What is Job Work?
What is Job Work? – Central Excise
Job work refers to a manufacturer provides goods to another person/entity for processing further. The process of job work applies during the initial process and completion process. Further, it applies to intermediate process, assembly, packing or other complete manufacturing.
Definition as per Central Excise (CBIC) for Job Work
The term states as providing the necessary goods to the job worker by the manufacturer to process products. As per GST, it refers to any treatment or process undertaken by the individual on goods belonging to a registered entity. The manufacturer provides goods to complete the production process. The process may include technical upgrades or manufacturing. In addition, it also includes finishing of an article or any operation. The completion process includes processing, working on raw materials or semi-finished goods.
Goods for Job Work
The goods sent for processing includes raw material or component parts. In addition, it also includes semi-finished goods and finished goods with a different variation. The processes undertaken include machining, welding, painting, electroplating, assembly, etc. The raw materials, components or semi-finished goods sent for processing to the receiver and the activity is undertaken is known as job work.
Inventory Accounting
The goods are returned back by the job worker after completion of the process. The property of the goods provided to the receiver still remains with the person who supplies the materials. Hence, since there is no transfer of property, there is no sale and no VAT applicable to the transfer of goods.
Tax Applicability
Typically VAT is not applicable to the transfer of goods from one party to another party, as there is no sale. However, CST/VAT shall apply if the receiver transfers any goods while doing the processing work. For instance, to complete electroplating, the individual would have to procure chemicals for the execution of the task. Service tax would be applicable for intermediate processes not amounting to manufacture also.
