Job work under GST: sending material out without paying tax on it
Checked against the Act and the Rules on 14 October 2026. Not tax advice — confirm anything you file with your CA.
Most factories send something out — castings for machining, parts for plating, fabric for dyeing, coils for winding. Section 143 of the CGST Act lets you do it without paying tax on the way out and without losing your input tax credit, provided the goods move on a challan and come back in time. Here is how it works, and where it goes wrong.
What counts as job work
Job work is any treatment or process that a person carries out on goods belonging to another registered person. You (the principal) still own the material while it is at the job worker; they charge you for their work, not for the goods.
That ownership is the whole point: because nothing has been sold, nothing is taxed when the material leaves — only the job worker's charge is taxed, on their invoice to you.
Sending material out
- Raise a delivery challan for the goods — not a tax invoice. It carries the value but no tax; our Rule 55 guide lists every field.
- If the job worker is in another state, generate an e-way bill whatever the value. Within a state, the usual ₹50,000 threshold applies.
- Keep your input tax credit. You may take credit on inputs and capital goods sent out, and even on goods delivered by your supplier straight to the job worker — the clock then starts from the day the job worker receives them.
The deadlines: one year and three years
| What was sent | Must come back within | Can be extended by |
|---|---|---|
| Inputs (raw material, parts) | 1 year | Up to 1 more year, by the Commissioner |
| Capital goods | 3 years | Up to 2 more years, by the Commissioner |
| Moulds, dies, jigs, fixtures, tools | No time limit | — |
"Come back" includes being supplied from the job worker's premises — sold to your customer straight from there, on your invoice — when the law allows.
If the time runs out, the goods are treated as supplied by you to the job worker on the day they were sent out. You owe tax on them from that date, with interest — on material you still own and may well get back next week.
Waste and scrap
Turnings, offcuts and rejects created at the job worker's end can be sold by the job worker, paying tax, if they are registered — or by you if they are not. Either way, record the waste against the challan it came from, or the quantities will never reconcile.
When it comes back
- The job worker sends the processed goods back on their own challan, and invoices you for the work.
- Book the receipt against the challan line it settles, with the quantity, and any loss or waste.
- Material that comes back in a different unit — 1,200 brackets from 500 kg of sheet — is still accounted for in the unit it went out in. Record how much material the returned pieces used.
Every principal then reports what went out and what came back on Form ITC-04, half-yearly or yearly depending on turnover.
A checklist for the factory
- Every dispatch to a job worker has a numbered challan — no exceptions for "just a few pieces".
- Inter-state job work always has an e-way bill.
- Every receipt is booked against a challan, the day it arrives.
- Someone looks every month at what is still out and how old it is.
- Scrap and process loss are written down against the challan, not left as a difference.
How XERP handles job work
- A job work order sends material out on a numbered Rule 55 challan and tracks it at the job worker, line by line.
- Receipts are booked against the challan they settle — consumed, returned or written off as waste — and an order closes only when every line is settled.
- Each line shows the days left on its section 143 clock, and the same records produce the ITC-04 tables.