Section 2(68) of CGST defines 'job work' to mean any treatment or process undertaken by a person on goods belonging to another registered person, and the expression 'job worker' shall be construed accordingly. In terms of the definition, any treatment or process done on goods belonging to another person is job work where the applicant is not just doing something on the critical components. As per Circular No. 38/12/2018, dated 26-3-2018, issued by CBEC, it is clarified that, in addition to the goods received from the principal, the job worker can use his goods for providing the services of job work.
In the case of Job work, the services are performed on physical inputs owned by units other than the units providing the services. They are characterised as outsourced operations of a manufacturing process or a complete outsourced manufacturing process. Under job work services, the output is not owned by the units providing this service. Therefore, the value of the services is based on the service charge paid, not the value of the goods manufactured. The job worker, as a supplier of services, is liable to pay GST if he is liable to be registered. He shall issue an invoice at the time of supply of the services.
If no treatment or process is done on the components supplied by the applicant and they are used as a part of the manufacture of a different component, the said activity done by the Service Provider is of a composite supply of goods and services with the manufacturing services of assembling integrating and testing of the final product being the principal supply and shall not be deemed as ‘Job Work’.