Most Indian factories send some work outside. A forging unit sends parts for heat treatment, a garment maker sends cut pieces for embroidery, a tile plant sends boxes for printing. Section 143 of the CGST Act lets the principal send inputs and capital goods to a registered or unregistered job worker without paying GST, as long as the goods come back on time and the records are kept.
01The challan goes with the goods
Material goes out on a delivery challan, not a tax invoice. The challan carries your GSTIN, the job worker's details, the description, quantity, value and HSN of each item, and a serial number for the year. Keep the challans in their own series, separate from sale invoices, so you can match every one to a return.
For movement between states, an e-way bill is needed for job work whatever the value. Within a state, follow your state's rule for the value limit.
02The time limits
| Goods sent | Must come back within |
|---|---|
| Inputs, such as yarn, castings or cut pieces | 1 year |
| Capital goods, such as a machine sent for a job | 3 years |
| Moulds, dies, jigs, fixtures and tools | No limit |
If inputs or capital goods do not come back within the limit, the law treats them as supplied by you on the day they were sent out. You then owe GST on them, with interest. The usual way this happens is not fraud but loose records: a lot that came back in three part deliveries, one of which was never entered.
03Waste, scrap and goods sent onward
Waste and scrap from the job can be sold by a registered job worker on payment of tax, or returned to you. With an intimation in your records, finished goods can also go straight from the job worker's premises to your customer, or from one job worker to the next. Record each movement against the original challan so the balance at each job worker is always clear.
04ITC-04, the job work return
The principal files ITC-04 with details of goods sent and received back. Since October 2021:
- Turnover above ₹5 crore
- file every half year, by 25 October and 25 April.
- Turnover up to ₹5 crore
- file once a year, by 25 April.
The form is only as good as the challan register behind it. Check due dates and formats on the GST portal before each filing, as they are changed by notification.
05A register that keeps you safe
For each job worker, keep one running balance: quantity sent, quantity received back as finished goods, waste returned or sold, and quantity still with them. Look at it monthly. Any lot older than ten months should be chased before it crosses the one year line.
Many factories also count yield here. If 1,000 kg of yarn went to a dyeing house and 940 kg came back, the 60 kg loss should match the agreed process loss. A rising loss with one job worker is worth a visit.
In MatruOS, job work challans, the balance at each job worker and the one year warning are part of production for factories that use job work.