3. CONCE
PT
3
The definition of job work has been defined in the Section 2(68) of
CGST Act which means any treatment or process under taken by a
person on goods belonging to another registered person.
Any treatment or process which is applied to another person's goods is
a supply of services [Sch. II entry 3]
Job worker means such person who performs such process or
treatment on raw material or semi finished goods.
Principal means a registered person on whose goods (input or capital
goods) job work is performed.
In the hands of job-worker, the value of supply would be the job-work
charges
Job worker, in addition to the goods received from principal, can use
his own goods for job work.
4.
5. WHY ARE JOB WORK PROCESSES FAVORED?
• Utilizing job work processes helps the principal/manufacturer in the following
ways:
1. Reduces the capital cost and operational cost of the activity – if it were to be
undertaken by the principal themselves.
2. Reduces the time gap between production and selling.
3. Increases focus on the market (such as matching consumer needs and trends)
rather than on the internal processes of machinery set-up and vocational ability.
4. Gain access to efficient facilities.
6. JOB WORK UNDER GST
• Section 143, which is read along with Rule 45 of the CGST act,
explains the procedures to be followed for the purpose of job work
transactions.
• The responsibility for meeting compliances falls on the principal
supplier – on behalf of the job worker for processing the goods.
• Generally, job workers are small-scale operations or individuals who
are not expected to be able to comply with the discrete provisions
of the tax law. Job workers merely carry out the processing of
goods, as directed by the requirements of the Principal.
7. SENDING GOODS FOR JOB WORK
7
No GST payable by a registered person (principal) [sec. 143(3)]:
◦ if principal sends any inputs or capital goods, to a job worker , or
◦ If principal subsequently sends inputs/capital goods to another job
worker , and
◦ If inputs are returned to principal to any of his places of businesses
within 1 year and capital goods within 3 years , or
◦ Such inputs (in any form) are not supplied from the place of business
of job worker
This period of 1 year and 3 years can be extended by the Commissioner
by further 1 year (inputs) and 2 years (capital goods), if sufficient cause is
shown
Restrictions not applicable to moulds, dies, jigs, fixtures, or tools.
8. SUPPLIES AFTER JOB WORK
8
Princip
al
Job
Worker
Option -
1
Customer
Conditions For Option 2
1.Principal declares job-worker’s POB as his additional
POB.
2.Job-worker is registered under GST.
3.Principal is a manufacturer of notified goods.
9. SUPPLY FROM JOB-WORKER’S POB
9
Principal can supply from Job worker’s POB (on
payment of GST):
◦ If Principal has declared job worker’s POB as his
additional POB,or
◦ If job worker is registered, or
◦ Principal is a manufacturer of notified goods
◦Such declaration for additional place of business may be given if the
Job Worker is in the same state. But if the Job Worker is in other state
then such declaration shall not be allowed.
◦ Time, value and place of supply is determined in hands of principal
irrespective of location of job worker’s POB
◦ Illustration: Principal P is in Maharashtra and job worker JW is in
Gujarat and customer C is in Maharashtra. This will be treated as an
10. ITC-04-SPECIAL PROCEDURE
10
• Rule 45(3) provides that principal is required to furnish the details
of challans in respect of goods sent to a job worker or received
from a job worker or sent from one job worker to another job
worker FORM GST ITC-04 will serve as the intimation as envisaged
under section 143 of the CGST Act.
• ITC-04 : To be filed half yearly/yearly
• Those with an annual aggregate turnover of more than Rs.5 crore – Half-
yearly from April-September- due on 25th October and October-March due
on 25th April.
• Those with an annual aggregate turnover of up to Rs.5 crore – Yearly from
FY 2021-22 due on 25th April.
Table 4 Details of input/capital goods sent for job work
Table 5 Details of input/capital goods received back from
job worker to whom such goods were sent for job
work and losses and wastes
11. Goods movement Compliance
From Principal to a job worker Principal prepares challan in triplicate & 2
copies sent to job-worker
From one job-worker to another
job- worker
Principal’s original challan or job-worker may
endorse original challan of principal
Job-worker to Principal, after job work Job-worker sends one copy of challan,
originally received from principal
Imported goods by principal to job-
worker from customs station
Principal issues challan directly to job
worker and goods are sent with bill of entry
Goods returned by job-
worker in piecemeal manner
Job-worker to issue fresh challan (since
challan of principal cannot be endorsed)
10
JOB-WORK
Procedural formalities [rule 45]
12. DELIVERY CHALLAN
Challan shall be issued according to the provisions of Rule 55 of the
CGST Rules.
Rule 55 (2) requires to prepare the challan in triplicate –
(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 consignor.
Contents of delivery challan under GST has been provided under
rule 55 are –
1. date & number of delivery challan,
2. name, address & GSTIN of consigner & consignee,
3. HSN code & description of goods,
4. quantity,
5. taxable value,
6. tax rate & tax amount,
13. EWB REQUIREMENTS
• Rule 138 of the CGST rules provide that e-way bill is required to be
generated before movement of goods by the principal to the job
worker or by the registered job worker to the principal or to the
another job worker who causes movement of goods of consignment
value exceeding fifty thousand rupees even in cases where such
movement is for reasons other than for supply.
• The third proviso to rule 138(1) of the CGST rules provides that the
e-way bill shall be generated either by the principal or by the
registered job worker irrespective of the value of the consignment,
where goods are sent by a principal located in one state/union
territory to a job worker located in any other state/ union territory.
• In case of movement of goods from job worker to principal, e-way
14. IF GOODS NOT RECEIVED BACK
14
If inputs and capital goods are not received back by principal within 1
year/ 3 years, of being sent out, then:
◦ Principal shall be deemed to have supplied these goods to job worker
on the date on which goods were sent and
◦ Principal liable to pay GST with interest
◦ Principal must declare such deemed supplies in GSTR-1 & in field 16B
of Form GSTR-3B.
If inputs are supplied directly from POB of job worker within 1 year,
then no issue
The time limits will not apply to items like moulds and dies, jigs and
fixtures, or tools sent out to a job worker for carrying out the job
work
15. ILLUSTRATION 1
• For example – the principal sent inputs to the job worker on 14-04-2018. If the inputs are not received back by 13-
04-2019 then it shall be deemed that such inputs had been supplied by the principal to the job worker on 14-04-
2018 when the inputs were sent out. Such supply shall be taken by the principal in the GST return of April 2019.
The principal shall make payment of output tax with interest from the due date of payment of tax for return to be
filed for the month of April 2018 till date of payment of output tax
PRN JW
02-11-
2021
IF 01-11-
2022
Pay tax
with
interest
Goods not
returned
by JW
IF 01-12-
2022
Treated as supply by JW to PRN
16. If goods neither received back nor supplied
16
Principal issues an invoice
Principal declares such supplies in his return GSTR-1 & GSTR-3B [16(B)]
for month, in which said period expires
Date of supply shall be the date on which such inputs or capital goods were
initially sent to the job worker
Interest for intervening period is also payable.
If such goods are returned by job worker after stipulated time period, it is
treated as a supply by job worker to principal and job worker pays GST , if
registered.
18. JOB-WORKER (COMPLIANCES)
18
Registration: Person making taxable inter-state supplyis
liable for registration, irrespective of turnover [CGST sec. 24(i)]
But, a job-worker, supplying services to a principal outside state-exempt from
mandatory registration
Of course, liable for registration, if turnover of job work services exceeds Rs. 20
lakh
(goods of principal directly supplied from the job worker’s premises will not be
included in the aggregate turnover of the job worker.)
Time of supply : Job-worker shall issue an invoice at the time of supply of
job-work services
Value of supply: Value of services of a job-worker shall include not only
service charges but also value of any goods or services used by him for
job-work
19. SCRAP AND WASTE
19
i. If job worker is registered:-
Job worker may supply the scrap along with payment under GST.
ii. If job worker is not registered but job worker premises added as additional Place of
business:-
Principal supply Waste or scrap from job worker Place directly or job worker Will
return scrap to principal and he will supply from his premises.
22. QUESTIONS
• The supply of goods after the completion of the job work from the registered business
place of a job worker by declaring it as an additional place of business of the former to the
place of the business of the recipient of supply will be a taxable supply of?
a) THE JOB WORKER
b) THE PRINCIPAL OR THE DEALER WHO DISPATCHED THE GOODS FOR JOB WORK
c) EITHER OF THE PARTY
d) DEEMED SUPPLY OF THE JOB WORKER
23. QUESTIONS
The goods sent by a registered taxable person to a registered job worker is?
a) Supply of goods
b) Deemed supply of goods
c) Not a taxable supply of goods
d) Either a) or b) above
24. REVERSE CHARGE MECHANISM
• Reverse charge means the liability to pay tax is on the recipient of supply of goods or services
instead of the supplier of such goods or services in respect of notified categories of supply.
25. Normal Payment GST Process
• Supplier of
goods/services
• Recipient of
Goods/Servic
es
• Government
GST
Goods/Services
Price of
Goods/Services
GST
26. • REVERSE CHARGE MECHANISM
• Supplier of
Goods/Servic
es
• Recipient of
Goods/Servic
es
Goods/Services
Price of Goods/Services
• Government
GST
27. OBJECTIVE
Reverse charge is a mechanism where the recipient of the goods or services is liable to
pay goods and services tax (GST) instead of the supplier.
The objective of shifting the burden of GST payments to the recipient is
• to widen the scope of levy of tax on various unorganized sectors,
• to exempt specific classes of suppliers, and
• to tax the import of services
28. SCENARIOS
dependent on the nature
of supply and/or nature
of supplier
taxable supplies by any
unregistered person to a
registered person
Section 9 (3) of the CGSTAct
and Section 5 (3) of the IGST
Act
Section 9 (4) of the CGST Act and
Section 5 (4) of the IGST Act
29. • For Services
• CBEC has notified a list of services on which the reverse charge
mechanism will be applicable under GST
30. • A. SUPPLY OF CERTAIN GOODS AND SERVICES SPECIFIED BY THE CBIC
• As per the powers conferred in section 9(3) of CGST acts, the CBIC has issued a list of goods and
services on which reverse charge is applicable.
• EG…
• B. SUPPLY FROM AN UNREGISTERED DEALER TO A REGISTERED DEALER
• Section 9(4) of the CGST act states that if a vendor is not registered under GST supplies goods to a
person registered under GST, then reverse charge would apply. This means that the GST will have to be
paid directly by the receiver instead of the supplier. The registered buyer who has to pay GST under
reverse charge has to do self-invoicing for the purchases made.
31. SUPPLY OF SERVICES THROUGH AN E-COMMERCE OPERATOR
• All types of businesses can use e-commerce operators as an aggregator to sell
products or provide services. Section 9(5) of the CGST act states that if a service
provider uses an e-commerce operator to provide specified services, the reverse
charge will apply to the e-commerce operator and he will be liable to pay GST.
This section covers the services such as:
• Transportation services to passengers by a radio-taxi, motor cab, maxi cab and
motorcycle. For example – ola, uber.
• Providing accommodation services in hotels, inns, guest houses, clubs,
campsites or other commercial places meant for residential or lodging purposes,
except where the person supplying such service through electronic commerce
operator is liable for registration due to turnover exceeding the threshold limit.
For example – oyo and makemytrip.
• Housekeeping services, such as plumbing and carpentering, except where the
person supplying such services through electronic commerce operators are
liable for registration due to turnover beyond the threshold limit. For example,
urban company provides the services of plumbers, electricians, teachers,
beauticians etc. In this case, urban company is liable to pay GST and collect it
32. COMPLIANCES
• Section 24 of the CGST Act, 2017 states that a person liable to pay GST under the
reverse charge mechanism have to compulsorily register under GST. The threshold
limits of Rs.20 lakh or Rs.40 lakh, as the case may be, will not apply to them.
• The recipient of goods/services should pay GST under RCM. However, as per the
provisions of GST law, the person supplying the goods must mention in the tax
invoice whether tax is payable under RCM.
• The recipient of goods or services can avail of the ITC on the tax amount paid under
RCM only if such goods or services are used for business or furtherance of business.
33. COMPLIANCES
• 1. As per section 31 of the CGST Act, 2017 read with Rule 46 of the CGST Rules, 2017, every tax
invoice has to mention whether the tax in respect of supply in the invoice is payable on reverse
charge
• 2. Maintenance of accounts by registered persons: Every registered person is required to keep and
maintain records of all supplies attracting payment of tax on reverse charge
• 3. Any amount payable under reverse charge shall be paid by debiting the electronic cash ledger.
In other words, reverse charge liability cannot be discharged by using input tax credit.
• 4. Invoice level information in respect of all supplies attracting reverse charge, rate wise, are to be
furnished separately in the table 4B of GSTR-1.
34. Input Tax Credit (ITC) Under RCM
• A supplier cannot take the GST paid under the RCM as ITC. The
recipient can avail of ITC on GST amount paid under RCM on receipt
of goods or services, only if such goods or services are used or will be
used for business purposes.
• The recipient cannot use the ITC to pay output GST on goods or
services under reverse charge and should be paid in cash only.
35. MCQS
1. Who are the persons liable to pay tax under reverse charge mechanism?
• A. REGISTERED SUPPLIER
• B. REGISTERED RECIPIENT
• C. UNREGISTERED SUPPLIER
• D. UNREGISTERED RECIPIENT
36. 2. Sec 9(4) of CGST reverse charge is applicable when supply of goods or services by
A. Unregistered supplier to registered person
B. Unregistered supplier to unregistered person
C. Registered supplier to registered person
D. Registered supplier to unregistered person
37. 3 Is ITC available to the supplier, supplying goods / services under reverse charge mechanism
a. YES
b. NO
c. NOT APPLICABLE
d. YES, IF PERMITTED BY THE AUTHORITY
38. COMPOSITION LEVY
• relieve small, medium small traders and businessmen of the need to keep the
detailed records,
• simpler, easy and convenient method of accounting,
• Simple and easy calculation and payment of tax to the Government.
NEED?
39. CONCEPT
• Composition levy is an alternative method of levy of tax for small taxpayers whose
turnover is up to Rs. 1.5 Crores/Rs. 75 Lakh in case of special category states.
North east states include Assam, Mizoram, Manipur, Meghalaya, Tripura, Sikkim,
Arunachal Pradesh, Nagaland Himachal Pradesh.
• Any registered person who wants to opt for composition levy has to file an
electronic intimation in the FORM GST CMP-02 prior to the commencement of
financial year for which the option to pay tax under composition levy is exercised
40. CONCEPT
• Persons opting for composition levy will have to pay tax on quarterly basis
before 18 of the month succeeding the quarter during which the supplies
were made.
• Composition dealers needed to electronically file quarterly returns in form
GSTR-4 by the 18th of the month succeeding the quarter.
• Gstr-4 is a return that must be filed by the taxpayers opting
for composition scheme on an annual basis. Until the FY 2018-19, the
return was filed every quarter which got replaced by CMP-08.
• The form GSTR-9A has been disabled from fy 2019-20 onwards for
composition taxpayers due to the introduction of gstr-4 (annual return).
However, the GSTR-9A is optional and can be filed for FY 2017-18 and FY
2018-19.
41. Taxable persons who are not eligible
i. A casual taxable person i.e. a person who occasionally undertakes supplies in a State
or Union Territory where he has no fixed place of business.
ii. A non-resident Taxable person i.e. a person who occasionally undertakes supplies
but has no fixed place of business or residence in India.
iii. A supplier of services except a person engaged in supply of restaurant service.
iv. A person engaged in providing inter-state supply of goods.
42. CONDITIONS
• No Interstate Outward Supply of goods.
• Shall not collect tax.
• Issue Bill of Supply & Not tax invoice.
• No Input Tax Credit to those who purchase from him.
• Not engaged in Electronic Commerce.
• Write the Words “Composition Taxable Person” on every sign board etc.
• Write the Words “composition taxable person, not eligible to collect tax” in every bill of
supply.
• All registered person having the same PAN have to opt for composition scheme. If one
registered person opts for normal scheme, others become ineligible for composition
scheme.
• Any intimation or withdrawal for one unit is applicable to others units of the same PAN.
43. ELIGIBILITY
• Conditions which may render a person in-eligible for the scheme
• A person is in-eligible for the scheme, if
• he wrongly opts for the scheme.
• His turnover exceeds Rs. 1.5 crore(in the case of 9 north east and special category
states, namely arunachal pradesh, assam, manipur, meghalaya, mizoram, nagaland,
sikkim, tripura and himachal pradesh, the limit of turnover is rs. 75 lakhs in the
preceding financial year)
• He contravenes eligibility criteria or any of the conditions of the scheme
44. PENAL PROVISIONS
• the registered person has wrongly opted for the scheme or he has contravened the
provisions of the scheme, then a show cause notice to such person in the FORM GST
CMP-05 is issued
• This notice is to be replied within 15 days of receipt of the same. Thereafter within
30 days of receipt of reply, officer has to issue an order in FORM GST CMP-07, either
accepting the reply or denying the option to pay tax under the scheme.
• Subsequently the registered person who has been denied the option to pay tax
under the scheme has to forward a statement in FORM GST ITC-01 containing details
of the stock of the inputs and inputs contained in semi-finished or finished goods
held in stock by him on the date on which the option is denied. The said statement
has to be submitted on the common portal within 30 days from the date of denial
order passed in the FORM GST CMP-07. The delinquent taxpayer will be liable to pay
the due tax and penalty.
45. MCQS
• Which of the following is correct with regards to registered person under composition scheme ?
1. CAN ISSUE TAX INVOICE
2. CAN COLLECT TAX
3. CAN NOT CLAIM INPUT TAX CREDIT
4. CAN ENGAGE IN INTER-STATE SUPPLY
