Section 143 of GST – Job work procedure under GST Act

Section 143 of GST – Job work procedure under GST Act. Complete Details for GST Section 143 under GST Act 2017. In this GST Section you may find all details for Job work procedure under GST Act 2017Detailed Analysis of GST Section 143 of GST Act 2017. We Provide Complete Details for All GST Section’s and In this article you may find all details for GST Section 143Check Section Wise Analysis of GST Act 2017, Chapter Wise Analysis of GST All Sections. in this article you may find complete details regarding Section 143 of GST Act 2017 – Job work procedure under GST Act, gst all sections and definitionsNow Check more details from below…..

Must Read – List of all sections of GST

Section 143 of GST – Job work procedure under GST Act

Statutory Provisions

Section 143 of GST

(1) A registered person (hereafter in this section referred to as the “principal”) may under intimation and subject to such conditions as may be prescribed, send any inputs 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, 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, 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 accordance with the provisions of this clause 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 25; or
  • (ii) where the principal is engaged in the supply of such goods as may be notified by the Commissioner.

(2) The responsibility for keeping proper accounts for the inputs 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 the provisions of clause (a) of sub-section (1) or are not supplied from the place of business of the job worker in accordance with the provisions of 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 the provisions of clause (a) of sub-section (1) or are not supplied from the place of business of the job worker in accordance with the provisions of 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.

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.

Analysis and Updates

Introduction

This section provides for a special procedure to exempt supplies from payment of GST by principal to job worker and return from job worker to principal subject to certain conditions and procedure.

Meaning of job work and job worker: Section 2(68) of CGST Act, 2017 gives the meaning of the term ‘job work’. As per the said provision, it means a person undertaking any treatment or processing of goods belonging to another registered person. Any person who does such job work will be considered as “Job worker”. As per the Section 2(68) the Job worker may or may not be registered but the principal should be registered.

This definition is much wider than the one given in Notification No. 214/86 – CE dated 23rd March, 1986 as amended, wherein job-work has been defined in such a manner so as to ensure that the activity of job-work must amount to manufacture. However, the definition of job-work under GST reflects the change in basic scheme of taxation relating to job-work in the proposed GST regime. Works such as fabrication, repair, etc which are not related to manufacture also gets included under the term “job work”.

Analysis

Definition of Job-work

the definition of job work contains three important phrases, namely:

  • treatment or process – there is no indication here that the result of the treatment or process must be manufacture, that is, the emergence of a distinct new product. This implies that whether or not the treatment or process results in manufacture the treatment or process per se will always be treated as a supply of services when read along with paragraph 3, schedule II of CGST Act. In case the treatment or process amounts to manufacture, there will be a new classification for the supply effected by the principal of the processed goods. But as far as the job worker is concerned, the classification will continue to be HSN 9988 and treated as supply of services always;
  • goods belonging to another person – this is the requirement that cannot be likely considered, that is, on one hand this requirement ought not to be understood that 100% of the goods required for the treatment or process must necessarily be provided by the principal on the other hand it cannot be satisfied where non-essential or ancillary goods alone are provided by the principal and yet attempt to operate under the job work model. A reasonable approach demands that at least one if not more of the primary material must be provided by the principal where the intention is to secure the services of – treatment or process – offered by the job worker to be expended on these primary materials of the principal. The transaction would not fail to be a job work with the job worker adds his own material, whether secondary or ancillary, but in addition to the primary material provided by the principal. And a case where all goods other than the primary material are provided by the principal, care needs to be taken in making the decision as to whether it qualifies for the facility under section 143 and no one-fits-all answer should be attempted in this case;
  • such person being a registered person – this is very interesting that unless the principal is himself already registered, the entire transaction will fail to be job work. In other words, job work will be job work only if the principal is registered and if the principal is unregistered then, job work will merely be work. And the classification available for job work under HSN 9988 will not be available and other classification as appropriate to the processed goods will need to be followed.

Sending of inputs or capital goods to job worker

This provision enables registered person to send inputs / capital goods under intimation and subject to such conditions as may be prescribed to a job worker without payment of tax.

The format of the intimation has not been specified in the CGST Act or Rules. Hence a letter along with a copy of the Delivery Challan may suffice.

It also provides that the inputs or capital goods can be sent from one job worker to another job worker as well without payment of any tax on such goods being sent.

Rule 55 of CGST rules ,2017 provides that transaction of goods for job work can be without invoice, but a proper delivery challan containing specific details must be issued while sending goods to the job worker serial number of such delivery challan shall also be provided in GSTR -1

Delivery challan to be treated as invoice if input/ capital goods not returned within 1 or 3 years The details of the Delivery Challan shall be as follows:

  • (i) date and number of the delivery challan,
  • (ii) name, address and GSTIN of the consigner, if registered,
  • (iii) name, address and GSTIN or UIN of the consignee, if registered,
  • (iv) HSN code and description of goods,
  • (v) quantity (provisional, where the exact quantity being supplied is not known),
  • (vi) taxable value,
  • (vii) tax rate and tax amount – central tax, State tax, integrated tax, Union territory tax or cess, where the transportation is for supply to the consignee,
  • (viii) place of supply, in case of inter-State movement, and
  • (ix) signature.

The delivery challan shall be prepared in triplicate, in case of supply of goods, in the following manner: –

(a) the original copy being marked as ORIGINAL FOR CONSIGNEE;
(b) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER; and
(c) the triplicate copy being marked as TRIPLICATE FOR CONSIGNER.

Where goods are being transported on a delivery challan in lieu of invoice, the same shall be declared in FORM [WAYBILL].

Receipt of inputs or capital goods from the job worker after completion of job work or otherwise

After the processing of goods or otherwise, the goods may be dealt with in any of the following manner by the principal within One year/Three Year

(a) Brought back to any place of business without payment of tax and thereafter supplied,

  • (i) Within India on payment of tax,
  • (ii) For export with or without payment of tax,

(b) Supply from the place of business of job worker –

  • (i) Within India on payment of tax,
  • (ii) For export with or without payment of tax,

Direct Supply of goods from job worker

The goods can be supplied directly from the place of business of job worker by the principal only when the principal declares the place of business of the job worker as his additional place of business. However, the exceptions are –

  • (i) If job worker is registered under Section 25;
  • (ii) The principal is engaged in the supply of notified goods.

Responsibility for accountability of Inputs/ Capital Goods

The principal is responsible and accountable for keeping proper accounts of the inputs or capital goods and for all the transactions between him and the job worker.

The above chain can be represented as under:

Inter-State job-work

Job-work activity can be undertaken in inter-State trade as ‘issue’ of inputs and capital goods to job worker is not a supply under section 7. Therefore, whether the job worker is located in a different State/UT as that of the Principal does not alter the operation of section 143. One of the additional features is that the Principal is permitted to supply the processed goods directly from the premises of the job worker provided that ‘the location of the job worker is included as an additional place of business’ of the Principal. Where the principal being registered in one state and the job worker is located in another state, such a principal will not be able to satisfy the above condition to be allowed to make supplies directly from the premises of the job worker. This is due to the fact that the principal is not a registered person in the state where the job worker is located although he may otherwise be registered in his own state. Accordingly, if the principal desires to directly supply processed goods from the premises of the job worker located in a state different from the state where the principle is registered, the principal will not be permitted to avail this facility allowed by section 143.

For example, if the principal registered in Hosur, Tamil Nadu, purchases a chassis from a factory in Hosur and sends the same to a job worker in Amritsar, Punjab for carrying out bodybuilding works on the chassis to make a bus. And then if the principal finds a customer in Chandigarh, it would not be economical to bring the finished bus all the way back to Tamil Nadu (to satisfy the requirement of section 143) and send the bus back to customer in Chandigarh. For this reason, if the principal desires to directly supply in the finished bus from the job worker’s premises in Punjab directly to the customer in Chandigarh, it would not be possible as the principal cannot include Amritsar in his registration obtained in Tamil Nadu. The principle has no option but to bring the bus all the way back and send it again.

In such cases, the entire transaction will have to be thought through a fresh and the principal may need to have a registered premises in Punjab or nearby states. Then undertake a stock transfer on payment of GST from Tamil Nadu to this new location where registration has been obtained and then carry out I get back and forth movement within a much shorter distance alternatively locate the new registration necessarily in Punjab. And then undertake intrastate job work along with the facility of direct dispatch from the premises of the job worker to the customer in Chandigarh or any other location.

Inputs sent to Job Worker not received back within one year

As per section 143(3), where the inputs sent for job-work are not received back by the “principal” after completion of job-work or otherwise or are not supplied from the place of business of the job worker as aforesaid 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. Hence, the Principal would be liable to pay GST along with interest from the date inputs were sent out.

Capital Goods Sent to Job Worker not received back within three years

As per section 143(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” or are not supplied from the place of business of the job worker as aforesaid 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. Hence, the Principal would be liable to pay GST along with interest from the date capital goods were sent out.

It is also important to note that the requirement of bringing back the goods sent to the job worker is not applicable on moulds and dies, jigs and fixtures, or tools. Hence such items may remain with the job worker.

Waste and Scrap generated at Job worker

As per section 143(5), 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. Aspects relating to taking input tax credit in respect of inputs/capital goods sent for job-work have been specifically dealt in Section 19, which provides that the credit of taxes paid on inputs or capital goods can be taken in the specified manner.

Application of certain provisions of CGST Act, 2017 under IGST Act, 2017

As per section 20 of the IGST Act, the provisions relating to job work would also be applicable in IGST Act.

Comparative review

The term ‘job work’ has not been defined in the Central Excise Act or Customs Act but the same has been provided for in Notification No 214/86 C.E. dated 25.03.1986 and CENVAT Credit Rules, 2004.

Related provisions

In section 143 there is no specific reference to any other sections but there are other provisions where section 143 has been referred to:

Section / Rule / Form Description Remarks
Sub-section (68) of Section 2 Job work definition The job work has been defined to mean undertaking any treatment or process on goods belonging to another registered person.
Section 19 Taking ITC in respect of inputs and capital goods sent for Job work The condition and procedure has been prescribed.
Section 22 – Explanation (ii) Registration Aggregate turnover of the registered job worker does not include turnover of work undertaken for principal

It is important to note here that Notification No.07/2017- Integrated Tax dated:14/09/2017 grants Exemption from registration to Job-workers making Inter-State Supply of services to a Registered Person from the requirement of obtaining registration.

Notification No.20/2017- Central Tax (Rate) Dated 22/08/2017 lays down the GST Rate on Job work for textile & textile products, printing service of books, newspapers to be 5%

Notification No.46/2017 – Central Tax (Rate) Dated 14/11/2017 lays down that the GST Rate on Job work on “Handicrafts Goods” to be Reduced to 5%

FAQ

Q1. Who shall undertake responsibility for keeping proper accounts under this provision and in case of contraventions?

Ans. The principal would undertake the primary responsibility and accountability of the goods including payment of taxes if any.

Q2. Can goods be supplied from job worker’s place?

Ans. Yes, this provision allows supply of goods from job worker’s premises but only on payment of taxes within India and without payment of taxes for export.

Q3. Whether any time period has been prescribed within which inputs have to be returned to principal?

Ans. Yes, inputs are to be returned to Principal or supplied from the place of business of job worker within one year of their being sent out.

Q4. Whether there is any time limit for capital goods also?

Ans. Yes, capital goods, other than moulds and dies, jigs and fixtures, or tools sent for job work, are to be returned to Principal or supplied from the place of business of job worker within three years of their being sent out.

Q5. Under what circumstances can the principal directly supply goods from the premises of job worker without declaring the premises of job worker as his additional place of business?

Ans. The goods can be supplied directly from the place of business of job worker without declaring it as additional place of business in two circumstances namely where the job worker is a registered taxable person or where the principal is engaged in supply of such goods as may be notified by the Commissioner.

MCQ

Q1. The inputs and/ or capital goods may be sent by ……………………………to job worker under intimation and subject to such conditions as may be prescribed.
(a) Taxable person
(b) Unregistered taxable person
(c) Registered person

Ans. (c) Registered person

Q2. The job workers are allowed to send such goods to other
(a) Manufacturers
(b) Traders
(c) Job workers
(d) All of the above

Ans. (c) Job workers

Q3. Who will undertake responsibility and accountability for any contravention under this section?
(a) Principal
(b) Manufacturer
(c) Job worker
(d) No body

Ans. (a) Principal

Q4. What is the time limit within which inputs return to principal?
(a) 365 days (One Year)
(b) 180 days
(c) 270 days
(d) 2 years

Ans. (b) 365 days (One Year)

Q5. What is the time limit within which Capital goods have to be returned to principal?
(a) One Years
(b) Two Years
(c) Three years
(d) None of above

Ans. (d) Three years

Recommended Articles –