goods to the job worker. serial number of such delivery challan shall also be provided in Table 13 of GSTR 1.The Circular referred to above has also clarified that the principal shall issue an invoice on the date on which the time period of one year / three years has lapsed and shall declare such invoice in the return filed for such tax period. It is further clarified that the date of sending the goods shall be termed as the date of supply and accordingly, the principal should pay the tax along with interest.The details of the Delivery Challan shall be as follows:

(i) date and number of the delivery challan,(ii) name, address and GSTIN of the consigner, if registered,(iii) name, address and GSTIN or UIN of the consignee, if registered,(iv) HSN code and description of goods,(v) quantity (provisional, where the exact quantity being supplied is not known),(vi) taxable value,(vii) tax rate and tax amount – central tax, State tax, integrated tax, Union territory tax or cess, where the transportation is for supply to the consignee,(viii) place of supply, in case of inter-State movement, and(ix) signature.

The delivery challan shall be prepared in triplicate, in case of supply of goods, in the following manner: –(a) the original copy being marked as ORIGINAL FOR CONSIGNEE;(b) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER; and(c) the triplicate copy being marked as TRIPLICATE FOR CONSIGNER.Where goods are being transported on a delivery challan in lieu of invoice, the principal should declare the details of goods and generate an e-way bill for movement of goods.Receipt of inputs or capital goods from the job worker after completion of job work or otherwiseAfter the processing of goods or otherwise, the goods may be dealt with in any of the following manner by the principal within One year/Three Year or such further period as extended by the commissioner-(a) Brought back to any place of business without payment of tax and thereafter supplied,

(i) Within India on payment of tax,(ii) For export – with or without payment of tax,

(b) Supply from the place of business of job worker –

(i) Within India on payment of tax,(ii) For export – with or without payment of tax,

Direct Supply of goods from job workerThe goods can be supplied directly from the place of business of job worker by the principal only when the principal declares the place of business of the job worker as his additional place of business. However, the exceptions are –

(i) If job worker is registered under Section 25;(ii) The principal is engaged in the supply of notified goods.

Responsibility for accountability of Inputs/ Capital GoodsThe principal is responsible and accountable for keeping proper accounts of the inputs or capital goods and for all the transactions between him and the job worker.The above chain can be represented as under:Inter-State job-workJob-work activity can be undertaken in inter-State trade as ‘issue’ of inputs and capital goods to job worker which is exempt from payment of tax irrespective of whether the job-worker is located within the State or otherwise. Therefore, whether the job worker is located in a different State/UT as that of the Principal does not alter the operation of section 143. One of the additional features is that the Principal is permitted to supply the processed goods directly from the premises of the job worker provided that ‘the location of the job worker is included as an additional place of business’ of the Principal. Where the principal being registered in one State and the job worker is located in another State, such a principal will not be able to satisfy the above condition to be allowed to make supplies directly from the premises of the job worker. This is due to the fact that the principal is not a registered person in the State where the job worker is located although he may otherwise be registered in his own State. Accordingly, if the principal desires to directly supply processed goods from the premises of the job worker located in a State different from the State where the principal is registered, the principal will not be permitted to avail this facility allowed by section 143. Accordingly, goods sent on job-work to another State can be further supplied after job-work, from the premises of such job-worker only if the job-worker is registered and not otherwise.For example, if the principal registered in Hosur, Tamil Nadu, purchases a chassis from a factory in Hosur and sends the same to a job worker in Amritsar, Punjab for carrying out body building works on the chassis to manufacture a bus; and then, if the principal finds a customer in Chandigarh, it would not be economical to bring the finished bus all the way back to Tamil Nadu (to satisfy the requirement of section 143) and send the bus back to customer in Chandigarh. For this reason, if the principal desires to directly supply the finished bus from the job worker’s premises in Punjab directly to the customer in Chandigarh, it would not be possible as the principal cannot include Amritsar in his registration obtained in Tamil Nadu. The principal has no option but to bring the bus all the way back and send it again. Alternatively, the supply can be effected from the premises of job-worker (Amritsar) if such job-worker seeks registration.Inputs sent to Job Worker not received back within one year or such extended period by the commissioner.As per section 143(3), where the inputs sent for job-work are not received back by the “principal” after completion of “job-work or otherwise” or are not supplied from the place of business of the job worker as aforesaid within a period of one year of their being sent out or such extended period to a maximum of one year, it shall be deemed that such inputs had been supplied by the principal to the job-worker on the day when the said inputs were sent out. Hence, the Principal would be liable to pay GST along with interest from the date inputs were sent out.As per amendment Act 2018, this period of one year can be extended up to further period of up to one more year by commissioner if taxpayer has shown sufficient reason for doing the same.Capital Goods Sent to Job Worker not received back within three years or such extended period by the commissionerAs per section 143(4), where the capital goods, other than moulds and dies, jigs and fixtures, or tools, sent for job-work are not received back by the “principal” or are not supplied from the place of business of the job worker as aforesaid within a period of three years of their being sent out or such extended period to a maximum of two years, it shall be deemed that such capital goods had been supplied by the principal to the job-worker on the day when the said capital goods were sent out. Hence, the Principal would be liable to pay GST along with interest from the date capital goods were sent out.In this regard, the Circular referred to above clarifies that the principal shall issue an invoice on the expiry of one year + one year if extended (inputs) / three years + two years if extended (capital goods) and declare such invoice in the return filed for such month. Since, it is deemed to be a supply effected on the date of sending the goods to the job-worker, the tax shall be paid along with applicable interest.It is also important to note that the requirement of bringing back the goods sent to the job worker is not applicable on moulds and dies, jigs and fixtures, or tools. Hence such items may remain with the job worker.As per amendment Act 2018, this period of three years can be extended up to further period of up to two more years by commissioner if taxpayer has shown sufficient reason for doing the same.Waste and Scrap generated at Job workers’ premisesAs per section 143(5), 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. Aspects relating to taking input tax credit in respect of inputs/capital goods sent for job-work have been specifically dealt in Section 19, which provides that the credit of taxes paid on inputs or capital goods can be taken in the specified manner.Amortization of capital goods issued free-of-chargePrincipal wants job worker to process the goods as per their customization and for that purpose, principal sends certain capital goods viz. Moulds and dies, jigs and fixtures or tools which are used in the process of Job working having short span of life and bound to be Wiped out during that process. By nature, such goods are regarded as capital goods for principal but similarly its very rare that such goods remain intact after certain period. Accordingly, even though such goods are issued free of charge to job worker, the same need not be returned back within stipulated time as mentioned in section 143(4).Eligibility of Input tax credit in the hands of Principal:Principal have availed input tax credit on procurement of such capital goods but he will amortize value of such goods in his books of over a period of time. It is clarified in circular No.38/12/2018 dated 26th March 2018 that, in view of the provisions contained in clause (b) of sub-section (2) of section 16 of the CGST Act, the input tax credit would be available to the principal, irrespective of the fact whether the inputs or capital goods are received by the principal and then sent to the job worker for processing, etc. or whether they are directly received at the job worker’s place of business/premises, without being brought to the premises of the principal. Since ownership of such goods will remain with principal, this is not called permanent transfer of business assets and not falls in Schedule-I transaction. Principal can claim ITC on such free supplied goods.Inclusion/exclusion of free-issue materials for use in job workThere are certain instances where Principal wants job worker to use only specific raw material in jobwork process. Now this arrangement can be two way.When such materials are procured by job workerIn this case, if responsibility to procure such materials are of Job worker only then Job worker is eligible to claim ITC on procurement of such material used in jobwork process and GST shall be leviable in Jobwork charges only since valuation of jobwork charges already considered cost of such raw material.But if responsibility to procure such materials are of principal but job worker will procure such materials on behalf of principal then together with Jobwork charges, value of such materials are also needs to be added as per valuation provision contained in section 15(2)(b).When such materials are free supplied by principal to job workerIn this case, raw material and consumables are purchased by Principal only and sent to job worker to be used in job working process. ITC on raw material and consumables are validly availed by principal. Job worker will raise invoice of job work charges to principal where in he is not supposed to include value of such free materials provided by principal.Job work not resulting in ‘manufacture’In erstwhile law, jobwork is defined as under”As per Rule 2(n) of the Cenvat credit Rules, 2004, Jobwork means processing or working upon of raw material or semi-finished goods supplied to the job worker, so as to complete a part or whole of the process resulting in manufacture or finishing of an article or any operation which is essential for aforesaid process and expression “Job worker” shall be construed accordingly.Jobwork definition as per GST is as below:job work” means any treatment or process undertaken by a person on goods belonging to another registered person and the expression “job worker” shall be construed accordingly.As you can see, there is wide coverage of meaning of job work under GST regime. Necessary ingredients to treat any process as job work is that goods must be belonging to another Registered person unlike in earlier regime that such process must be resulting in manufacture or finishing of an article. So even though any treatment or process may not be resulting in to Manufacture, the same can be treated as Jobwork.Application of certain provisions of CGST Act, 2017 under IGST Act, 2017As per section 20 of the IGST Act, the provisions relating to job work would also be applicable to the IGST Act.Comparative reviewThe term ‘job work’ has not been defined in the Central Excise Act or Customs Act but the same has been provided for in Notification No 214/86 C.E. dated 25.03.1986 and CENVAT Credit Rules, 2004.Related provisions In section 143 there is no specific reference to any other sections but there are other provisions where section 143 has been referred to:  Issues and concernsInterest on reversal of ITC: if goods sent for job work not received within in a specified period – the principal to retain ITC on goods sent to job work provided, they are received back within a specified period. Else, the section requires reversal of ITC on expiration of such periods, and permits re-availing of the same when the goods are finally received.Reporting in Annual ReturnDeemed supply which are getting covered under section 143(3) and 143(4), is to be reported in Table 16B of GSTR-9. For detailed discussion from Annual return and GST Audit perspective, please refer Technical Guide on Annual return and GST Audit. MCQQ1. The inputs and/ or capital goods may be sent by ……………………………to job worker under intimation and subject to such conditions as may be prescribed.(a) Taxable person(b) Unregistered taxable person(c) Registered personAns. (c) Registered personQ2. The job workers are allowed to send such goods to other(a) Manufacturers(b) Traders(c) Job workers(d) All of the aboveAns. (c) Job workersQ3. Who will undertake responsibility and accountability for any contravention under this section?(a) Principal(b) Manufacturer(c) Job worker(d) No bodyAns. (a) PrincipalQ4. What is the time limit within which inputs return to principal?(a) 365 days (One Year)(b) 180 days(c) 270 days(d) 2 yearsAns. (b) 365 days (One Year)Q5. What is the time limit within which Capital goods have to be returned to principal?(a) One Years(b) Two Years(c) Three years(d) None of aboveAns. (d) Three yearsRecommended Articles –

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