Under GST, job work is not just outsourcing. Clause (68) of section 2 of the CGST Act, 2017 defines job work as "any treatment or process undertaken by a person on goods belonging to another registered person". The registered person who owns the goods and sends them out is the principal. Once that test is met, the law gives the principal a special route: inputs and capital goods can move to the job worker without payment of tax, input tax credit stays with the principal, and the goods can come back or be sold from the job worker's premises. The price of that route is tracking. Every challan has a clock, and a missed deadline turns the original dispatch into a taxable supply.
This guide explains the rules a principal and its finance team need to apply, drawing on sections 19 and 143 of the CGST Act, CBIC Circular No. 38/12/2018-GST dated 26 March 2018, the GST Council's job work flyer and the GSTN Form GST ITC-04 user manual.
When an arrangement is job work under GST
Two facts decide it. First, the goods must belong to another registered person, the principal. Second, the job worker must carry out treatment or processing on those goods. The job worker supplies a service; ownership of the goods does not pass to the job worker merely because they are physically lying at the job worker's premises.
If the owner of the goods is unregistered, or if the vendor buys its own material and sells a finished product, the arrangement is an ordinary supply and the job work procedure does not apply. That check should be done before the first challan is raised, because every later concession depends on it.
What section 143 allows the principal to do
As summarised in Circular No. 38/12/2018-GST, section 143 lets a registered principal send inputs or capital goods to a job worker "without payment of tax, under intimation to the proper officer and subject to the prescribed conditions". The goods can also move from one job worker to another for further processing.
After processing, the GST Council flyer lists the ways the goods can leave the job worker:
- to another job worker for further processing;
- back to the principal's place of business without payment of tax;
- to a customer in India on payment of tax, or for export with or without payment of tax, as a supply by the principal.
When goods are supplied from the job worker's premises, the circular is clear that this is "regarded as supply by the principal and not by the job worker". The principal issues the invoice, and the time, value and place of supply are worked out in the principal's hands.
Input tax credit, including direct dispatch by the supplier
The principal does not reverse credit when goods are sent out for job work. The flyer records that under section 19 the principal is entitled to credit "even when the goods have been directly supplied to the job worker without bringing into the premise of the principal". The circular says the same: credit is available whether the inputs or capital goods first reach the principal or are received directly at the job worker's place.
For direct dispatch, the circular sets out the paperwork. The supplier's invoice is raised in the name of the principal (the buyer) and shows the job worker as consignee under rule 46(o). The goods move to the job worker under a copy of that invoice, and the principal then issues its own challan under rule 45 for the goods treated as sent for job work. A registered job worker can also take credit on inputs it uses in supplying its job work service.
The one-year and three-year limits
This is where most exposure arises. The time limits, as set out in the circular and the flyer, are:
| Goods sent | Must be returned or supplied from job worker's premises within | Clock starts (direct dispatch) |
|---|---|---|
| Inputs | 1 year | Date the job worker receives them |
| Capital goods (other than the items below) | 3 years | Date the job worker receives them |
| Moulds and dies, jigs and fixtures, tools | No return requirement | Not applicable |
If inputs or capital goods are neither received back nor supplied from the job worker's premises within the period, the law deems the original sending to be a supply by the principal to the job worker on the day the goods were first sent out. The circular adds the practical consequence: the principal must issue an invoice and declare the supply in the return for the month in which the one-year or three-year period expired, and interest is payable for the intervening period.
If the job worker sends goods back after the period has expired, the circular treats that return as a supply by the job worker to the principal, and the job worker pays GST on it if it is liable to be registered.
Worked example: tracking the clock
A registered manufacturer in Pune buys aluminium castings and asks the vendor to deliver them straight to a registered machining unit. The machining unit receives them on 14 October 2025. Because the goods never entered the manufacturer's factory, the one-year clock runs from that receipt date, so the castings must be back with the manufacturer, or sold from the machining unit's premises, by 14 October 2026.
The manufacturer had also sent a small lathe to the same unit as capital goods on 20 November 2024, and has lent it a CNC fixture. The fixture has no return deadline. The lathe must be returned or supplied by 20 November 2027. A challan-wise ageing report that shows the start date, the category and the expiry date for each line lets the team act 60 to 90 days before expiry, instead of discovering a deemed supply at year end.
Delivery challans and e-way bills
Goods go to the job worker under a challan issued by the principal, not under a tax invoice. Under rules 45 and 55, as explained in the circular, the challan is prepared in triplicate; two copies travel with the goods, and the job worker sends one copy back with the processed goods. When goods move from one job worker to another, the challan can be endorsed for the onward movement.
On e-way bills, the circular clarifies that:
- an e-way bill is needed when the consignment value exceeds ₹50,000, including for job work movements;
- for inter-State movement of goods to a job worker, the principal or a registered job worker must generate the e-way bill irrespective of the value;
- where the job worker is unregistered, the principal generates it.
Supplying from the job worker's premises
The facility to supply finished goods directly from the job worker's place is available only if the principal declares that place as an additional place of business, or if the job worker is registered. The flyer states the same point: the declaration is unnecessary when the job worker is GST-registered. Before instructing a job worker to ship straight to a customer, confirm the job worker's registration status; if it is unregistered, amend the principal's registration first.
The job worker itself needs registration only if its aggregate turnover, computed on an all-India basis, crosses the threshold. The circular cites ₹20 lakh, or ₹10 lakh in special category States, and makes the point that this applies whether the principal and job worker are in the same State or in different States.
Waste and scrap
Under section 143(5), waste and scrap generated during job work can be supplied by a registered job worker directly from its place of business on payment of tax. If the job worker is unregistered, the principal supplies it. The same quantity must then be shown when reconciling what was sent against what came back, because Table 5A of ITC-04 captures losses and wastes along with goods received back.
Form GST ITC-04: frequency and tables
The principal reports job work movements in Form GST ITC-04. According to the GSTN ITC-04 user manual, the form was quarterly for periods up to September 2021. From 1 October 2021 the frequency depends on the annual aggregate turnover of the preceding financial year:
| Annual aggregate turnover | ITC-04 frequency |
|---|---|
| More than ₹5 crore | Half-yearly: April to September and October to March |
| Up to ₹5 crore | Yearly, from FY 2022-23 |
The manual describes four reporting tables:
- Table 4: inputs or capital goods sent for job work;
- Table 5A: goods received back from the job worker to whom they were sent, with losses and wastes;
- Table 5B: goods received back from a job worker other than the one to whom they were originally sent;
- Table 5C: goods sent to a job worker and then supplied from the job worker's premises.
The form can be prepared in the GSTN offline utility, and a nil JSON file cannot be generated. Under the circular, the principal is responsible for including every relevant challan, including goods sent from one job worker to another. ITC-04 is a declaration of what the books already show; filing it does not cure a missing challan trail or a lapsed time limit.
Monthly control checklist for principals
- Confirm the arrangement: the goods belong to the registered principal and the vendor only processes them.
- Record the right start date: dispatch date for goods sent by the principal; job worker's receipt date for direct dispatch by a supplier.
- Tag the category: inputs (1 year), capital goods (3 years), or moulds, dies, jigs, fixtures and tools (no limit).
- Run an ageing report: list open challan lines with expiry dates and escalate anything within 90 days.
- Check each outward movement: e-way bill where required, endorsed challan for job worker to job worker transfers, and additional place of business before direct sales from an unregistered job worker.
- Capture waste and scrap: who supplied it and on what invoice.
- Reconcile before filing ITC-04: quantities sent, received back, transferred and supplied should agree with stock records.
- Act on lapses: where a period has expired, raise the deemed-supply invoice in the month of expiry and pay interest, rather than waiting for the job worker to return the goods.
Mistakes that create tax exposure
- Treating any outsourced work involving goods as job work without checking ownership and registration of the principal.
- Assuming credit is lost if goods go straight from the supplier to the job worker.
- Using one ageing period for inputs and capital goods, or applying it to moulds and dies that have no limit.
- Counting the clock from the supplier's invoice date instead of the job worker's receipt date on direct dispatch.
- Selling from an unregistered job worker's premises without declaring it as an additional place of business.
- Filing ITC-04 from purchase and sales data alone, without challan-level reconciliation.
Updated on 27 September 2026: retitled; added the ITC-04 half-yearly and yearly frequency from 1 October 2021 with its four tables, challan and e-way bill rules, job worker registration and late-return treatment from CBIC Circular No. 38/12/2018-GST, and a dated worked example of the time limits.
