Job work under GST section 143

 Job work under GST section 143

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What Is Job Work?

“Job work under GST section 143" means any treatment or process undertaken by one registered person on goods belonging to another registered person, with the latter being termed the “principal” and the former the “job worker. Entry 3 of Schedule II to the CGST Act classifies such activities as a supply of services, ensuring they fall within the GST net unless covered by a specific procedural exemption like Section 143.

Why Section 143?

Section 143 was introduced to balance administrative ease with revenue safeguards by allowing principal-to-job-worker transfers without immediate tax outlay, thus preserving working capital and operational flexibility. At the same time, it prescribes safeguards—timely return of goods, records, and returns—to prevent misuse of input tax credits.

Detailed Analysis of Section 143 CGST Act

Text of Section 143 (Job work procedure)

(1) A registered person (hereafter in this section referred to as the “principal”) may under intimation and subject to such conditions as may be prescribed, send any inputs or capital goods, without payment of tax, to a job worker for job work … and shall—

(a) bring back inputs … within one year and capital goods … within three years … without payment of tax;

(b) supply such inputs … on payment of tax … from the place of business of a job worker … Provided that the principal shall not supply … unless he declares the place of business of the job worker as his additional place of business … except where the job worker is registered under section 25 or where goods are notified by the Commissioner.

Section 143(1): Sending and Returning Goods

• Clause (a): Inputs must return within one year, and capital goods (excluding moulds, dies, jigs, fixtures, tools) within three years, to any place of business of the principal, without payment of tax.
• Clause (b): If goods are supplied from the job worker’s premises post-processing, tax must be paid by the principal; for exports, the supply may be with or without tax as applicable.

Section 143(2): Record-Keeping Obligations

The principal bears full responsibility for maintaining proper accounts of goods sent out and receipts upon return, including details like invoice numbers, dates, quantities, and timelines.

Section 143(3) & (4): Deemed Supply and Tax Implications

• Inputs Not Returned: If inputs aren’t returned or supplied from the job-worker premises within one year, they are deemed supplied by the principal to the job worker on the date of initial dispatch, and must be declared in GSTR-1 with tax and interest liability.
• Capital Goods Not Returned: Similarly, capital goods not returned within three years are deemed supplied on the date of dispatch, with corresponding tax and interest.

Section 143(5): Scrap and Waste

Scrap or waste generated during job work may be cleared by the principal or job worker without payment of tax if accounted for against inputs sent, subject to the conditions laid down in Rule 45 of the CGST Rules.

Extension Provisions

Recognizing that businesses may face legitimate challenges in meeting these timelines, Section 143 empowers the Commissioner to extend these periods upon demonstration of sufficient cause. The extension can be:

• Up to one additional year for input goods (extending the total period to two years)
• Up to two additional years for capital goods (extending the total period to five years)

This extension provision offers flexibility for businesses facing genuine operational constraints while maintaining the overall regulatory framework. However, businesses must make formal applications demonstrating valid reasons for seeking extensions.

Procedural Steps for Compliance

1. Intimation to Proper Officer: The principal must electronically intimate details of goods sent for job work—such as tax invoice number, date, quantity, HSN codes—to the jurisdictional officer in Form GST ITC-04 within 48 hours of the commencement of the quarter following the quarter in which goods were sent.

2. Declaring Additional Place of Business: To supply processed goods directly from the job-worker’s premises, the principal must add that premises as an “additional place of business” in his GST registration, unless the job worker is separately registered under section 25.

3. Filing Quarterly ITC-04 Return: Form ITC-04 captures details of inputs/capital goods sent for job work, received back, transferred between job workers, or written off as scrap. It must be filed quarterly through the GST portal.

4. E-Way Bill and Transit Compliance: Movements of goods for job work follow general e-way bill rules—if consignment value exceeds ₹50,000 or moves inter-state, an e-way bill must be generated unless exempted under transit provisions.

Key Judicial Pronouncements

•  M/s Shri S. K. Buxy (2018): CESTAT held that return of galvanized structures within time fulfilled Section 143(1)(a) compliance.
• M/s Sheen Electroplaters Pvt. Ltd. (2021 AAR 166): Karnataka AAR confirmed 12% GST on job-work services, clarifying rate applicability under Notification No. 11/2017-Central Tax (Rate).
• M/s Tata Marcopolo Motors Ltd. (2019 AAR 27 G.S.T.L. 283): Activity of body building on chassis under job work was treated as supply of service, guiding classification.
• GST-Online Advisory: Sending goods without opting for Section 143 procedure does not itself constitute exempt supply—principal may instead send goods against payment of tax (Section 143 of CGST Act, 2017-Whether mere activity of sending goods by principal to job worker without opting for the procedure laid down in section 143 can be treated as supply; Without such activity falling within the scope of supply under section 7 of CGST Act, 2017, whether principal can be asked to send the goods against payment of tax in absence of any deeming provision in section 143 to treat the activity of sending the goods as deemed supply ).

Job work under GST example

1. Standard Job Work Flow: A textile manufacturer sends ₹10 lakhs worth of fabric to a dyeing job worker on 1 May. The principal intimates this in ITC-04 by 30 June. Dyeing completes on 15 September; goods return by 30 November (within one year). No tax is paid on dispatch or return, preserving working capital.
2. Missed Timeline Scenario: If the fabric isn’t returned by 30 April next year (one year), it’s deemed supplied on 1 May, and the manufacturer must declare and pay tax plus interest in the tax period of dispatch.
3. Clearing Scrap: Dyeing generates ₹50,000 scrap. The principal, holding accounts linking scrap to inputs, can clear scrap without tax under Rule 45, boosting compliance and cash flow.

Common Pitfalls & Practical Advice

• Maintain Robust Records: Invoice, dispatch challans, return challans, ITC-04 filings, and scrap registers are non-negotiable.
• Monitor Timelines Meticulously: Use reminders for one-year and three-year return deadlines to avoid deemed supply.
• Evaluate Option to Pay Upfront: If turnaround is uncertain, principal may opt to send goods with tax payment to avoid future liabilities.
• Regular Reconciliation: Match physical returns with ITC-04 data and GSTR-1 disclosures to preempt notices.

Conclusion

Section 143 offers a valuable mechanism to optimize working capital and operational efficiency through procedural relief for job work; adherence to conditions, timely filings, and structured record-keeping are essential to avail the benefits and avoid unintended tax liabilities. Practitioners should stay abreast of rule amendments, case-law developments, and leverage digital compliance tools to streamline job-work operations under GST.

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