Input Credit on Job Work and ITC-04

What is job work?

Job work means processing or working on raw materials or semi-finished goods supplied by the principal manufacturer to the job worker. This is to complete a part or whole of the process which results in the manufacture or finishing of an article or any other essential operation.

For example, big shoe manufacturers (principal) send out the half-made shoes (upper part) to smaller manufacturers (job worker) to fit in the soles. The job workers send back the shoes to the principal manufacturer.

As per GST Act, job work means any treatment or process undertaken by a person on goods belonging to another registered person. The person doing the job work is called job worker.

Please also refer our article on Impact of GST on job work.

Input Tax Credit on job work

The principal manufacturer will be allowed to take credit of tax paid on purchase of goods send on job work.

However, there are certain conditions. Let us go through them in detail.

Place of business

ITC will be allowed in both the cases

Effective date

Is there a time limit for the principal manufacturer to receive back the goods?

Yes. The principal manufacturer must receive the goods back within the following period:

1. Capital Goods- 3 years from effective date
2. Input Goods- 1 year from effective date

Please refer our article on impact of GST on job work for more details.

What happens if the goods are not received within the specified time?

In case goods are not received within the period as mentioned above, such goods will be deemed as supply from effective date. The principal manufacturer will have to pay tax will on such deemed supply.

The challan issued will be treated as an invoice for such supply.

Can the principal directly sell 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.

Various machinery sent to the job worker to carry out the job work

The time limits will not apply to items like moulds and dies, jigs and fixtures, or tools sent out to a job worker for carrying out the job work.

Summary of conditions for claiming ITC on goods sent for job work

A.Goods can be sent to job worker:

1. From principal’s place of business
2. Directly from the place of supply of the supplier of such goods

ITC will be allowed in both the cases.

B. Effective date for goods send depends on place of business:

1. Sent from principal’s place of business- Date of goods sent out
2. Send directly from the place of supply of the supplier of such goods- Date of receipt by job worker

C. The goods send must be received back by the principal manufacture within the following period:

1. Capital Goods- 3 years
2. Input Goods- 1 year

D. 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.

For transitional provisions, please refer our article on Impact of GST on job work.

Form ITC-04

FORM GST ITC-04 must be submitted by the principal every quarter. He must include the details of challans in respect of the following-

• Goods dispatched to a job worker or
• Received from a job worker or
• Sent from one job worker to another

Due date of FORM GST ITC-04

ITC-04 is a quarterly form. It must be furnished on or before 25^th day of the month succeeding the quarter.

For example, for Oct-Dec quarter, the due date is 25^th Jan.

Details to be furnished in ITC-04

There are 2 parts-

• Goods sent to job worker
• Goods received back from the job worker

Details of inputs/capital goods sent for job-work

Various details must be mentioned such as GSTIN, challan number, tax amount etc. All details will be available from the challans.

Goods received back from job worker or sent out from business place of job-work

The details of goods received back will be mentioned here. The goods may be received by the principal or sent to another job worker directly from the first job worker’s place of business.

All details of original challans and new challans must be mentioned.

Guide to GST Portal for filing ITC-04

Here’s a step-by-step guide on filing on the GST portal.

Step 1

Login to the GST Portal

Step 2

Go the Services>>Returns>>ITC Forms

Step 3

Go to “Prepare Offline”

Upload invoices.

Step 4

Once invoices are uploaded then click ‘Initiate Filing’.

Step 5

Select tax period.

Step 6

Check taxable amount and other details.

Step 7

Finally, file the return with DSC or EVC as applicable.

A considerable amount of time has been provided by the government to the job workers for returning goods to the principal holder. GST will help in maintaining transparency in the details of input credit on goods sent for job work.

For more information on GST impact on job work and other input tax credit provisions please visit our blog.

Be GST ready through ClearTax GST Software, an easy user-friendly versatile software which will help you to be GST compliant.