Last updated: March 21st, 2020 11:33 AM

Supply of Goods to Job Workers under GST

Job work is a type of outsourced service, wherein goods are manufactured or processed using goods supplied by the principal. Thus, under a job work, the principal manufacturer sends inputs or semi-finished goods to a job worker for further processing. This article is further to our earlier article on job workers. It contains a glimpse of what was already covered, and a few more aspects, which is specifically discussed in detail.

Goods Supplied directly to a Job Worker

• The principal may arrange to dispatch the required inputs/capital goods directly from the supplier and deliver it to the job worker, instead of the usual two-way process where the supply is first made to the principal, post which it is delivered to the job worker.
• The principal is entitled to take the input tax credit for this kind of a transaction.
• The Job worker, to whom the input/capital goods are supplied to, must return the same to the principal in a period ranging from one-three years from the date of receipt. One year for inputs, and three years for capital goods.

Conditions Don't Apply

The common rule that input/capital goods must be taken back by the principal in a stipulated period of 1-3 years, as the case maybe, doesn't apply in certain cases. To be specific, supply of moulds and dies, jigs and fixtures of tools are eliminated from the mandate. The principal can also take input tax credit for those supplies, without any compulsion of bringing it back.

Completion of Job Work

Upon completion of job work, the principal may opt for any of the choices mentioned below.

• Bring back the supplied inputs/capital goods to his own premises.
• Make further supply of those job worked goods on payment of tax directly from the premises of the job worker.
• Supply those job worked goods for the purpose of export with/without payment of tax.

In case of supply of goods directly from the job workers premises or the supplier must satisfy the below-mentioned conditions:

• The principal, by way of a declaration, has stated the place of the job worker as his additional space of business on GST registration.
• The job worker is a registered taxable person.
• The goods are such, as has been notified by the commissioner.

Non-Receipts of Inputs Within a Year

If the principal doesn't take back the supplied inputs within a years time, it shall apply as taxable supply applicable from the original date of supply as agreed to the job worker. The principal will then be penalized to pay the taxes along with the interest thereon.

Non-Receipts of Capital Goods Within Three Years

If the principal doesn't take back the supplied capital goods in a span of three years from the date of supply, the transaction becomes a deemed supply conducted by the principal, which will make him liable to pay taxes along with the interest thereon.