Job work is basically the process or work done on the goods that are supplied by another entity or a person to finish the process either fully or partially. It can be undertaken for any of the following – intermediate process, initial process, packing, assembly or other types of finishing procedures or simply full manufacture.
Definition of Job Work according to the Central Excise
Generally, job work stands for the processing or working of the semi-finished goods or the raw materials that have been supplied to the worker in order to complete the process partially or fully. This results in the finishing or manufacture of any item or good or any operation that is important for the aforementioned process.
Goods
Normally, semi-finished goods, component parts or the raw materials are the types of goods that get send to the worker to get completed. The goods which are already finished can be a variation of the complete or the same product. Hence, we understand from this is that the items sent to the worker can be component parts, semi-finished goods or the raw materials and the process of doing such work or activity is termed as job work. The processes by which these works are done can be assembly, electroplating, painting, welding, machining and so on.
Accounting of Inventory
After the said job work is completed, the goods are sent back by the worker. The ownership of the items belong to the person who supplied those items to the job worker. Therefore, as there is no need for the transport of the ownership, no sale money or Valued Added Tax, VAT, is involved with the processing of the items.
Tax
Since there is no involvement of sale, VAT is inapplicable on the transfer of the items from one group to another for the job work. But, if the job worker transfers any items during the processing of the job, then taxes like CST and VAT will be eligible to get applied. For example, in order to complete the process of electroplating, the worker has to arrange necessary chemicals to get the job done. For this kinds of processes, Service Tax will be applied for the intermediary processes which does not amount to the manufacture.
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