Q Whether all the activities carried out by a job work amounts to manufacture?
Answer: The definition of job work in Model GST law provides job work as undertaking of any treatment or process on the goods of principal. Thus, any activity of job work under the GST law may or may not be manufacture for the purpose of levy of GST.
As per Explantion 2 of Schedule V of Revised Model GST Law – Person Liable to be registered
Explanation 2.- The supply of goods, after completion of job-work, by a registered jobworker shall be treated as the supply of goods by the “principal” referred to in section 55, and the value of such goods shall not be included in the aggregate turnover of the registered job worker.
Treatment of Goods supplied to Job Worker under GST :– If inputs/ capital goods are not received back by the principal from job worker within the prescribed period of 1 year (for Inputs) or 3 years ( for Capital Goods) , it is presumed that such inputs had been supplied by the principal to the job worker on the day when the said inputs are sent to job worker. and Thus the principal/ shall have to pay tax/ reverse credit along with interest.
Treatment of Waste and Srcap of Job Worker under GST Such waste and scrap should be returned to the principal . However Section 55 (5) provides that job worker may supply such waste and scrap after payment of tax.
Job Worker doing work for principal in different state :- If job worker is doing job work for a principal which is located in different State, his services would be taxable from the very beginning, it being an inter State supply of service. The Job worker will have to obtain registration if he is making inter-State supply of services.
Job Worker and GST Liability :- Point 3 of Schedule II of Revised Model GST Law provides that activity of Job worker will be treated as Supply of Service
Treatment or process
(a) Any treatment or process which is being applied to another person’s goods is a supply of services.
Schedule V of Revised Model GST Law provides for persons liable to be registered. Clause 1 provides that every supplier is liable to be registered in the State from where he makes a taxable supply of goods/ services if his aggregate turnover in a financial year exceeds Rs. 20 Lakhs. . Therefore, for the purpose of obtaining registration as well as basic exemption, only job charges received by the job worker are to be considered. Job worker would be liable for payment of tax as may be applicable to the services.
As per Section 2(61) under Revised Model GST Law – Job Work Definition
(61) “job work” means undertaking any treatment or process by a person on goods belonging to another registered taxable person and the expression “job worker” shall be construed accordingly;
Section 55 under Revised Model GST Law – JOB WORK
- Special procedure for removal of goods for certain purposes
(1) A registered taxable person (hereinafter referred to in this section as the “principal”) may, under intimation and subject to such conditions as may be prescribed, send any inputs and/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, and/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, and/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 terms of clause (b) 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 23 ; or
(ii) where the “principal” is engaged in the supply of such goods as may be notified by the Commissioner in this behalf.
(2) The responsibility for accountability of the inputs and/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 clause(a) of sub-section (1) or are not supplied from the place of business of the job worker in accordance with 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 clause(a) of sub-section (1) or are not supplied from the place of business of the job worker in accordance with 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.