Understanding Job Work under GST

Understanding Job Work under GST


Definition (CGST Act): Under the CGST Act, “job work” is defined as any treatment or process
undertaken by one person on goods belonging to another registered person . The owner of the
goods is the principal; the processor is the job worker. Ownership does not transfer to the job worker.

Conditions for sending goods tax-free: Section 143 of the CGST Act allows a principal to send inputs or capital goods to a job worker without payment of tax, provided certain conditions are met.
Specifically, inputs (raw materials) sent for job work must be returned within 1 year (from dispatch)
and capital goods within 3 years, to any place of business of the principal, without payment of GST. (These time limits exclude tools/moulds/jigs sent to a job worker.) If the principal supplies the
processed goods from the job worker’s premises, the job worker must be declared as an additional
place of business (unless the job worker is separately registered) . The Commissioner may
extend the 1‑year/3‑year periods by up to 1 year and 2 years respectively on sufficient cause .

Deemed Supply: If goods sent for job work are not returned (or supplied from the job worker’s place)
within the prescribed time, they are deemed to have been supplied by the principal on the date of
dispatch . In that case, the principal must pay GST on the original value of the goods, and the
delivery challan issued becomes the taxable document.


Documentation and Compliance:

  • Delivery Challan: Every consignment to a job worker must be accompanied by a delivery challan (as per Rules 45/55 of the CGST Rules). The principal prepares a triplicate challan, sends two copies with the goods to the job worker (one copy remains with the principal) . When returning the goods, the job worker must affix one copy of this challan with the goods back to the principal . (By amendment, a job worker may endorse a principal’s challan if goods move on from one job worker to another.)
  • ITC-04 Intimation: The principal must report all job-work movements vi GST ITC-04. Form ITC-04 is filed quarterly (due by the 25th day after each quarter) . The form lists challans covering goods sent to job workers, received back, or sent between job workers. This quarterly
    ITC-04 filing serves as the official “intimation” under Section 143 . (For principals with turnover ≤ ₹5 crore in the previous year, ITC-04 can be annual; larger businesses must file quarterly.

Waste/Scrap Treatment: Section 143(5) provides a special rule for scrap or waste generated during job work. A registered job worker may supply such waste/scrap directly (from his premises) on payment of GST, or the principal may do so if the job worker is unregistered . Importantly, the ownership of
waste/scrap remains with the principal . Thus, even if the job worker sells the scrap, the sale is deemed to be by the principal. (The job worker “cannot confer valid title” to scrap he does not own .) Proceeds from scrap disposed by the job worker are treated as additional consideration to the
principal’s job-work service.

Input Tax Credit (ITC) Eligibility: GST allows full ITC claim in job-work cases. A principal is entitled to claim credit on inputs and capital goods sent for job work even if those goods are delivered directly to the job worker’s premises . Likewise, a registered job worker can claim credit on the GST paid for any
inputs he uses in performing the job work . (Note: if a job worker is unregistered and takes delivery of inputs, the principal would normally self-assess GST under reverse charge—but that provision has been kept in abeyance.) Circular No.38/2018 clarifies these credit rules . 

Key Citations: The above follows Section 2(68) and Section 143 of the CGST Act , and CBIC’s Job Work Circular . Relevant legal maxim applies: nemo dat quod non habet (“no one can give what he doesn’t have”) for scrap sales .


E-Way Bill under GST


Purpose and Rule 138: The e-Way Bill system (introduced by GST Council) ensures that every consignment of goods in transit complies with GST rules. As per Rule 138, an e-way bill (EWB) must be generated electronically for the movement of goods exceeding prescribed value thresholds . The EWB carries key details of the supplier, recipient, goods, vehicle, etc., enabling real-time tracking by tax authorities . This deters tax evasion and streamlines transport.
 

Applicability & Thresholds: By default, an e-way bill is required for any inter-state or intra-state movement of goods valued over ₹50,000 (consignment value) . “Consignment value” is the invoice value (GST-inclusive) of all goods moved together . The ₹50,000 threshold applies to movements “in
relation to a supply, for reasons other than supply, or from an unregistered person” . There are notable exemptions under Rule 138(14) and notifications (e.g. many agricultural/food products, certain public distribution items, printed books, etc.), but these are limited in scope. Certain categories (handicrafts by exempt artisans, shipments of goods by rail/air, principal-to-jobworker transfers, etc.) require an e-way bill irrespective of value .

 Roles – Supplier, Recipient, Transporter: - Supplier/Recipient: The e-way bill is normally generated by the supplier of goods (or the recipient, if registered and supplying goods inwards) before or during transport. The supplier enters Part A details (invoice, goods description, value, GSTINs) into Form GST
EWB-01 on the common portal .
- Transporter: After Part A is filled, the transporter must update Part B by entering the vehicle number and transporter details before the goods move. If the supplier or recipient fails to generate the e-way bill, the transporter must generate it using the invoice/challan details provided by the supplier .
(Under Rule 138(3), the registered consignor furnishes Part A info and the transporter then generates the EWB .) A single e-way bill is valid even if the consignment is moved via multiple vehicles, as long
as the transporter updates Part B each time.

 Validity and Extension: An e-way bill’s validity depends on distance (and whether goods are over dimensional cargo). For normal goods: up to 100 km – valid 1 day; >100 km – add 1 day for each additional 100 km or part thereof . (Over-dimensional goods: 20 km/day +20 km/day segments.) The validity starts from the time of generation (the “relevant date”) . If delays occur (breakdowns, etc.), the validity can be extended online: amendments allow extension up to 8 hours before or after the original expiry (i.e. a 16-hour window centered on the expiry).


Exemptions: Certain transport types or goods are exempt. For example, movement of specified notified goods (fresh milk, curb/lassi, khadi products, salt, cattle, etc.) by private vehicle or other means may be exempt under Rule 138(14). Also, movements under Central/State excise certificates or other govt orders can be exempt. Importantly, if goods are handed to a transporter within 50 km of supplier, no Part B conveyance details are needed . (Detailed exemption lists are issued by CBIC periodically.)


Penalties: Moving goods without a valid e-way bill (when one is required) invites penalties under the GST law. Officials can detain or seize goods and vehicle until compliance. The transporter or consignor faces a penalty of ₹10,000 or the amount of tax evaded (whichever is higher) . Repeated noncompliance may lead to prosecution and disqualification of officers. Hence, compliance (and carrying the EWB copy) is critical.
 

Recent Amendments & Issues: In late 2023, GST rules were amended to link e-invoicing compliance with e-way generation: taxpayers above ₹5 Cr turnover who are required to issue e-invoices must do so before generating e-way bills. Failure to e-invoice can block e-way bill generation (a measure to enforce
adoption of e-invoicing). Also, the 8‑hour extension window was widened (from the earlier 4‑hour grace). Practically, taxpayers face issues like portal downtime, vehicle detail mismatches, and manual entry errors (wrong GSTIN, mismatch between invoice value and EWB value). To mitigate this, businesses often integrate e-way bill generation into their billing systems or use bulk upload tools. Recent CBIC FAQs also stress that part‑B details can be updated even after generation (in case of vehicle change) and that government e-transporters (rail/air) must generate e-way bills for cargo movement even if the consignor is unregistered.

 E-Invoicing under GST

 Applicability (Rule 48(4)): Rule 48(4) CGST Rules requires certain taxpayers to generate invoices through the GST e-Invoice system (via the Invoice Registration Portal, IRP). Currently, any registered supplier with aggregate turnover exceeding ₹5 crore (in any preceding financial year since 2017-18) is required to issue e-invoices . This threshold was gradually lowered (₹100Cr → ₹50Cr → ₹20Cr → ₹10Cr → ₹5Cr from Aug 2023) as notified by CBIC. E-invoicing is mandatory for B2B supplies, exports (with/without payment), SEZ supplies, and deemed exports by these taxpayers . (Credit/Debit notes related to such invoices must also be e-invoiced. Bill of supply or B2C invoices are not covered.)

 Thresholds & Updates: As of 2024-25, the turnover criterion is ₹5 Cr (e.g. a company with ₹6 Cr turnover in FY2023 must e-invoice all applicable B2B sales in FY2024-25). This applies nationwide (some businesses in Union Territories follow the same rules). Entities below this threshold are not currently mandated to e-invoice, though they may opt in. (GST Council periodically reviews thresholds; stay updated via CGST notifications.)


Invoice Reference Number (IRN) and QR Code: Under the e-invoice system, each e-invoice is uploaded to the IRP which validates it and returns a unique Invoice Reference Number (IRN) and a digitally-signed QR code. The IRN is a 64-character hash (e.g. 35054cc24d97033a… ) generated by the
system . Crucially, only an invoice with an IRN/QR is legally valid. Per Rule 48(4) (and CBIC guidance), a taxpayer must upload invoice details in Form GST INV-01 on the IRP and obtain the IRN and QR code . Any invoice issued otherwise (without IRN) by a notified person will not be treated as a
valid tax invoice . The QR code (embedded with the IRN) must be printed on the physical or electronic invoice , enabling quick verification. (Including a separate display of the IRN on the invoice is optional but the QR is mandatory.)


Generation Workflow: 
The typical e-invoice process is:

1. Generate Invoice JSON – The supplier’s billing/ERP system (or offline tool) composes the invoice data
in JSON format with required fields (GSTINs, buyer details, item HSN codes, values, tax rates, etc.).
2. Submit to IRP – The JSON is sent to an IRP (one of the GSTN-enabled portals) via API or offline upload.
3. Validation & IRN – The IRP validates the data (checks GSTINs, duplicate number, HSN lengths, amount arithmetic, etc.). On success, it assigns an IRN and signs the JSON. (If errors occur, an error code/message is returned; common errors include duplicate invoice number, invalid state code, or
missing mandatory fields.)
4. Receive Signed Invoice – The IRP returns the signed e-invoice JSON along with the IRN and QR code.
5. Issue Invoice – The supplier then generates the final invoice (PDF or print) embedding the IRN/QR. At his point the invoice is official and sent to the buyer. 

After IRN generation, the IRN remains valid for 30 days . The supplier should finalize and dispatch the invoice within this window. If needed (e.g. error or order cancellation), the supplier can cancel the
IRN (within the permissible time limit, currently up to 24/48 hours from issue) and reissue a corrected invoice.


Differences from Traditional Invoicing: E-invoicing differs from a regular invoice process in key ways: it is an electronically authenticated invoice. Traditional invoices are created and stored by the seller (on paper or PDF) without any real-time government authentication, and details are manually reported in GSTR-1. By contrast, an e-invoice is pre-validated by the government system (IRP) at the moment of creation. This ensures data accuracy (buyer/seller GSTIN, HSN, taxable value, etc.) and automatically
populates GST returns. For example, once the IRN is issued, the invoice data is auto-populated into the seller’s GSTR-1 (ANX-1) and simultaneously made available to the buyer’s GST portal (for viewing/ITC). Thus, many fields in the return no longer require manual entry, reducing errors and reconciliation.

Impact on ITC and Reporting: With e-invoicing, the buyer can claim input tax credit more reliably and quickly, since the invoice appears in his GST ledger as soon as the seller uploads it to the IRP. The linkage to the GSTN also means that details flow automatically into GST returns (reducing underreporting
or mismatches). In effect, e-invoicing brings near-real-time reporting of high-value B2B transactions in the GST system.

Common Issues & Solutions: While e-invoicing greatly streamlines compliance, businesses often face practical issues:

  •  Data Errors: If mandatory fields are incorrect (e.g. HSN has wrong digits, taxable value doesn’t match quantity×rate, buyer GSTIN invalid), IRP will reject the invoice with an error code. Pre-validate invoice data. Use standardized masters (item/party master in ERP) to avoid manual
    entry errors. 
  • Duplicate Invoice Numbers: The supplier’s invoice numbering must be unique for each GSTIN per financial year (Rule 46). If the same invoice number is submitted twice, IRP returns a duplicate number error. Solution: Ensure unique sequential invoice numbers; if you need to reissue, cancel the original IRN first.
  • Connectivity/Portal Downtime: On the generation day, IRP or network issues may prevent submission. Solution: Prepare invoices in JSON but wait to upload until the portal is accessible. The IRP accepts invoices up to 30 days late; one can use the offline tool and batch upload. 
  • Cancellation Restrictions: Once an IRN is generated, the invoice becomes valid. Cancellations are allowed only within a short window (24–48 hours). Solution: Double-check invoices before uploading. If a post-upload change is needed beyond the cancellation window, issues arise (the only remedy is often issuing a credit note). 

Format Compliance: The e-invoice JSON must follow the prescribed schema exactly (character limits, date formats, etc.). Some legacy systems may need custom integration. Solution: Use GSTN-provided specifications or authorized software APIs.
 

In summary, e-invoicing under Rule 48(4) requires that large businesses issue digitally-signed invoices (with IRN/QR) via the government portal . This system is closely integrated with GST returns and ITC mechanisms, significantly changing how B2B invoices are recorded and processed.

Key Citations: The above is based on Rule 48(4) CGST and Notifications (latest: Notfn.10/2023‑CT), and official FAQs/circulars by GSTN/CBIC . Notably, CBIC guidance states that a notified person’s invoice is valid only if uploaded to the IRP and assigned an IRN/QR . The reduction of the turnover
threshold to ₹5 Cr from Aug 2023 is documented in CBIC Notification No.10/2023‑CT and explained by tax experts.