Job Work Under GST: Compliance Guide for FY 2024-25

Job Work Under GST: Compliance Guide for FY 2024-25

Definition and Legal Framework (Sec.2(68), Sec.143 CGST Act): GST Section 2(68) defines job work as “any treatment or process undertaken by a person on goods belonging to another registered person” . Section 143(1) empowers a registered principal (the owner of the goods) to send inputs or capital goods to a job worker for job-work without payment of tax, subject to intimation and prescribed conditions . Under this regime, the goods remain the principal’s property. Key legal provisions include: 

  • Movement by Challan: Rule 45 mandates that all goods sent to a job worker (including onward transfers between job workers) must be sent under a GST challan containing prescribed details (GSTINs, HSN, quantity, taxable value, etc.) 3 . (CBIC Circular 38/2018 clarifies that the principal issues the challan, which the job worker may endorse these movements 3 4 3 .) The challan replaces a tax invoice for . An e-way bill is required if goods exceed ₹50,000 (or in inter-state cases, regardless of value) .
  • Intimation (ITC-04): The principal must file Form GST ITC-04 to inform the tax authorities of goods sent to and received from job workers. (Originally quarterly, ITC‑04 is now filed annually or half-yearly by the principal, as discussed below.) 
  • Record-Keeping: By law, the principal is responsible for maintaining proper accounts of all inputs and capital goods sent on job work 5 7 6 . Even though the goods are at the job worker’s premises, legal accountability rests with the principal 7 . The principal must track quantities sent, returned, and supplied from the job-worker’s location (Sec 143(2)) .

Roles & Responsibilities: Principal vs. Job Worker

  •  Principal (Owner of Goods): Issues the GST challan (with GSTIN, job-worker address, description, HSN, quantity, etc.) when sending goods 8 . Files Form ITC‑04 by the due date, declares any supplies from the job-worker’s premises in GSTR‑1, and pays tax/interest if goods are not returned in time 9 • 10 11 7 . Maintains records of all goods sent and received . If supplying processed goods directly from the job-worker’s location, the principal must declare that location as an additional place of business (unless the job worker is GST‑registered or the goods fall under notified categories) . 

  • Job Worker: Performs the agreed processing on the principal’s goods. Must preserve the goods and follow instructions for their return. When re‑sending goods onward or back, the job worker may endorse the principal’s challan with details of quantity and description 3 13 . If the job worker is GST‑registered, they can directly supply any waste or scrap from the job work (see below) . If unregistered, the principal must handle disposal of scrap. A job worker generally needs GST registration only if his aggregate turnover (all business) exceeds the threshold (₹20 lakh/₹10 lakh) or if he makes inter‑state supplies (subject to the same ₹20L/₹10L exemption) .

    Movement of Goods Without GST

     Under Sec 143(1), goods sent for job work move duty-paid-free, provided: (a) the principal files the prescribed intimation (ITC‑04) and (b) all regulatory conditions (e.g. issuance of a challan) are met . In practice: 

  • The principal issues a GST challan in lieu of an invoice 3 2 3 . This challan (containing GSTINs, HSN, qty, value, etc.) travels with the goods. Rule 45 (as amended) requires these goods to be covered by such a challan . 
  • Once the job work is complete, the principal may bring the goods back (tax-free) or supply them from the job-worker’s premises (with tax) 15 16 • . If supplying from the job worker’s location, GST must be paid (unless the job worker is registered or goods are notified). The principal cannot issue his own invoice at the job worker’s address unless that address is registered as his business location .
  •  An e-way bill must be generated when moving goods (even job work goods) if the consignment value exceeds ₹50,000 4 or if it is an inter‑state movement (no matter the value) . 

Time Limits for Return of Goods

GoodsReturn PeriodDeemed Supply if Overdue
Inputs (consumables)1 yearYes – treated as supply by principal on 17 day sent
Capital Goods (excl. molds/dies, jigs/  fixtures, tools)3 yearsYes – treated as supply by principal on day sent

Goods sent for job work must return within statutory time-limits or be deemed supplied: 

Goods Return Period 4 Deemed Supply if Overdue Inputs (consumables) 1 year Yes – treated as supply by principal on 17 day sent 9 Capital Goods (excl. molds/dies, jigs/ fixtures, tools) 17 3 years Yes – treated as supply by principal on day sent 

If inputs are not returned within 1 year (or capital goods within 3 years), Sec 143(3–4) deems those goods to have been supplied by the principal to the job worker on the date of dispatch . The principal must then declare such supply in his GSTR‑1 and pay GST (with interest) on it . (The Commissioner may extend these time limits by up to 1 year for inputs and 2 years for capital goods on sufficient cause .) 

 Deemed Supply and Tax Liability 

When goods are not returned in time, tax treatment changes:

  •  Deemed Supply: Late or non-returned inputs/capital goods are treated as if the principal supplied them to the job worker on the date sent 9 9 • 18 10 . The principal must pay GST on this supply (with interest) and include it in his GSTR‑1 . 
  • ITC Reversal: Since tax is charged on the deemed supply, the principal effectively loses the ITC on those goods (the credit must be reversed). In practice, paying tax on the supply (Sec 143 deemed supply rule) offsets any earlier credit claimed
  • GST Invoice: The principal may issue a tax invoice to the job worker for the sale of these goods (to support the tax payment) if the job worker is registered. Otherwise, the principal simply reports the supply in GSTR-1 without an output invoice.

Waste and Scrap from Job Work 

Section 143(5) treats waste/scrap generated during job work specially : 

  • Job worker registered: The job worker may supply scrap (e.g. metal cuttings) directly from his premises, paying GST on it 12 . He should issue a tax invoice (with GST) for that supply. 
  • Job worker unregistered: The scrap must be sent back to the principal. The principal then accounts for the scrap (and pays GST if sold). 
  • In ITC-04: The principal reports all losses and scrap arising on job work in Form ITC-04 (see below, Table 5A–5C include “losses and wastes” fields ).

Input Tax Credit (ITC) Eligibility 

  • Principal’s ITC: The principal can claim ITC on inputs/capital goods sent for job work, subject to normal conditions of Sec 16 (possession of invoice, use in furtherance of business, etc.). Crucially, to retain ITC the goods must be returned (or invoiced) within the statutory period • 21 . If goods are brought back in time, the principal simply uses them as usual and the earlier ITC stands.
  • Time-limit condition: Sec 143(3) & (4) and Rule 45(4) imply that if goods are not returned in time, ITC must effectively be reversed (since the principal must pay tax on the deemed supply) . Thus, ensure timely returns to avoid additional tax. 
  • Waste/scrap: Any input tax credit on scrap inputs must be adjusted: since scrap is treated as output supply by either party, the corresponding ITC is counterbalanced by output tax paid. 
  • Composition Scheme: Principals under composition scheme have special limits on ITC and job work may have additional conditions (not covered here), but similar return-time rules apply for sending goods to job workers. 

GST Registration for Job Workers

  • Turnover Threshold: A job worker generally needs GST registration only if his aggregate turnover (all income) exceeds the registration threshold (₹20 lakh/₹10 lakh in special states) . Processing another’s goods itself is not a “supply” by the job worker, so pure job-work services do not by themselves trigger registration unless other taxable supplies are made. 
  • Inter-State Job Work: If the job worker is located in a different state from the principal, the movement of goods is treated as an inter‑state supply of services by the job worker. In that case, compulsory registration applies under Section 24(i) (inter-state supply) – again subject to the same ₹20L/₹10L exemption .
  •  Principal’s Registration: Only a registered person can use Sec 143 provisions . If a manufacturer (principal) is below threshold and not registered, he cannot send goods to a job worker tax-free under GST. 
  •  Additional GSTIN: If the principal supplies from a job-worker’s premises, he must either register that premises or, if the job worker is registered, note the exception. Always coordinate GSTINs: Form ITC-04 requires the GSTIN of each job-worker to whom goods are sent .

Filing Form GST ITC-04 (Goods to Job Worker) 

  • Purpose & Scope: ITC‑04 is a declaration by the principal, summarizing all inputs/capital goods sent to and received back from job workers in the period 5 . It serves as the intimation of such movements to the tax authorities, and underpins the ITC claims on those goods 23 . (Without ITC‑04, the tax department cannot verify that goods were returned in time.)
  •  Frequency & Due Dates: The filing frequency depends on annual turnover (preceding FY):

Aggregate Turnover (Preceding FY) Filing Frequency Due Date(s) Above ₹5 crore Half-yearly 24 Up to ₹5 crore Annual Apr–Sep period: due 25 Oct (FY year),
Oct–Mar period: due 25 Apr (next FY) . Entire FY: due 25 April following year .

 Examples: For FY2024-25, a large principal (turnover >₹5Cr) would file ITC-04 for Apr–Sep 2024 by Oct 25, 2024, and for Oct 2024–Mar 2025 by Apr 25, 2025. A smaller principal (≤₹5Cr) would file a single ITC-04 by Apr 25, 2025 covering all of FY2024-25 . (Earlier, ITC-04 was quarterly; Notification 35/2021 changed this periodicity .)
- Form Layout & Data:  ITC‑04 consists of several tables into which the principal must enter: 

  • Table 4: Inputs/Capital Goods sent to Job Worker. List each challan (no./date), job worker GSTIN, HSN code, quantity, value, and tax amount for all goods dispatched (to both registered and unregistered job workers) . 
  • Table 5A: Goods received back from original Job Worker. Include goods returned on completion, plus any acknowledged losses/wastes. (List challan details and values for returned goods, plus quantity/value of losses.) .
  •  Table 5B: Goods received back from other Job Worker (chain jobs). If goods were sent from one job worker to another, report returns in this table (with losses) . 
  • Table 5C: Goods supplied from Job Worker’s premises. If the principal supplied goods directly from the job worker’s location, report those goods and losses here .  

Each entry should reconcile with the issued challans. The principal can use the GST portal (online) or the offline utility to prepare ITC-04. 
- Challan and Invoice Recording: Form ITC‑04 captures data from GST challans (issued by principal) and invoices (for scrap/supplies). For example, the principal’s challan (Sec 72) must include GSTINs, HSN, quantity, value, etc. . If the job worker (GST‑registered) sells scrap, he issues a GST invoice, which the principal should also record (add scrap returns in ITC‑04).
- Common Errors & Tips: Typical mistakes include: incorrect or mismatched GSTINs; missing dispatch/ receipt dates; quantity mismatches; failing to reconcile job‑worker acknowledgments; and late filing . To avoid issues: double-check GSTINs and product details on each challan, reconcile physical stock vs. ITC-04 entries, and file by the due date. Maintain clear records of all challans and e-way bills (if any). Regular reconciliation between the principal’s and job worker’s books is critical to catch discrepancies early .- Practical Example: Issuing a Challan: A manufacturer (principal) sending raw materials worth ₹10 lakhs to a job worker will issue a GST challan (no invoice) detailing the material HSN, quantities, and GSTINs . After processing, when the goods return, the principal updates inventory and records the return. In the next ITC-04, the principal lists the challan under Table 4 (sent) and Table 5A (received back) with zero losses. If any scrap was generated and sold by the job worker, the job worker issues a GST invoice for the scrap and pays tax; the principal would note that scrap disposal (loss) in ITC‑04. If the goods had not been returned within 1 year, the principal would instead declare a supply in GSTR-1 and pay GST on that deemed supply . 

 Recent Amendments and Circulars 

  • CGST (Amendment) Act, 2018: Inserted key changes effective Feb 2019. It added the “extension” proviso to Sec 143(1)(a) (allowing the Commissioner to extend return periods by up to 1 year for inputs/2 years for capital goods) 19 . It also added Sec 143(5) on waste/scrap Notification 14/2018-CT (Mar 2018) amended Rule 45 to allow a job worker to endorse the principal’s challan .
  •  Notifications on ITC-04 (Rule 45(3)): Notification 35/2021-CT (Sep 2021) revised ITC-04 periodicity. It prescribes that: a) taxpayers with prior-year turnover >₹5Cr file ITC-04 twice a year (Apr–Sep due 25 Oct, Oct–Mar due 25 Apr) and b) those with ≤₹5Cr file once a year (due 25 Apr) . Earlier, ITC-04 was quarterly. These due dates remain current for FY2024–25 .
  •  CBIC Circulars: Circular No.38/12/2018 (Mar 2018) issued detailed clarifications on job-work documentation . Circular No.206/18/2023 (Dec 2023) addressed service classifications: it confirms that processing barley into malt is “job work in relation to food products” (customs chapters 1–22) and taxed at 5% . (By contrast, it is not treated as alcohol manufacturing at 18%.) CBIC continues to issue clarifications affecting job work – e.g. treatment of scrap, clause of principal’s services, etc. – so practitioners should monitor CBIC Circulars and GST Council minutes.