Job work under GST: Section 143, ITC-04 and the one-year rule

Job work under GST lets a manufacturer (the principal) send material to another business (the job worker) for processing without paying GST on the movement, as long as the goods come back within the time allowed and the movement is reported in Form ITC-04. The rules are in Section 143 of the CGST Act and Rule 45 of the CGST Rules. They're simple to state. The risk is in the tracking: with dozens of challans a month across several job workers, it's easy to lose sight of material that has been out for eleven months.

What counts as job work?

The CGST Act defines job work as any treatment or process carried out by one person on goods belonging to another registered person. Typical examples in Indian manufacturing:

• Machining, turning, grinding or heat treatment of engineering parts
• Electroplating, galvanising and powder coating
• Dyeing, printing, embroidery and stitching in textiles and garments
• Printing and lamination in packaging
• Assembly of sub-components

Ownership is the test. The goods stay yours while the job worker processes them. If the job worker buys the material and sells you a finished part, that is an ordinary purchase, not job work.

How does Section 143 work?

Section 143 lets you send inputs and capital goods to a job worker without paying tax, under a challan (Rule 45). You can also have your supplier deliver inputs straight to the job worker, and you still take the input tax credit. The job worker can send the processed goods back to you, pass them to another job worker, or (with conditions) supply them from their premises on your behalf.

What "deemed supply" costs you

Say you sent ₹4,00,000 of steel components for heat treatment on 10 November 2025. They are still at the job worker on 10 November 2026. GST now treats them as supplied by you on 10 November 2025: you owe 18% GST of ₹72,000, plus interest at 18% a year from the date the tax was originally due. If the goods come back later, they come back as a supply, not as a job work return. All of it is avoidable if someone looks at an ageing list of material at job workers once a month.

What paperwork does job work need?

• Delivery challan. Every dispatch to a job worker goes on a challan, serially numbered, with the job worker's GSTIN, description, quantity and value. Returns from the job worker come back against the same challan.
• E-way bill. Goods sent to a job worker in another state need an e-way bill whatever their value. Within a state, the normal ₹50,000 threshold applies. On the e-way bill, use the sub-supply type Job work.
• Form ITC-04. A statement of goods sent to and received from job workers, filed by the principal.
• Job worker's invoice. The job worker bills you for the service (the job charges), with GST at the applicable rate. You take input tax credit on it as usual.

When is ITC-04 due?

So the next half-yearly return, for April to September 2026, is due on 25 October 2026. ITC-04 is only as good as the challan register behind it. If your challans live in a book and returns are noted on WhatsApp, filing it means reconstructing six months of movements by hand.

What GST rate applies to job work charges after GST 2.0?

From 22 September 2025, the GST Council simplified rates on job work services. A set of specified job works, including job work on umbrellas, printing, bricks, pharmaceuticals and leather, is taxed at 5% with input tax credit. Job work not covered by a specific entry moved from 12% to 18%. For many engineering and fabrication job workers, that made outsourcing costlier overnight.

The applicable rate depends on the goods being processed and the exact entry in Notification 11/2017-Central Tax (Rate) as amended. Check each job worker's invoice against it, and update your purchase rates for job work services so job costing reflects the new tax.

What happens to scrap at the job worker?

Waste and scrap generated during job work can be sold by the job worker directly, on payment of tax, if the job worker is registered. If not, the principal supplies it. Either way, record it: scrap left at the job worker is still material you issued, and your yield calculations are wrong without it.

How do you keep track of material at job workers?

The most reliable method is to treat each job worker as a warehouse in your inventory. Then the rules follow naturally:

1. A dispatch to a job worker is a stock transfer from your store to their warehouse, on a challan.
2. A return is a transfer back, of the processed item, against the same challan. Any difference in quantity is recorded as process loss or scrap.
3. Stock "at job workers" is just the balance of those warehouses, valued like any other stock, and visible in your closing stock.
4. An ageing report on those warehouses, by challan date, tells you what is approaching the one-year mark. Chase anything over nine months.
5. At ITC-04 time, the challan register gives you the return directly.

If you can't say today how much of your material is lying at each job worker, and since when, you're carrying a GST liability you can't see.

How Dravyaa handles job work

In Dravyaa, every subcontractor has its own subcontractor warehouse. When an operation in a production order is marked as subcontracted, Dravyaa raises a service order to the job worker, and the material moves to their warehouse on a delivery challan, with an e-way bill under the Job work sub-supply type. The subcontractor overview shows every open job, what's with whom and what's delayed. The job charges from the service order flow into the cost of the finished product.