Job work under GST: the delivery challan, the one-year rule and ITC-04
Sending cloth for processing is not a sale, so no tax is charged on the way out — provided it comes back in time. What to send it on, how long it may stay, and the records that keep it clean.
Job work is processing done on goods that belong to somebody else. The trader — the principal — sends grey cloth to a mill or a job worker; the job worker dyes, prints or finishes it and sends it back. Ownership never changes, so there is no sale and no GST on the cloth itself. Only the job charges are taxed.
Going out: a delivery challan, not an invoice
Goods sent for job work travel under a delivery challan issued by the principal. It should carry:
- A serial number and date.
- The principal's and the job worker's names, addresses and GSTINs.
- Description, HSN code and quantity of the goods.
- The value of the goods.
- A line saying the goods are sent for job work.
An e-way bill is needed too, even though nothing is being sold: for a job worker in another state whatever the value, and within the state once the consignment crosses the limit.
Coming back: the time limit
| What was sent | Must be back, or supplied from the job worker's place, within |
|---|---|
| Inputs (cloth, yarn, dyes) | One year |
| Capital goods (machines, other than moulds, dies, jigs and tools) | Three years |
If the goods are not back in time, the law treats them as having been SOLD to the job worker on the day they were sent out. Tax becomes due from that day, with interest. An extension can be applied for, but it must be asked for — it does not happen by itself.
Coming back: the job worker's bill
The job worker raises a tax invoice for the JOB CHARGES only — never for the value of the cloth. That tax is input credit in the principal's hands. Job work on textiles has its own rate of tax; confirm the current rate rather than assuming it is the rate on the cloth.
ITC-04
The principal files a statement, Form GST ITC-04, of goods sent to job workers and received back. How often it is due depends on turnover — half-yearly for larger businesses, yearly for smaller ones. Check which applies to you this year.
The register that makes all of this easy
Everything above rests on one record: for each challan sent, how much has come back and how much is still out.
| Challan | Sent on | Sent (m) | Received (m) | Shrinkage | Pending (m) | Days out |
|---|---|---|---|---|---|---|
| MI-041 | 4 April | 10,000 | 9,400 | 600 | 0 | — |
| MI-058 | 19 June | 8,000 | 5,000 | 310 | 2,690 | 101 |
| MI-077 | 2 September | 12,000 | 0 | 0 | 12,000 | 26 |
- Pending meters are your stock on any closing date.
- Days out tells you which challans are getting close to the limit.
- Sent, received and shrinkage, period by period, are what ITC-04 asks for.
Goods can be sold straight from the job worker's premises without coming back, provided the job worker is registered or the principal has declared that place as an additional place of business. The sale is still the principal's, on the principal's invoice.
Time limits, rates and the frequency of ITC-04 have each changed since GST began. Use this as a map, and confirm the current rule before relying on a number.