Concept of supply:
As the incidence of supply attracts GST, the first question is whether the goods sent by the principal to a job-worker is a supply of goods or not. In this regard, Para 5 of Schedule I of the MGL states that the supply of goods and/or services by a taxable person to another taxable or non-taxable person in the course of furtherance of business shall be treated as supply without consideration. However, the proviso to the said para carves out a distinction in case of supply of goods for job-work by a registered taxable person to a job-worker in terms of section 43A of the MGL. The proviso clearly spells out that the supply of goods by a registered taxable person (principal) to job worker shall not be regarded as supply of goods. Therefore, it can be inferred that no GST shall be applicable on the goods supplied by the registered principal to a job worker. This position is same as is prevalent in the present law.
Section 43A of the MGL provides that the registered taxable person (principal) can send the taxable goods to a job worker for job work without payment of tax. He can further send the goods from one job worker to another job worker and so on. The principal can bring back such goods, after completion of job work, for supply from his own place of business either on payment of tax within India or the goods can be cleared for exports with or without payment of tax. The principal need not bring back the goods to his place of business and he can supply such goods from the place of business of job worker itself provided the principal has declared the premises of job worker as his additional place of business. The goods can be supplied directly from the place of business of job worker without declaring it as additional place of business in two circumstances namely where the job worker is a registered taxable person or where the principal is engaged in supply of such goods as may be notified in this behalf.
Explanation 2 to para 1 of Schedule-III also provides that the supply of goods, after completion of job-work, by a registered job-worker shall be treated as the supply of goods by the principal and the value of such goods shall not be included in the aggregate turnover of the registered job worker.