Job-work billing under GST — challans, returns and invoicing

What job work means under GST

Job work is the outsourcing backbone of Indian manufacturing: a principal sends raw material or semi-finished goods to a job worker — for machining, plating, heat treatment, stitching, printing, assembly — and gets processed goods back. GST defines it in Section 2(68) of the CGST Act as any treatment or process undertaken by a person on goods belonging to another registered person. The two words that drive all the billing consequences are "belonging to": the goods never stop being the principal's property. The job worker sells labour and skill, never the material.

That single fact splits job-work billing into two completely different documents, and confusing them is the classic error. The movement of goods to and from the job worker is not a sale — no tax invoice, no GST — and travels on a delivery challan under Section 143. The work itself is a service, and the job worker bills it with a normal GST tax invoice for job-work charges. If those foundations — challans vs invoices, CGST/SGST vs IGST — are new to you, start with the pillar guide, what is GST billing software.

The delivery challan — how material moves without tax

Section 143 lets a registered principal send inputs or capital goods to a job worker — and from one job worker to another — without paying tax, and claim input credit on those goods as if they had never left. The vehicle is the delivery challan, and the rules (Rule 45 and Rule 55) are specific about what it must carry: date and serial number, both parties' GSTINs, description, HSN and quantity of the goods, taxable value, the tax that would apply (for e-way bill purposes), and place of supply. The challan is issued in triplicate — original for the consignee, duplicate for the transporter, triplicate retained.

Three practical disciplines follow. Every outward challan must be serially numbered and logged, because ITC-04 is built from challans, not memory. The return leg needs its own challan from the job worker (or an endorsement of the original), referencing what it returns against. And partial returns are normal — 100 shafts go out, 40 come back machined this month — so each challan's outstanding balance must be tracked line by line, exactly the way an invoice consumes a dispatch in ordinary billing. A system that links return challans to outward challans gives you, at any moment, the answer to the audit question: what of ours is lying at which job worker, against which challan, since when?

The clock: 1-year and 3-year return limits

The tax-free movement has a deadline. Inputs must come back (or be supplied onward from the job worker's premises) within one year of being sent; capital goods within three years — moulds, dies, jigs and fixtures are exempt from the limit. Miss the deadline and Section 143 deems the original movement to have been a supply on the day the goods were sent: you owe GST on that supply, with interest running from the original challan date, and the "challan" retroactively becomes a sale you never invoiced.

This is why challan ageing is not bookkeeping pedantry. A principal with hundreds of open challans needs the system to surface anything approaching its deadline while there is still time to recall the material or invoice it deliberately — a deemed supply discovered during an audit, with two years of interest attached, is the expensive version of the same event.

The job worker's invoice — billing the work, not the goods

The only tax invoice in a clean job-work cycle is the job worker's GST invoice for the processing charges. It is a service invoice under SAC 9988 (manufacturing services on physical inputs owned by others), and its taxable value is the job-work charge — never the value of the principal's material. The commonly applicable rates: 12% when the principal is a registered person, 18% when the work is done for an unregistered principal, and concessional rates for specific sectors (several textile and printing processes attract 5%). Rates and entries shift with council meetings — confirm yours with your CA.

Everything you would expect of a B2B invoice applies: the principal's GSTIN, the CGST/SGST or IGST split by state, amount in words, e-invoicing with IRN and QR if the job worker's turnover has crossed the ₹5 crore threshold. Billing bases vary — per piece, per kg, per operation, or against an agreed rate card — and a fabricator running long jobs may bill monthly against accumulated work. Job workers who bill by operation or by resource consumed rather than per SKU will find the project and resource billing pattern a natural fit — billing the work performed, which is precisely what job work is. Payment collection and follow-up run like any B2B receivable, through payments, receipts and follow-up.

ITC-04, e-way bills and scrap

Three compliance threads wrap around the cycle. ITC-04 is the principal's periodic return of job-work movements — goods sent, received back, and supplied from the job worker's premises, built challan by challan. Principals with aggregate turnover above ₹5 crore file half-yearly (April–September due 25 October, October–March due 25 April); smaller principals file annually. A challan register that reconciles outward against return legs makes ITC-04 an export; a shoebox of challans makes it a quarterly crisis. E-way bills apply to job-work movements like any other — above the value threshold (and for inter-state job work, regardless of value in most cases), generated against the challan since there is no invoice. See GST, e-Way Bill & e-Invoice. Scrap generated during processing: a registered job worker may sell it from their premises on their own tax invoice; if unregistered, the principal supplies it. Either way it must be someone's invoice — scrap that simply evaporates is how job-work audits go wrong.

Running both sides: principal and job worker

Most engineering SMEs are not purely one or the other — the same firm sends plating out to a vendor and takes machining in from a bigger principal. The two roles need mirrored records. As principal: outward challans with ageing against the 1-year clock, return receipts linked to challans, ITC-04 from the register, and the vendor's service invoice booked as an expense with input credit. As job worker: inward material logged against the principal's challans (their material, your custody — it never enters your stock valuation), processing tracked, the return challan, and your SAC 9988 service invoice with GST. Both roles post to Tally — the service invoice as a sales voucher, the vendor bill as a purchase voucher — keeping the books clean on either side of the fence. Firms whose main billing is product dispatches should read this alongside the manufacturing billing guide; fabricators billing structured site work will also recognise the pattern in the construction and project billing guide.

What job-work billing software must do

Generic invoicing tools have no concept of goods that move without being sold — which is the entire point of job work. The checklist:

For engineering and fabrication firms, Fast Billing Software's manufacturing profile covers both halves — challan-based movement with document-linked returns, and GST service invoicing that posts to Tally. Pricing is indicative and in INR — see billing software pricing — and job-work rates and thresholds do change, so confirm current positions with your CA.

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