ITC-04 & Job Work: Charging GST on Goods not Owned

Job Work and ITC 04 : Charging GST on Goods not Owned

Job-work constitutes a major industry in Indian economy and hence needs special attention. It includes outsourced activities that may or may not culminate into manufacture and can be simply stated as the processing of goods supplied by the principal to a job worker.

With the application and evolution of GST in India, every industry contributing to the economy has undergone a massive change in how it works. One such industry is Job Work. While Job Work is not manufacturing in the sense that goods do not belong to the registered person who is performing job work on the goods, the GST treatment for the industry is also different from that of manufacturing. To receive ITC on products sent for job work, the main (whether a trader or a manufacturer) must submit Form ITC-04 every quarter.

Elements of Job Work

The job work sector primarily revolves around the following three elements:

Job work – Any treatment or process undertaken by a person on goods belonging to another registered person.
Principal– The registered person on whose goods, inputs or capital goods, job work is performed.
Job worker– The person who treats or processes the goods sent by the principal.

While the job worker processes or treats the goods, the ownership of the goods sent for job work does not transfer to the job-worker but rests with the principal manufacturer. Which also implies that the job worker is only required to carry out the process specified by the principal manufacturer on the goods supplied by him and it is principal manufacturer’s responsibility to keep and maintain proper accounts of inputs or capital goods sent for job work.

Documents required to be Issued under Job Work Procedure

In order to send inputs or semi-finished goods, without payment of duty / without reversal of input tax credit to a job worker, the principal manufacturer has to prepare a ‘Delivery Challan’ in the prescribed format.

This Challan should contain:

Date and number of the delivery challan;
Name, address and GSTIN of the consigner and consignee;
HSN code, description and quantity of goods;
Taxable value, tax rate, tax amount- CGST, SGST, IGST, UTGST separately; and
Place of supply and signature.

Details of the challans must be reflected in Form GSTR-1 in document issued section.

What is Form ITC – 04 in GST?

The details of the delivery challans must also be filed through Form GST ITC – 04 and should be submitted on quarterly basis by 25th day of the month succeeding the quarter. Under form GST ITC – 04, following details are to be provided:

Goods dispatched to job-worker;
Goods received from job-worker;
Goods send from one job-worker to another job-worker; and
Goods directly supplies from place of job worker.

Is Form ITC-04 Mandatory?

There’s no such notification that has been shared stating completing Form ITC-04 is not required.

What is ITC-04 Due Date?

Because the ITC-04 is a quarterly form, it must be submitted by the 25th day of the month following the quarter.

The deadline for the July-September quarter is October 25th.
The deadline for the April-June quarter is July 25th.
The deadline for the January-March quarter is April 25th.

E-way Bill for Job Work

As per GST provisions on E-way bill, E-way bill must be generated by every registered person who causes movement of goods of consignment with a value exceeding Rs. 50,000, even if the movement is for reasons other than for supply. Hence even in case of movement of goods for job work, the generation of e-way bill becomes mandatory.

In case of interstate movement of goods, e-way bill would be generated either by the principal manufacturer or by the registered job worker, irrespective of the value of the consignment. However, if a job worker is unregistered, then it is the responsibility of the Principal manufacturer to generate E-way bill.

Input Tax Credit for Material Supplied to Job Worker

The principal manufacturer will be allowed to take credit of tax paid on the purchase of goods sent on job work under the following conditions:

Effective date for goods sent depends on place of business:
1. Sent from the principal’s place of business- Effective date considered is “Date of goods sent out”
2. Send directly from the place of supply of the supplier of such goods- Effective date considered is “Date of receipt by job worker”.
ITC will be allowed in both the cases.
Goods can be sent to worker:
1. From principal’s place of business
2. Directly from the place of supply of the supplier of such goods. Effective date is important because it will help to determine the point of taxation if the goods are not returned back within the specified time (see point C below)
The goods sent must be received by the principal manufacture within the following period:
1. Capital Goods- 3 years
2. Input Goods- 1 year

In case goods are not received within the period mentioned above, such goods will be treated as supply from the effective date and tax will be payable by the prinicpal.

Return of Goods to Principal in case of Job Work

Return of goods to principal is a very important aspect under job work. Inputs and/or capital goods sent to a job worker are required to be returned to the principal within 1 year (in case of inputs) and 3 years (in case of capital goods) from the date of sending such goods to the job worker.

Provision of return of goods is not applicable in case of moulds and dies, jigs and fixtures or tools supplied by the principal manufacturer to job worker. However, when such moulds and dies, jigs and fixtures or tools are disposed off as scrap by the job worker, GST would be payable by the job worker (if job worker has GST registration), otherwise GST on sale of scrap would be payable by the principal manufacturer.

When input and/or capital goods are not returned within the specified time, such goods will be deemed as supply from effective date. The same is required to be disclosed in Form GSTR-1 and the principal manufacturer is liable to pay the tax along with applicable interest.

Waste Generated by Job Worker

Waste generated at the premises of the job-worker, and if said job worker is registered under GST and if he directly clears this waste from his place of business then in such case GST is payable by job-worker. However, if job-worker is not registered then such waste may be cleared by the principal manufacturer and GST endured would be payable by the principal manufacturer.

Can the principal sell directly from the job worker’s place?

The principal manufacturer can supply the goods from the place of business of a job worker, only if he (the principal) declares such place of business as his additional place of business.

This rule does not apply for the following-

(i) The job worker is registered
(ii) The principal supplies goods which are specifically notified by the Commissioner to be allowed to sell directly from job worker’s place.

Key points to Note

The job worker can also use his own goods, in addition to the goods sent by the principal, for providing the services of job work.
The job worker need not necessarily get GST registration for sending the goods by principal for job work.
The job worker needs to get registration only when his turnover exceeds the threshold limit of INR 20 lakhs in a financial year, irrespective of his place of business, whether it is in the same state where principal is located or outside the state (Note: Value of goods sent by the principal will not be included in the aggregate turnover of the registered job worker).
The delivery challan should be prepared in triplicate. Two copies of the same may be sent to job worker along with goods. The job worker should send one copy of challan while returning the goods to the principal.
Where goods are sent from one job worker to another job worker, either principal or job worker can issue the challan or the challan issued by the principal can be endorsed by job worker indicating the quantity and description of goods and so on.
In case of imports, the goods can be moved from customs to job worker with a copy of bill of entry along with the delivery challan issued by the principal.
Where the goods are sent by one job worker to another job worker in piecemeal, the challan issued by the principal cannot be endorsed and a fresh challan has to be issued by the job worker.
Job worker, as a supplier of services is liable to pay GST, if he is liable to be registered. An invoice can be issued at the time of supply of services and value of services as well, if he has used some goods or services for supply of job work services then he can charge the same in the invoice and recover that amount from principal.

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