Nowadays most of the corporates are outsourcing certain processes so as to reduce the cost of manufacturing or output.
Principal and Job Worker: Principal is the person who outsources to another person and Job worker is the person to whom the work or process is outsourced.
Definition as per GST law:
“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 — clause 2(68) of CGST Act, 2017.
“Principal” means a person on whose behalf an agent carries on the business of supply or receipt of goods or services or both. – clause 2(88) of CGST Act, 2017.
Section 143 Sub- Section (1)
A registered person (principal) may under intimation and subject to such conditions as may be prescribed,
- send inputs or capital goods for job work,
- without payment of tax, to a job worker
This permission will be for transfer of goods from principal to the job worker and then from there to another job worker again without payment of tax. Further to this after the completion of job work the goods shall be:
- brought back inputs or capital goods within one year and three years, respectively, of their being sent out, to any of his place of business, without payment of tax; OR
- supply such inputs or capital goods, 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:
Direct supply from the premises of job worker shall be allowed only after fulfilling the following conditions:
- Principal declares the place of business of the job worker as his additional place of business except in a case where:
- the job worker is registered under section 25; or
- the “principal” is engaged in the supply of such goods as may be notified by the Commissioner.
- Provided further that the period of one year and three years may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding one year and two years respectively.
Section 143 Sub- Section (2)
The responsibility for accountability of the goods including payment of tax thereon shall lie with the “principal”.
Section 143 Sub- Section (3)
Where the inputs sent for job work are not received back within the time limit mentioned in sub-section (1) above or are not supplied from the place of the job worker within the time limit of one year, 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.
Section 143 Sub- Section (4)
Where the capital goods, other than moulds and dies, jigs and fixtures, or tools, sent for job work are not received back within the time limit mentioned in sub-section (1) above or are not supplied from the place of the job worker within the time limit of three years, 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.
Section 143 Sub- Section (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.
Explanation.—For the purposes of job work, input includes intermediate goods arising from any treatment or process carried out on the inputs by the principal or the job worker.
- See Circular No. 38/12/2018, dated 26-3-2018 for clarification on issues related to Job Work.
- See rule 45 of the CGST Rules, 2017.