In today's scenario, where the demand for goods and services is increasing at a rapid pace, a large number of industries as a part of their survival strategy are dependent on outside support for completing their manufacturing activities. Such activities are being undertaken by many small and medium scale industries to complete the process on raw material/semi-finished goods as desired by principal manufacturer and is known as "Job-Work". Job-work is otherwise also understood as the processing or working on goods supplied by the principal (i.e. the manufacturer) so as to complete a part or whole of the process. The principal usually sends the raw material or semi-finished goods or components which are processed by the job worker resulting in a further processed or finished product. The manufacturer may also send finished product to a job worker for assembling/packing. The term job-work has various synonyms in various industries – "job-work" or "sub-contracting" in engineering industry, "processing" in chemical or textile industry and "a loan licensee" in pharmaceutical industry, "contract manufacturing" in FMGC industry.
This being the commercial aspects of the entire transaction, the Indirect tax aspects broadly revolves around Central Excise Duty, Service tax and Value Added Tax/Central Sales Tax. The taxable events for all three taxes are different i.e. for Central Excise duty it is upon manufacture of goods, for Service tax it is rendition of service and for Value Added Tax/Central Sales Tax it is sale of goods.