The government on Tuesday clarified several aspects of transactions between a principal manufacturer and a job worker under GST, and said that the compliance burden for certain transactions would be on the manufacturer. Under GST, ‘job work’ is defined any treatment or process undertaken by a person on goods belonging to another registered person. The clarification issued by central board of excise and customs (CBEC) said that a job worker would be required to obtain GST registration only in cases where annual turnover exceeds the threshold limit Rs 20 lakhs, regardless of whether the principal manufacturer and job worker are located in the same state or in different states.
Additionally, the location of job worker would be immaterial for classifying a supply as inter or intra-state even when the supply is made directly from job worker’s premises, the government said. This would depend entirely on the location of principal manufacturer and the recipient. Further, if the inputs or capital goods sent to job worker is not returned within the time stipulated by law, the principal manufacturer will be required to pay tax along with interest from the date when goods were initially sent. When such goods are subsequently returned by the job worker after the expiry of deadline, it be treated as supply by job worker to the principal manufacturer and will attract GST.
“With this circular, the government has clarified various aspects around typical transactions between a principal manufacturer and a job worker, where industry had made several representation. It would be very helpful for the industry if government can come out with similar detailed clarification on other complex topics such as deemed supply of service (viz. cross-charge) between different GST registrations of same legal entity,” Pratik Jain , leader indirect tax, PwC said.