GST Migration – Goods Sent for Job Work

For manufacturers, an important concern is the tax treatment of goods sent for job work in the current tax regime which are being held by the job worker as on 1st July, 2017 – the date of transition to GST. Two questions that such principal manufacturers will have are-

• Will tax be applicable when the goods sent for job work in the current regime are brought back or supplied in the GST regime?
• What is the documentation required for goods lying with a job worker on 1st July, 2017?

Let us answer these questions.

1. Tax applicability on goods sent for job work in the current regime and brought back or supplied in the GST regime

A. Goods brought back within 6 months from 1st July, 2017

When inputs, semi-finished goods or finished goods have been sent to a job worker prior to 1st July, 2017 and have been brought back to the principal’s place of business within 6 months from 1st July, 2017, no tax will be applicable.

B. Goods supplied from the job worker’s premises within 6 months from 1st July, 2017

Goods sent to a job worker prior to 1st July 2017 can be supplied from the job worker’s premises within 6 months from 1st July 2017, along with payment of tax if the supply is in India, and without payment of tax if the supply is for export.Note: For supplying the goods from the job worker’s place of business, the principal has to declare the job worker’s place of business as his additional place of business, unless-

• The job worker is registered OR
• The supply is of notified goods

C. Goods not brought back or supplied within 6 months from 1st July 2017

When goods sent to a job worker prior to 1st July 2017 have not been brought back to the principal’s place of business or supplied within 6 months from 1st July 2017, the principal has an option to seek an extension by a maximum of 2 months. For this, the principal has to show sufficient cause for the extension and obtain approval from the Commissioner.If the goods have not been brought back or supplied within 6 months from 1st July 2017 or by the extended date (as approved by the Commissioner), the input tax credit availed by the principal on these inputs or semi-finished goods will be reversed.Illustration: Rajesh Apparels, a registered apparel manufacturer in Bangalore, sends 100 kurtas to a registered job worker, Ramesh Embroiders, in Bangalore, on 15th June 17, for embroidery work on the apparel. As on 1st January 2018, the status of the kurtas sent for embroidery work is as shown below:StatusQuantityTax treatmentReceived back by Rajesh Apparels on 20^th August ‘1740No tax is applicableSupplied from Ramesh Embroiders’ premises to a customer in Bangalore on 15^th September ‘1730CGST + SGST will be applicable on the supply of the kurtas to the customerNot brought back or supplied30The ITC availed by Rajesh Apparels on the kurtas will be reversed

2. Documentation required for goods held by the job worker on 1st July 2017

For goods held by a job worker on behalf of a principal manufacturer on 1^st July, 2017, the manufacturer and job worker (if registered) have to declare the details of the goods. This declaration has to be submitted electronically in Form GST TRAN-1 within 90 days from 1^st July, ‘17.The principal has to declare the details of goods held by a job worker in Section 9(a) of Form GST TRAN-1, as shown below:

A. Details of goods sent as principal to the job worker under Section 141

A job worker (if registered) has to declare the details of the stock held, principal manufacturer-wise in Section 9(b) of Form GST TRAN-1, as shown below:

B. Details of goods held in stock as job worker on behalf of the principal under Section 141

Conclusion

The process of moving to GST and reporting of the stock lying with job workers has been simplified under the GST Regime. The details of the goods lying with the job worker as on 1^st July 2017 should be declared by the manufacturer and the job worker (if registered) within 90 days, in Form GST TRAN-1. Also, the goods must be brought back or supplied within 6 months to ensure that ITC availed on the goods is not reversed.