Helpful circular on taxing of job work

The Central Board of Excise and Customs (CBEC) has issued a very useful circular (38/12/2018, dated March 28), clarifying various issues on job work. 

CBEC says, essentially, sending goods for job work is not supply, as such. It acquires the character of supply only when the inputs/capital goods sent for job work are neither got back by the principal nor supplied further by the principal from the place of business/premises of the job worker within one to three years of being sent out. And, that the responsibility for sending the goods for job work, as well as bringing these back or supplying these further, and for maintaining proper accounts, has been cast on the principal. 

A job worker is required to obtain registration under the Goods and Services Tax (GST) only in cases where his aggregate turnover, to be computed on an all-India basis, in a financial year exceeds the threshold limit, regardless of whether the principal and job worker are located in the same state or in different states. 

The job worker may use own goods for providing the service of job work. The value of this service would be determined in terms of section 15 of the Central GST Act. And, include not only the service charges but also the value of any goods or services used by him for supplying the job work service, if recovered from the principal. 

Strangely, the circular also says ‘the value of moulds and dies, jigs and fixtures or tools supplied by the buyer may not be included in the value of job work services, provided its value has been factored in the price for the supply of such services by the job worker’, whatever this means!

The goods must move under a delivery challan and an e-way bill must be generated. The principal must include the details of all challans relating to goods sent by him, to one or more job worker or from one job worker to another, in the ITC-04 intimation form.

Where the principal supplies the goods from a job worker’s premises, the time, value and place of supply would have to be determined in the hands of the principal. This applies irrespective of the location of the job worker’s place of business or premises. Further, the invoice would have to be issued by the principal. It is also clarified that in any export directly from the job worker’s place of business or premises, the Letter of Undertaking or bond, as the case may be, shall be executed by the principal. 

The input tax credit (ITC) would be available to the principal. This is irrespective of whether the inputs or capital goods are received by the principal and then sent to the job worker for processing, etc or whether these are directly received at the job worker’s place of business/premises, without being brought to the premises of the principal. The job worker is also eligible to avail of the ITC on inputs, etc, used by him in supplying the job work services, if he is registered.  

The circular deals with many situations that might be encountered, such as supply of waste and scrap generated during the job work, where goods are sent from one job worker to another job worker, where goods are returned in piecemeal form by the job worker and so on. Overall, it guides the trade and CBEC’s field formations on the correct provisions.

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