CA Final · Indirect Tax Laws

Job Work: formula sheet

Full chapter guide

Key formulas

Job work: Job work = any treatment or process undertaken by a person on goods belonging to another registered person; This is the CGST Act definition in s.2(68). Ownership of goods stays with the principal.
Job worker: Job worker = person who undertakes job work on behalf of a registered person (the principal); The job worker may be registered or unregistered. The job worker does not own the goods.
Principal: Principal = the registered person on whose behalf the job worker undertakes job work; The job worker acts on behalf of this registered person, who is called the principal. The principal must be a registered person.
Nature of supply: Job work charges = supply of services by the job worker to the principal; Schedule II treats a process on another person's goods as a service. The job worker does not supply the goods.
Movement of goods: Goods sent for job work under s.143 conditions: no tax on movement. Not received back in 1 year (inputs) or 3 years (capital goods): deemed supply by the principal on the date of dispatch; The relief on movement depends on following the s.143 procedure and time limits, not only on ownership staying with the principal. The three-year limit does not apply to moulds and dies, jigs and fixtures, or tools. Section 19 is relevant only for input tax credit on inputs and capital goods sent for job work.
Test to apply: Job work if: (1) goods belong to a registered principal, (2) process or treatment is carried out by another person, (3) goods come back or go as directed by the principal; If the person owns the inputs and sells the product in its own name, it is manufacture, not job work.
ITC allowed: Registered principal + inputs sent for job work + prescribed conditions → ITC allowed (Section 19(1) and (2)); Allowed even if the inputs go directly to the job worker without first coming to the principal's place.
Time limit for inputs: Return or supply from job worker's premises within 1 year of sending out; Deemed supply arises if this is not met.
Deemed supply on default: Inputs not back in 1 year → deemed supplied on the date sent out; principal pays tax with interest (Section 143(3)); Tax is at the rate applicable to the inputs: CGST and SGST/UTGST if intra-state, IGST if inter-state. Interest runs from the date of sending out until payment.
Time limit for capital goods: 3 years (Section 19) for capital goods other than moulds and dies, jigs and fixtures, and tools; Covered in the separate topic on capital goods. Moulds and dies, jigs and fixtures, and tools are outside this time limit and the deemed-supply rule. None of this applies to inputs.
Reporting: Quarterly FORM GST ITC-04 by the principal; Reports goods sent to and received back from job workers. Keep the delivery challan.
Time limit for return of inputs: Inputs: return within 1 year from the date of being sent out from the principal's place; If not returned in time, the inputs are deemed supplied by the principal on the day they were sent out. Tax and interest become payable. For transfers between job workers, count from the original dispatch from the principal's place.
Time limit for return of capital goods: Capital goods: return within 3 years from the date of being sent out from the principal's place; Moulds and dies, jigs and fixtures, and tools are outside the three-year limit under Section 143, so no return time limit applies to them. The one-year input limit does not apply to them either.
Delivery challan by principal: Challan issued by the principal under Rule 55 with the specified particulars; for transport, three copies (original, duplicate, triplicate); Particulars include number, date, consignor and consignee details, HSN, description, quantity, taxable value, tax details where applicable, place of supply for inter-state movement, and signature. For transport, the original goes with the consignee, the duplicate with the transporter, and the triplicate stays with the consignor.
Challan number series: Consecutive serial number, not more than 16 characters, in one or more series; Rule 55 asks for the same discipline as invoice numbering.
Supply from job worker's premises: Allowed if the job worker's place is declared as the principal's additional place of business, OR if the job worker is registered; The principal issues the invoice and pays tax on the supply. Notified goods are a separate route: the principal may supply them from the job worker's premises without the declaration or the job worker's registration (Section 143(3)). Export from the job worker's premises is also allowed.
ITC-04 reporting: Under Rule 45(3) as amended: quarterly if aggregate turnover exceeds ₹5 crore; half-yearly otherwise; due by the 25th of the month after the period; Reports goods sent to and received back from job workers during the period, including goods supplied directly from the job worker's premises. It does not report sales.
Waste and scrap: Registered job worker supplies it from his place of business; if he is unregistered, the principal supplies it (Section 143(4)); Where the job worker is unregistered, the supplier of the waste and scrap is the principal, not the job worker.

Quick revision

Job work means any treatment or process undertaken on goods belonging to another registered person.
The principal is the registered person who sends the goods. The job worker is the person who does the process.
Under Section 19, the registered principal can take ITC on inputs and capital goods sent for job work, as if they were received at his own premises. ITC is subject to the Section 16 conditions, including use in the course or furtherance of business.
Goods can go directly from the supplier to the job worker, and the registered principal can still claim ITC, subject to the same Section 16 conditions.
Under Section 143, the principal may send goods to the job worker without paying tax, under a challan.
Under Section 143, inputs must return to the principal, or be supplied from the job worker's premises, within one year.
Capital goods must return within three years. Moulds, dies, jigs, fixtures and tools are outside this limit.
If inputs or capital goods sent without payment of tax are not received back or supplied within the time limit, they are deemed supplied by the principal on the day they were sent out (Section 143). Tax with interest is payable from that date.
Where the supplier sends goods directly, the time limit is counted from receipt by the job worker.
The principal issues a challan for goods sent out and remains responsible for it.
Goods sent back to the principal after the process are not a fresh supply when they come back within time.
Under Section 143, waste and scrap can be supplied from the job worker's premises by the job worker if he is registered, or by the principal if the premises is declared as his place of business. Otherwise, supply by an unregistered job worker follows the registration rules.
The principal furnishes details of goods sent to and received from job workers in Form GST ITC-04, as prescribed.

Common mistakes

Treating the job worker as a supplier of goods. Fix: Remember that ownership never passes. The job worker supplies only a service, the processing.
Calling a manufacturer who buys its own raw material a job worker. Fix: Ask who owns the inputs. If the processor owns them and sells the product, it is manufacture.
Saying ITC is lost when inputs are sent directly to the job worker. Fix: Remember the direct-delivery rule in Section 19(2). ITC is allowed, subject to the conditions.
Ignoring the deemed supply when the one-year period is missed. Fix: On failure the inputs are deemed supplied on the date sent out, and the principal must pay tax with interest under Section 143(3).
Counting the one-year or three-year period from the date the job worker received the goods. Fix: Count the period from the date the principal sent the goods out. If goods move between job workers, count from the original dispatch from the principal's place. The deemed supply date, if the limit is missed, is also the day of sending out.
Saying that tax must always be paid when goods are sent to a job worker. Fix: Sending goods for job work is not a supply if the conditions are met. Tax arises only if the goods are not returned in time or the principal supplies them.

Exam tips

Start every answer with the CGST Act definition of job work, job worker or principal, then apply it to the facts.
In case scenarios, look for the words 'belonging to' and 'registered'. They decide the answer.
Write clearly that the job worker supplies a service. Examiners look for this line.
When goods are sent out, check the time limit: one year for inputs and three years for capital goods. A missed limit makes it a deemed supply.
When a question asks for a difference from manufacture, compare ownership of inputs, the nature of the charge and the type of supply in two or three points.
Use the party names from the question when you label principal and job worker. It shows you applied the law.
Cite Section 19 for inputs and say one year. Do not mix it with the capital goods period.
Say that ITC is allowed on direct delivery to the job worker. This line often carries a mark.