Key takeaways
- Who owns the material
- The principal, even while it sits at the job worker
- Document
- Delivery challan for every movement out
- Time limits
- Inputs back in 1 year, capital goods in 3
- ITC-04
- Half-yearly above ₹5 crore AATO; annual otherwise
- Real cost
- Shortages, delays and rework, not only the charge
What job work is, and why it matters so much in India
Very few Indian manufacturers do every process in-house. A knitting unit sends grey fabric to a dyeing house; a hosiery unit sends garments for embroidery or printing; a fastener plant sends lots for heat treatment and zinc plating; an auto-component maker sends castings to a machine shop. In each case the material leaves the factory, is processed by someone else, and comes back.
Under GST, job work means processing by a person on goods belonging to another registered person, the principal. Ownership never changes: the fabric at the dyeing house is still the knitting unit's stock. That is what makes job work a stock, quality and compliance problem at the same time.
A Ludhiana knitwear group typically has material at five to fifteen processors on any given day. Without a pending register by processor, the owner cannot say how much of their own stock is outside the gate.
The GST rules in brief
| Rule | What it means |
|---|---|
| Sending without tax (Section 143) | The principal may send inputs and capital goods to a job worker without paying tax, under intimation, on a delivery challan |
| Delivery challan (Rule 55) | Each movement to the job worker is covered by a serially numbered challan with item, quantity, value and purpose |
| Time limit for inputs | Must be brought back, or supplied from the job worker's premises, within one year |
| Time limit for capital goods | Within three years; moulds, dies, jigs, fixtures and tools are not bound by this limit |
| If the limit is missed | The original dispatch is treated as a supply on the day it was sent, and tax becomes payable with interest |
| E-way bill | Required for movement to job workers; inter-state job-work movements need one regardless of value |
| Form ITC-04 | Reports goods sent to, received from and supplied from job workers |
This is a practical summary, not legal advice. Rules and due dates change by notification.
Form ITC-04: what, when and how often
ITC-04 is the return in which the principal reports job-work movements: what was sent out, what came back, what was sent from one job worker to another, and what was supplied directly from a job worker's premises. It is filed by the principal, not by the job worker.
| Aggregate annual turnover | Frequency | Due date |
|---|---|---|
| Above ₹5 crore | Half-yearly | 25 October (April–September) and 25 April (October–March) |
| Up to ₹5 crore | Annual | 25 April for the previous financial year |
The hard part of ITC-04 is not the form but the data: every challan out must be matched to receipts back, including partial receipts, losses, waste and goods sent onward. If that matching is done in a notebook, the return takes days and is rarely exact. If it is done in an ERP as the receipts happen, the return is a report.
The job-work cycle in an ERP
- Issue on challan. Material is issued against a job-work order and a lot, on a numbered delivery challan with an e-way bill where needed.
- Pending register. The material shows as stock at that job worker, by lot, with the date it left.
- Receipt against challan. Returned material is received against the original challan, by weight or count, with any waste or by-product recorded.
- Inspection. Received material is inspected; rework or rejection is recorded against the processor.
- Shortage and charges. The difference between expected and received quantity is compared with the agreed allowance; the processing bill is checked against quantities received.
- Ageing alerts. Challans approaching the one-year limit are flagged before they become a tax liability.
- ITC-04. The return is prepared from issues and receipts for the period.
Shortage: where job work quietly costs money
Every process has a natural loss: moisture in yarn, process loss in dyeing, scale in forging, waste in cutting. The question is whether each processor's loss is within what you agreed. Without measurement, shortage becomes an argument; with it, it becomes a number.
| Processor | Sent (kg) | Received (kg) | Loss | Allowed | Excess (kg) |
|---|---|---|---|---|---|
| Processor A | 4,200 | 3,910 | 6.9% | 7.0% | 0 |
| Processor B | 3,100 | 2,830 | 8.7% | 7.0% | 53 |
| Processor C | 2,600 | 2,430 | 6.5% | 7.0% | 0 |
The figures are illustrative, but the report is exactly what owners use to settle bills and decide where to send the next lot. It is only possible when receipts are matched to challans by lot.
Job work by trade
| Trade | Typical job work | What to track |
|---|---|---|
| Knitting | Yarn to knitters, fabric to dyers and compactors | Yarn lot, roll weights, process loss, shade |
| Garment | Embroidery, printing, washing, stitching contractors | Pieces by size and colour, bundle numbers, rejections |
| Weaving | Sizing, weaving on hired looms, processing | Beams, metres, picks, grades |
| Fastener | Heat treatment, plating | Heat number, count by weight, coating thickness |
| Auto component | Machining, plating, painting | Drawing revision, lot, rejection by reason |
| Railway parts | Machining, heat treatment | Heat traceability through every outside step |
Questions buyers ask
What is ITC-04 in GST?
ITC-04 is the form in which a principal manufacturer reports goods sent to job workers, received back from them, sent from one job worker to another and supplied directly from a job worker's premises.
What is the due date for ITC-04?
For businesses with aggregate annual turnover above ₹5 crore it is half-yearly: 25 October for April to September and 25 April for October to March. For others it is annual, due 25 April for the previous financial year.
What is the time limit for goods sent on job work?
Inputs must return within one year and capital goods within three years of being sent. Moulds, dies, jigs, fixtures and tools are not bound by these limits. If the limit is missed, the original dispatch is treated as a supply.
Is an e-way bill needed for job work?
Yes, for movement to job workers; for inter-state job-work movements it is required regardless of value.
How does ERP help with job work?
It issues challans against lots, keeps a pending register by processor, matches receipts and waste to challans, measures shortage against allowances, warns before time limits expire and prepares ITC-04 from the same entries.