1. Impact of GST JOB WORK
Rakesh Garg, LLB, FCA
(Author & Consultant)

2. (Manufacturi ng services on physical inputs (goods) owned by others)
Job Work – Rates of Tax
Rate
Heading 9988
(Manufacturi ng services on physical inputs (goods) owned by others)
(i) Services by way of job work in relation to-
(a) Printing of newspapers;
(b) Textile yarns (other than of man- made fibres) and textile fabrics;
(c) Cut and polished diamonds; precious and semi- precious stones; or plain and studded jewellery of gold and other precious metals, falling under Chapter 71 in the First Schedule I to the Customs Tariff Act
(d) Printing of books (including Braille books), journals and periodicals;
(e) Processing of hides, skins and leather falling under Chapter 41 in the Schedule I to Customs Tariff Act 5%
(ii) Manufacturing services on physical inputs (goods) owned by others, other than (i) above
18% 2

3. Job Work – Rates of Tax Rate Heading 9988
Rate
Heading 9988
Services provided by the National Centre for Cold Chain Development under the Ministry of Agriculture, Cooperation and Farmer’s Welfare by way of cold chain knowledge dissemination.
Nil
Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labelling of fruits and vegetables which do not change or alter the essential characteristics of the said fruits or vegetables.
Heading
Other manufacturing services; publishing, printing and reproduction services; materials recovery services
18% 3

4. Job Work – Decisions taken at 20th GST Council Meeting on 5.8.2017
Description of service
From To 1
Job work services in respect of the textiles and textile products (including MMF yarn, garments, made-ups, etc. falling in Chapters 50 to 63)
18% / 5% 5% 2
Services by way of printing of newspapers, books (including Braille books), journals and periodicals where only content is supplied by the publisher and the physical inputs including paper used for printing belongs to the printer
18% with full ITC
12% with full ITC 3
Services by way of printing of newspapers, books (including Braille books), journals and periodicals using physical inputs owned by others (including an unregistered publisher/supplier)
5% with full ITC 4

5. Job Work - Classification
498
Heading 9988
Manufacturing services on physical inputs (goods) owned by others
499
Group 99881
Food, beverage and tobacco manufacturing services
509
Group 99882
Textile, wearing apparel and leather manufacturing services
513
Group 99883
Wood and paper manufacturing services
516
Group 99884
Petroleum, chemical and pharmaceutical product manufacturing services
520
Group 99885
Rubber, plastic and other non-metallic mineral product manufacturing service
524
Group 99886
Basic metal manufacturing services
526
Group 99887
Fabricated metal product, machinery and equipment manufacturing services
534
Group 99888
Transport equipment manufacturing services
537
Group 99889
Other manufacturing services 5

6. Job Work - Classification
546
Heading 9989
Other manufacturing services; publishing, printing and reproduction services; materials recovery services
547
Group 99891
Publishing, printing and reproduction services
550
Group 99892
Moulding, pressing, stamping, extruding and similar plastic manufacturing services
552
Group 99893
Casting, forging, stamping and similar metal manufacturing services
556
Group 99894
Materials recovery (recycling) services, on a fee or contract basis 6

7. JOB WORK
Job-worker, in general, means a person, who undertakes any process on goods belonging to another person
Job-work might be of the nature of manufacture, or works contract, or service contract
Job work is an important activity; and every taxpayer would require job work on almost daily basis. Whenever goods are given for certain process, such as manufacture, reconditioning, fabrication, assembly, repair, etc. it would be covered in the term Job work
In this sense, job-work may be carried upon the movable as well as immovable property of another person

8. JOB WORK Issues need discussion: -
Whether transfer of inputs or semi-finished goods by the principal to job-worker is subject to GST
If yes, on what value and under which circumstances
Whether Principal is eligible for ITC on such goods
Whether supply of goods by Job worker to Principal is subject to GST
If yes, on what value, GST would be payable by job- worker
Can the Principal transfer goods to another job-worker or supply goods from the premises of first job-worker 8

9. Job Work under Central Excise
S. 2(n) of Cenvat Credit Rules
(n) "job work" 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 the manufacture or finishing of an article or any operation which is essential for aforesaid process
Thus inputs/material must be supplied by the Principal
Minor material may be added by job-worker [Prestige Engg. India Ltd. (1994) SC]
The scope is confined to movable goods
Where the process by J.W. amounts to manufacture, he is liable for Excise, unless the Principal has undertaken to pay the Excise on such manufacture

10. Job Work under Service Tax/VAT
If the goods are sold by the Principal from the premises of the J.W., it would be subject to E.D. at the transaction value (However, In case of related parties - at FMV)
If the said process is termed as manufacture, service tax is not leviable by virtue of Mega Exemption.
Pure job work, where no material is added by J.W, is not subject to VAT. It would be subject to either Excise Duty (in case of manufacture) or Service Tax
Where material is added by J.W., it is also subject to VAT as works contract (in addition to Excise Duty).
Transfer of material by Principal to J.W., & return thereof by J.W. after processing, takes place on the strength of Form F; otherwise deemed as sale under Central Sales Tax

11. Job Work under GST
S. 2(68) - Meaning of job work : means undertaking any treatment or process by a person on goods belonging to another registered person
If Principal is not registered person, then the treatment or process itself would not be termed as job-work
The term ‘process’ has not been defined. As per Black’s Law Dictionary, ‘process’ is mode, method or operation whereby a result is produced.
Not clear whether repair would fall in job-work under GST

12. Job Work under GST Whether the term ‘job worker’ includes ‘own unit’?
When the goods are sent for job work to another unit of the same person, an interesting question arises, whether the transfer would be considered as “stock transfer” or “transfer for job work”?
In our opinion, since various units of the same person have been treated as distinct persons under GST Law, transfer to own units would be considered as transfer to j.w..
It is important to note that goods may be transferred to job worker without payment of tax, subject to other conditions like intimation to GST Authorities, return within 1 year, etc.; whereas, it is not possible in case of stock transfer. However, in case of transfer, GST would be taxed on the transaction value at the time of every transfer.

13. Job Work under GST
As per Sec. 2(52), “goods’’ means every kind of movable property other than money and securities. Thus, the term job work is confined to the process undertaken by the J.W. on movable goods only
As per Sch. II (3), any treatment or process which is being applied to another person’s goods is a supply of services
Where J.W. also adds certain material– Not clear -
whether covered in this clause; and
whether to be considered as composite/mixed supply when goods are sent back by the J.W. 13

14. Job Work – Sec. 143
S. 143(1) – Principal - “Principal” means a registered taxable person sending taxable goods for job work.
Thus, sec 143 is NOT applicable to “unregistered person”
Facilities to the Principal (Sec. 143 and 19):
To send any inputs/capital goods to a job worker for job work without payment of tax
To send inputs/capital goods subsequently from one job worker to another job worker without payment of tax
To claim ITC on goods transferred to J.W.
Section 143 is optional. Principal may supply goods to J.W. after charging of GST

15. Job Work – Sec. 143
Sec. 143 enables the Principal to send taxable goods to a job worker (and also to another job-worker therefrom) without payment of tax, subject to-
Intimation, and
certain prescribed conditions,
If the benefit under sec 143 is availed, the Principal shall be responsible and accountable for all the transactions between him and the job worker [S. 143(2)].

16. Job Work – Sec. 143
Conditions contained in section 143(1) in relation to INPUTS:
Within 1 year of their being sent out inputs, Principal shall –
Bring back inputs, after completion of job-work or otherwise, to any of his place of business, or
Supply these inputs, after completion of job-work or otherwise, after payment of tax, or
Export these inputs with or without payment of tax.
Where inputs are not so received back or supplied, 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. [S. 143(3)]
For the purposes of J.W., input includes intermediate goods arising from any treatment or process carried out on the inputs by the principal or the job worker

17. Job Work – Sec. 143
Conditions contained in S. 143(1) in relation to CAPITAL GOODS:
Within 3 years of their being sent out the capital goods (other than moulds and dies, jigs and fixtures, or tool), the Principal shall -
Bring back these goods to any of his place of business, or
Supply these goods, after completion of job-work or otherwise, after payment of tax, or
Export these goods with or without payment of tax.
Where the above-stated capital goods are not so received back or supplied, it shall be deemed that such capital goods had been supplied by the principal to the job-worker on the day when the said goods were sent out.[S. 143(4)]

18. Job Work – Sec. 143
Proviso to S. 143(1): Goods may be supplied directly from the place of business of job worker by the principal only when the principal declares place of business of the job worker as his additional place of business; except where-
(a) the job worker is registered under Section 25; OR
(b) Principal is engaged in supply of notified goods.
S. 143(5): Any waste and scrap generated during the job work may be supplied -
(a) by the job worker directly from his place of business on payment of tax if such job worker is registered, OR
(b) by the principal, if the job worker is not registered. 18

19. Job Work – Sec. 143– Critics
Section 143 attempts to create exception, which is not absolute; and is subject to intimation and certain conditions.
Sec.143 requires intimation. Whether such intimation be given by all the principals in India at the time to every supply.
Whether pre-intimation is required in each and every case; or will it be the post intimation along with GST Return
Not clear whether J.W. includes repair. If yes, whether intimation is required for every transfer of, such as, cars, or generators or U.P.S given for repair 19

20. Job Work – Sec.143 – Critics
Not clear whether job work included those cases where J.W. also uses certain material.
For example, electroplating, galvanising, fabrication of garments. Or where goods are manufactured by supported manufacturer using part of inputs by J.W.
Definition of the term “works contract” u/s 2(110) is confined to immovable goods only.
This means, J.W with material will either be treated as composite contract or the mixed contract. 20

21. Liability of the Job Worker
Job Worker shall charge GST on the job charges, subject to its threshold limit. If J.W. Charges GST, ITC will be available to the Principal.
Under the existing draft law, the turnover of the J.W. shall not include the value of goods, unless activity takes place by related person or another branch/unit of the same person
Sec 22- Persons liable to be registered - Every supplier shall be liable to be registered under this Act in the State from where he makes a taxable supply of goods/services if his aggregate turnover in a financial year exceeds Rs.20 lacs. 21

22. Liability of the Job Worker
Explanation (ii) to sec 25 –- Supply of goods, after completion of job-work, by a registered job-worker shall be treated as supply of goods by the “principal” (referred in S. 143), and value of such goods shall not be included in aggregate turnover of registered job worker.
What would happen when J.W. is unregistered, or where Principal is unregistered – Whether the value of goods would be included in the turnover of job worker for registration purpose under the GST.
Revised Definition of the term “works contract” u/s 2(119) is confined to immovable goods only. In such cases, when goods are supplied by J.W. using certain inputs and services, whether it would be taxed as composite supply or mixed supply. 22

23. ITC to Principal – Goods sent for Job Work
A. INPUTS - Sec. 19(1) to (4) -
Principal shall be entitled for ITC on inputs sent to a job- worker for job-work
Not necessary that inputs must first be received at the premises of the Principal
If inputs sent for job work are not received back or supplied in accordance with S.143(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 (or the date when receipt to the job-worker, where goods are directly sent to job worker) 23

24. ITC to Principal – Goods sent for Job Work
B. CAPITAL GOODS - Sec. 19(5) to (7) -
Principal shall be entitled for ITC on capital goods sent to a job-worker for job-work
Not necessary that capital goods must first be received at the premises of the Principal
If capital goods are not received back within a period of 3 years of their being sent out, it shall be deemed that such goods had been supplied by the principal to the job-worker on the day when the said goods were sent out (or the date when receipt to the job-worker, where goods are directly sent to job worker)
These provisions shall not apply to moulds, dies, jigs and fixtures, or tools sent out to a job-worker for job-work. 24

25. Job Work – Sec. 143 The above chain can be represented as under:
Customer
Supply of
goods without
payment of tax
Supply of
goods without
payment of tax
Supply of Goods on payment
of tax
Principal
Job worker 1
Job worker 2
Supply of
goods on
payment of tax
Supply of
goods without payment of tax
Customer
Export

26. THANK YOU RAKESH GARG, LLB, FCA S S A R & ASSOCIATES, N. DELHI
(Author of Central Sales Tax,
Delhi VAT, Service Tax & GST)
S S A R & ASSOCIATES, N. DELHI
Ph: (011) ,