Job work under GST: section 143 and ITC-04

Key facts

• A registered principal can send inputs and capital goods to a job worker for processing without paying GST, under a delivery challan (section 143).
• Inputs must come back (or be supplied from the job worker's place) within 1 year. Capital goods within 3 years. Moulds, dies, jigs and tools have no time limit.
• If goods do not come back in time, they are treated as supplied by the principal on the day they were sent, with GST and interest payable.
• The principal claims ITC on the inputs, even if they go directly from the supplier to the job worker.

ITC-04 return

It reports goods sent to and received back from job workers.

GST on the job work charges

• The job worker charges GST on its processing charges only, not on the value of your material.
• Rates depend on the goods processed. After GST 2.0, job work on items such as pharmaceuticals and leather is at 5%, many textile, jewellery and food-related processes are also at lower rates, and general manufacturing job work is at 18% (56th GST Council FAQs).
• Job workers need registration only if their turnover crosses the threshold (₹20 lakh for services in most states).

Steps for the principal

1. Issue a delivery challan with your GSTIN, job worker details, description, quantity, value and HSN.
2. Generate an e-way bill if the consignment value is above ₹50,000 (inter-state movement always needs one, regardless of value, for job work).
3. Track quantity sent, processed and returned, including scrap and waste.
4. File ITC-04 on time.

Common questions

Can the job worker sell the finished goods directly from its place?

Yes, if the principal declares the job worker's premises as an additional place of business, or the job worker is registered. The principal still invoices the buyer and pays GST.

What about scrap generated at the job worker?

The job worker can sell it and pay GST if registered; otherwise the principal pays GST on it.

Is jewellery job work treated differently?

Yes. Job work in relation to jewellery, diamonds and precious stones is taxed at a lower rate. Check the rate notification for your exact process.

Sources

• Central Goods and Services Tax Act, 2017 (as amended)
• Central Goods and Services Tax Rules, 2017
• FAQs on the decisions of the 56th GST Council (job work rates and other services)
• E-way bill system: user manual and FAQs