Chapter 16: Job Work and Supply Chain

Definition (Section 2(68), CGST Act): “Job Work” means processing or working on goods belonging to another registered person (called the Principal), by a person known as the Job Worker.

Job work is a common business practice in manufacturing, repair, and assembly operations, allowing outsourcing without transfer of ownership.

Statutory Basis: Sections 143 and 19 of the CGST Act, 2017 read with Rules 45 and 55 of the CGST Rules, 2017.

Key Features:

Ownership of goods remains with the Principal.

Job worker performs processing or treatment on goods.

Job worker can be registered or unregistered.

Movement of goods to job worker does not constitute a supply, if conditions under Section 143 are met.

Examples of Job Work Activities:

Textile dyeing and finishing.

Goldsmith processing ornaments.

Automobile component machining.

Electronic component assembly.

Advantages: ✅ Flexibility in manufacturing. ✅ Efficient cost management and outsourcing. ✅ No tax burden on inter-location processing within prescribed time limits.

Movement of goods to and from the job worker is permitted without payment of tax under Section 143, provided they are returned within specified time.

Time Limits for Return:

If Not Returned in Time:

The goods are deemed to be supplied by the principal to the job worker on the date of dispatch, and tax is payable accordingly.

Movement Scenarios:

Note:

Job worker may return goods partially or after completion of processing.

Goods may also be supplied directly from job worker’s premises with prior intimation and endorsement in registration certificate.

(a) Input Tax Credit to Principal

As per Section 19(1), the Principal is entitled to claim ITC on inputs or capital goods sent to the job worker, even if the goods are not received back immediately.

Conditions:

ITC allowed if goods are sent for job work under intimation and returned within time limits under Section 143.

If not returned → deemed supply → reversal of ITC + interest.

Example: Principal sends raw materials worth ₹5,00,000 + GST ₹90,000 to job worker in January 2024. If goods are not returned by January 2025, ITC ₹90,000 must be reversed.

(b) ITC to Job Worker

The Job Worker can avail ITC only on:

Inputs or input services used by him for providing job work services, and

Tax paid on his own inward supplies (not on goods received from principal).

(c) Supply of Waste or Scrap

As per Rule 45(5):

Waste and scrap generated during job work can be supplied:

By the job worker (if registered) directly from his premises, or

By the principal, if the job worker is unregistered.

Such supply is taxable under GST.

(a) Delivery Challan (Rule 55)

When goods are sent for job work, no tax invoice is issued. Instead, a Delivery Challan in triplicate must accompany the goods.

Mandatory Contents of Delivery Challan:

Date and serial number.

Name, address, and GSTIN of consignor and consignee.

HSN code and description of goods.

Quantity and taxable value (for reference).

Signature of the authorised person.

Copies:

Original – for recipient (job worker).

Duplicate – for transporter.

Triplicate – for consignor (principal).

(b) Intimation to Department (Form ITC-04)

The Principal must file Form GST ITC-04 furnishing details of:

Goods sent to job workers,

Goods received back, and

Goods supplied directly from job worker’s premises.

Filing Frequency:

Due Date: 25th day of the month succeeding the relevant period.

(c) Responsibility and Records

Principal is responsible for proper accounting of goods sent for job work.

Both parties should maintain a register of movement to track inputs and capital goods.

Documentation is essential for ITC eligibility and compliance verification.

Type of Goods	Time Limit for Return to Principal
Inputs	Within 1 year from date of dispatch
Capital goods (except moulds, dies, jigs, fixtures, tools)	Within 3 years from date of dispatch
Moulds, dies, jigs, fixtures, tools	No time limit

Scenario	E-Way Bill Requirement	Tax Treatment
Goods sent from principal to job worker	Yes (Form EWB-01)	No tax; accompanied by delivery challan
Goods sent from one job worker to another	Yes	No tax
Goods returned to principal after processing	Yes	No tax
Goods sold directly by job worker (on principal’s invoice)	Yes	Tax payable by principal

Turnover in Preceding FY	Frequency of Filing ITC-04
Exceeding ₹5 crore	Quarterly
Up to ₹5 crore	Half-yearly

Concept	Legal Reference	Essence
Definition of Job Work	Sec. 2(68)	Processing of goods belonging to another registered person
Tax Exemption on Movement	Sec. 143	No tax if goods returned within 1 / 3 years
ITC to Principal	Sec. 19	Allowed even if goods sent to job worker
Waste / Scrap Disposal	Rule 45(5)	Taxable supply by job worker or principal
Documentation	Rule 55, Form ITC-04	Delivery challan and periodic return filing