NO. CLE-HO/POL/GST/17-18
March 28, 2018

Sub : Clarification on issues related to Job Work

Dear Member

The Central Board of Excise and Customs has issued a GST Circular No. 38 dated 26.3.2018 (copy enclosed) on the above subject. The highlights of the circular are as follows.

a)      The registered person on whose goods (inputs or capital goods) job work is performed is called the “Principal” for the purposes of Section 143 of CGST Act, which encapsulates provisions related to job work

b)     The said section 143 provides that the registered principal may, without payment of tax, send inputs or capital goods to a job worker for job work and , if required, from there subsequently to another job worker and so on. Subsequently, on completion of the job work (by the last job worker), the principal shall either bring back the goods to his place of business or supply (including export) the same directly from the place of business/premises of job worker within one year in the case of inputs or within three years in the case of capital goods (except moulds and dies, jigs and fixtures or tools)

c)      The job worker is expected to work on the goods sent by the principal and whether the activity is covered within the scope of job work or not would have to be determined on the basis of facts and circumstances of each case. Further, it is clarified that the job worker, in addition to the goods received from the principal, can use his own goods for providing the services of job work

d)     A job worker is required to obtain registration only in cases where his aggregate turnover, to be computed on all India basis in a financial year, exceeds the threshold limit regardless of whether the principal and the job worker are located in the same state or in different states. It is to be noted that the job worker is required to obtain registration only if his aggregate turnover, to be computed on all India basis, in a financial year exceeds the specified threshold limit of Rs.20 lakhs or Rs.10 lakhs in cases of special category states except Jammu and Kashmir.

e)      The job worker, as a supplier of services, is liable to pay GST if he is liable to be registered. If the job worker is not registered, GST would be payable by the Principal on reverse charge basis in terms of provisions contained in Section 9(4) of the CGST act but this provision has been kept in abeyance for the time being.

f)       The Input Tax Credit would be available to the Principal, irrespective of the fact whether the inputs or capital goods are received by the principal and then sent to the job worker for processing etc., or whether they are directly received at the job workers place of business/premises, without being brought to the premises of the Principal. It is also clarified that the Job worker is also eligible to avail Input Tax Credit on inputs etc., used by him in supplying the job work services if he is registered.

The aforementioned GST circular also has clarifications on documents required to be issued for sending goods by principal to job worker, from one job worker to another job workers and from the job worker back to the principal , issuance of challan etc.,

Members may please note the above

Thanks and regards

R. Ramesh Kumar
Executive Director

Circular