GST on Job Work — Section 143, ITC for Principal and Compliance Requirements

Job work refers to any treatment or process undertaken by one person (the job worker) on goods belonging to another (the principal). In manufacturing, it is common to outsource processes like stitching, plating, painting, assembly and testing to job workers. GST provides special provisions under Section 143 to facilitate job work without creating a GST event at the time of goods being sent to the job worker.

Key Features of GST Job Work Provisions

• The principal can send goods to the job worker without payment of GST — under a delivery challan (not a tax invoice)
• The principal can claim ITC on inputs sent to the job worker — even before receiving the processed goods back, provided conditions are met
• The principal does not need to include the job worker's premises as an additional place of business if the job worker is registered under GST
• If the job worker is not registered — the principal must declare the job worker's premises as an additional place of business

Time Limits for Return of Goods

• Inputs (raw materials): Must be returned to the principal or supplied directly from the job worker's premises within 1 year of being sent
• Capital goods: Must be returned within 3 years of being sent
• Moulds, jigs, fixtures, dies: Can remain at the job worker's premises — no time limit
• If goods are not returned within the time limit — it is treated as a supply on the date the goods were originally sent (GST becomes payable)

Compliance Requirements

• Issue a delivery challan (with serial number) when sending goods to job worker
• Maintain detailed records of goods sent and returned
• The job worker charges GST on job work charges (services) — principal pays this and can claim ITC
• GST rate on job work services: Generally 12% for manufacturing; 5% for textiles, footwear; 18% for general services

Waste and Scrap

Waste and scrap generated during job work must be returned to the principal or cleared by the job worker from his premises — with payment of applicable GST. The job worker is treated as the supplier of waste/scrap cleared from his premises.

Conclusion

GST job work provisions facilitate manufacturing outsourcing without creating unnecessary tax events — but require strict compliance with time limits, challan documentation and job worker registration. SPOTON provides job work compliance advisory and GST return filing for manufacturers and job workers across Kerala. Contact us for expert GST advisory services.