Job worker

[Jasbir Uppal]

My respected professionals

That my client doing the business as job worker and all material dies & moulds provided by principal as per section 143

That the job work charges charged by the job worker as per the labour quantum involve in job and principal pay accordinglysection 143.

1. That as per section 143 the applicant firm has return the balance stock of raw material at the end of financial year and principal issued the martial to job workers in next financial year. Some job work orders had on hand as on 1^st April which were completed in this financial year and the quantity on hand as on 31^st March were completed in next financial year after receiving the material. There is only job work order in hand.
2. That the rate of article fixed with the principle according to job work.

My quarry is if any stork of stock found in the premises of job worker the liability of tax paid on principal not on job worker because he was doing only job work of only this principal.

Pl. give your valuable opinion

J S Uppal

Tax Conslutant

[YAGAY andSUN]

Based on the information you have provided; it seems that the situation involves a job work arrangement where the job worker performs processing or work on goods provided by the principal (business owner). Under Section 143 of the GST Act, the principal is responsible for ensuring the movement of goods and maintaining the records of raw materials, and the job worker is expected to perform the job work as per the terms agreed.

Here’s a breakdown of your queries:

1. Stock Found on Job Worker’s Premises:
   • If the stock of raw materials or finished goods is found at the job worker’s premises, the principal remains responsible for the tax on the materials. The job worker is merely processing the goods as per the agreement.
   • Section 143(3) provides that the goods sent for job work should be returned to the principal or another location within the prescribed time (i.e., 1 year for inputs and 3 years for capital goods).
   • The tax liability on these materials would remain with the principal (the owner of the goods), not the job worker, since the job worker is merely a service provider under a job work arrangement and is not the owner of the goods.
2. Tax Paid by Job Worker or Principal:
   • The principal should ensure that GST is paid on the materials when they are sent out or during the transfer of goods. The job worker is not liable for the tax since he is not the owner of the goods; rather, he is providing a service of processing the goods for the principal.
   • Any goods that are sent back to the principal after job work should be treated as goods returned under the provisions of GST.
3. Goods in Transit (Job Work Orders on 1st April):
   • If there are any goods that were in transit (job work orders that were completed in the next financial year), the job worker’s role is only to complete the work; the movement of goods is still controlled by the principal, and the tax implications remain with the principal.
   • The timing of goods being completed (whether they were completed before or after 31st March) does not change the responsibility for the tax, which remains with the principal as the owner of the goods.

Conclusion:

• The liability for tax on goods and materials provided by the principal remains with the principal, not the job worker, even if the goods are stored at the job worker’s premises.
• The job worker is only providing the service (processing) and not the ownership of goods, so the principal is responsible for paying any tax on the goods.

*** 

[Ganeshan Kalyani]

Yes, Sir. Your understanding is right.

[Shilpi Jain]

Job worker is liable only to the extent of GST on his service / job work charges and not in relation to the goods that he received from the principal.

[Shilpi Jain]

Job worker liable to GST only to the extent of his job work charges and not on the goods received from the principal

[Jasbir Uppal]

Thank to all respected professionals for given his/her valuable opinion  

AI Summary

Job work tax liability remains with the principal; job worker liable only for GST on his service charges. Under Section 143, goods sent for job work remain the principal's property and tax liability; the job worker is liable only for GST on his job work charges. Stocks found at the job worker's premises do not shift tax responsibility. Completion of job work across financial years does not change the allocation of tax liability, and the principal must comply with prescribed return and record-keeping requirements while the job worker accounts for service GST only.