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File Tax Returns
Job work means outsourcing of activities by a principal manufacturer to a job worker.
XYZ of New Delhi, who is well known for its hand-woven shirts hands over the task of sewing buttons to a professional tailor, Miss K.
Parties involved in Job Work here:
(1) Principal Manufacturer – XYZ, and
(2) Job Worker – Miss K
Most of the industries today hand over a part of their processing to outsiders. In other words, Job work is nothing but the outsourcing of activities by the principal manufacturer. The work done by the job worker may either amount to manufacture or can even be a service activity. Further, a manufacturer can send his goods to a job worker at any point in time. Be it at the initial stage, the intermediate stage or even at the final stage for packing and assembling. Add to that, the principal manufacturer might send either raw materials, semi-finished goods or even finished goods to the job worker.
The income received by a job worker will usually be liable to tax under the head, “Profits and Gains of Business and Profession”. Section 44AD of the Income Tax Act gives an option to an eligible assessee who is engaged in an eligible business, to consider the following as business income:
|1||When gross receipts/total turnover received through an account payee cheque/ account payee bank draft/ electronic clearing system||Minimum of 6% of the gross receipts/ total turnover of the assessee will be considered as his business income|
|2||When the payment is through other modes(other than those mentioned above)||Minimum of 8% of the gross receipts/ total turnover will be considered as his business income|
Rate of TDS u/s 194C for Job work:
Section 2(68) of the CGST Act, 2017 defines job work as ‘any treatment or process is undertaken by a person on goods belonging to another registered person’. Here, the responsibility of keeping proper accounts for inputs/capital goods solely belongs to the principal. For the purpose of job work, inputs also include the intermediate goods that arise from a treatment or process carried on the inputs of the principal or Job Worker
Points to remember: