CBEC issues Clarification on issues related to Job Work

Mar 27, 2018 | by Avantis RegTech Legal Research Team

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Various representations have been received regarding the procedures to be followed for sending goods for job work and the related compliance requirements for the principal and the job worker. In view of the difficulties being faced by the taxpayers and to ensure uniformity in the implementation of the provisions of the law across the field formations, the Central Board of Excise and Customs (CBEC) has clarified the various issues raised as below:

·       As per clause (68) of Section 2 of the CGST Act, 2017, “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. The registered person on whose goods (inputs or capital goods) job work is performed is called the “Principal” for the purposes of Section 143 of the CGST Act. The said section which encapsulates the provisions related to job work, provides that the registered principal may, without payment of tax, send inputs or capital goods to a job worker for job work and, if required, from there subsequently to another job worker and so on. Subsequently, on completion of the job work (by the last job worker), the principal shall either bring back the goods to his place of business or supply (including export) the same directly from the place of business/premises of the job worker within one year in case of inputs or within three years in case of capital goods (except moulds and dies, jigs and fixtures or tools).

·       It may be noted that the responsibility of keeping proper accounts of the inputs and capital goods sent for job work lies with the principal. Moreover, if the time frame of one year / three years for bringing back or further supplying the inputs / capital goods is not adhered to, the activity of sending the goods for job work shall be deemed to be a supply by the principal on the day when the said inputs / capital goods were sent out by him. Thus, essentially, sending goods for job work is not a supply as such, but it acquires the character of supply only when the inputs/capital goods sent for job work are neither received back by the principal nor supplied further by the principal from the place of business / premises of the job worker within one/three years of being sent out. It may be noted that the responsibility for sending the goods for job work as well as bringing them back or supplying them has been cast on the principal.

With respect to the above legal requirements, various issues have been raised and clarified by the CBEC on the following aspects:

a.        Scope / ambit of job work;

b.       Requirement of registration for a principal / job worker;

c.        Supply of goods by the principal from the job worker’s place of business / premises;

d.       Movement of goods from the principal to the job worker and the documents and intimation required;

e.        Liability to issue invoice, determination of place of supply and payment of GST; and

f.         Availability of input tax credit to the principal and the job worker.

[Circular No.38/12/2018]

URL: http://www.cbec.gov.in/htdocs-cbec/gst/Jobwork_Circular_38_of_2018.pdf


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