Definition of Job work

GST update 17.07.2016

Definition of Job work:-

At present, the term Job work is defined in Explanation I to Notification No. 214/86 dated 25.03.1986 which prescribes the procedure for job work. This definition reads as follows:-
“Explanation I. - For the purposes of this notification, the expression "job work" means processing or working upon of raw materials or semi-finished goods supplied to the job worker/ so as to complete a part or whole of the process resulting in the manufacture or finishing of an article or any operation which is essential for the aforesaid process.”
One more definition of job work is given in rule 2(n) of the Cenvat Credit Rules, 2004 which reads as follows:-
“(n) "job work" means processing or working upon of raw material or semi-finished goods supplied to the job worker, so as to complete a part or whole of the process resulting in the manufacture or finishing of an article or any operation which is essential for aforesaid process and the expression "job worker" shall be construed accordingly;”
An analysis of above makes it clear that both the definitions are more or less similarly worded. Thus, job work includes working upon or processing of raw material or semi-finished goods supplied by some other person.
The draft GST Act defines this term at section 2(62) as follows:-
“(62) “job work” means undertaking any treatment or process by a person on goods belonging to another registered taxable person and the expression “job worker” shall be construed accordingly;”

A comparision of present and proposed definition reflects that the proposed definition is somewhat similar to those existing now. Only difference in the two definitions is that job work will be construed only if the goods are supplied by “another registered taxable person”. Thus, the person should be “taxable person” as well as registered with the department.

The definition of taxable person is given in section 2(96) of draft GST Act which reads as follows:-

“(96) “taxable person’’ shall have the meaning as assigned to it in section 9 of this Act;”

Thus, the person shall be considered as “Taxable person” only if the conditions specified in section 9 of the draft GST Act are satisfied. The analysis of relevant provisions contained in section 9 is given as follows:-

·         This section lays down provisions related to “Taxable person”.
·         It says that an agriculturist shall not be considered as a taxable person.
·         It also states that any person who provides the services as employee to another person will also not be considered as taxable person.
·         It prescribes that any person engaged in the business of exclusively supplying goods and/or services that are not liable to tax under this Act shall also not be construed as taxable person.

Thus, if the person supplying the goods is not covered in the definition of “taxable person”, the process undertaken on the said goods will not come in purview of “job work” as per proposed definition. An analysis of section 9 which provides provisions related to taxable person makes it clear that the agriculturist and any person engaged in the business of exclusively supplying exempted goods or services will not be covered in the definition of taxable person.

The impact of this provision is that an agriculturist or person engaged in exclusively supplying exempted goods or services will not be able to claim the benefit of sending the goods on job work. Thus, the proposed definition of job work needs a review in this regard.

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GST update 17.07.2016

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