Understanding Job Work Under GST: A Comprehensive Guide

Job work under GST is a vital process in India’s manufacturing and supply chain ecosystem, enabling businesses to outsource specific treatments or processes on goods while maintaining compliance with the Goods and Services Tax (GST) regime. This guide provides a detailed, SEO-optimized overview of job work under GST, incorporating the latest amendments, compliance requirements, and practical insights for businesses.

What is Job Work Under GST?

Job work, as defined in Section 2(68) of the CGST Act, 2017, refers to any treatment or process undertaken by a person (the job worker) on goods belonging to another registered person (the principal). The principal retains ownership of the goods throughout the process, while the job worker is responsible for carrying out the specified transformation, such as assembly, finishing, or packaging.

Example:

A textile manufacturer (principal) sends unstitched fabric to a tailoring unit (job worker) for stitching and embroidery. The finished garments are then returned to the principal, who sells them in the market.

Key Procedures for Sending Goods to a Job Worker

1. Issuance of Delivery Challan The principal must send goods to the job worker accompanied by a delivery challan, which contains:

• Name, address, and GSTIN of both principal and job worker
• HSN code, description, and quantity of goods
• Taxable value and applicable GST rate
• Place of supply and signature

- Why it matters: A correctly issued challan ensures traceability and compliance, preventing disputes during audits.

2. Intimation via Form ITC-04 The principal is required to file Form ITC-04 to inform tax authorities about goods sent for job work and those received back.

• Filing frequency:

• Turnover > Rs. 5 crore: Half-yearly (April–September by 25th October, October–March by 25th April)

• • Turnover ≤ Rs. 5 crore: Annually (by 25th April for the previous financial year)

• Tip: Timely filing of ITC-04 is crucial to avoid penalties and maintain eligibility for input tax credit.

3. Return of Goods Within Stipulated Time

• • Inputs: Must be returned within 1 year from dispatch.
• Capital goods: Must be returned within 3 years.
• Exemptions: Tools, jigs, moulds, and dies are not subject to these return timelines.

Input Tax Credit (ITC) on Job Work

The principal can claim ITC on inputs or capital goods sent for job work, even if sent directly to the job worker without first receiving them at the principal’s premises.

The job worker cannot claim ITC on these goods; only the principal is eligible.

• Real-World Example: An electronics company sends circuit boards to a job worker for soldering. The principal claims ITC on the GST paid for the boards, provided they are returned within the prescribed time.

• Tax Implications and Compliance

• Deemed Supply and Tax Liability

If goods are not returned within the specified period, they are deemed as a supply from the principal to the job worker from the date of dispatch.

The principal must report this as an outward supply in GSTR-1 and pay GST with interest (typically 18% per annum).

Supplying Goods Directly from Job Worker’s Premises

The principal can supply goods directly from the job worker’s premises only if:

• The job worker’s premises are declared as an additional place of business, or
• The job worker is registered under GST, or
• The Commissioner has notified the goods for such supplies.

GST Rates Applicable to Job Work

General job work services: 12% GST rate applies to most job work services provided to registered persons.

• Exceptions: Some specific industries, like diamond processing, may attract different rates.
• Responsibilities and Record-Keeping
• Both the principal and job worker must maintain comprehensive records of goods sent, received, and processed for at least six years.
• Proper documentation is essential for smooth audits and compliance.

Penalties and Consequences for Non-Compliance

• Penalty: Up to 10% of tax payable or Rs. 10,000, whichever is higher.
• Interest: 18% per annum from the date of default.
• Seizure: Goods may be seized by authorities if compliance is not met.

Recent Amendments and Updates (Effective April 2025)

Biometric authentication for GST registration is now mandatory for new applicants, ensuring enhanced compliance.

GST Waiver Scheme: Businesses that have cleared all dues by March 31, 2025, may apply for a waiver under new schemes within three months. Invoice Series Update: New invoice series required for FY 2025–26 to ensure accurate record-keeping.