For Indian manufacturers — whether you're running a garment unit outsourcing stitching, a food processor outsourcing packaging, or an auto component maker sending parts for heat treatment — job work is a daily reality.

But job work under GST has specific rules that many manufacturers get wrong. Here's the full picture.

What Is Job Work Under GST?

Job work is when you (the principal) send your own goods — raw materials, semi-finished goods, or capital goods — to another person (the job worker) for processing, testing, repair, or any other work. The goods remain yours throughout. You're not selling anything to the job worker.

Under GST, this arrangement is governed by Section 143 of the CGST Act, which provides specific tax treatment and compliance obligations.

Common examples: garment units outsource stitching, embroidery, dyeing, and printing to small units. Auto component manufacturers send parts for heat treatment, surface finishing, or plating. Food processors outsource packaging and labelling. Textile businesses send fabric for weaving, bleaching, or sizing. Engineering shops outsource machining, welding, and fabrication.

Key Rules Under Section 143

1. No GST on Goods Sent for Job Work

When you send your own materials to a job worker, no GST is charged on the goods themselves. You're not making a supply — you're moving your own property. You only need to issue a delivery challan (not a tax invoice) for the goods dispatched.

2. GST Is Charged on the Job Work Service Fee

The job worker charges GST on their processing charges (the value they add). This is a taxable service. The rates that apply most often:

Textile and textile products job work: 5%
Leather goods and footwear job work: 5%
Diamonds and jewellery job work: 1.5%
All other manufacturing job work: 12%
Repair and maintenance job work: 18%

As the principal, you can claim ITC on the GST paid on job work charges, as long as the final goods are taxable.

3. Mandatory Delivery Challan

Under Rule 45 of CGST Rules, every dispatch of goods for job work must be accompanied by a delivery challan in triplicate. It must contain the date and challan number, your name, address, and GSTIN, the job worker's name and address (GSTIN if registered), the description and quantity of goods dispatched, the taxable value for reference, and the signature of an authorised person.

Keep the original, send a copy with the goods, and file one for records.

4. Time Limits for Return of Goods

This is where many manufacturers get caught out. Inputs (raw materials, semi-finished goods) must be returned within 1 year from the date of dispatch. Capital goods (machinery, moulds) must be returned within 3 years.

If goods are not returned within this period, the original dispatch is deemed to be a supply — meaning GST becomes payable from the original dispatch date, along with interest.

Track every job work dispatch date. Don't let goods sit with a job worker indefinitely.

5. Direct Supply from Job Worker Premises

You don't always have to bring goods back to your factory before supply. Section 143(1)(b) allows you to supply directly from the job worker's premises, provided the job worker's premises is declared as your additional place of business in your GST registration, or the job worker is registered under GST.

This is common in garment export — goods go for finishing and ship directly from the job worker.

Compliance Checklist for Job Work

Before dispatch:

Issue delivery challan in triplicate
Record the dispatch date — this starts the return clock
Note the job worker's GSTIN (or Aadhaar for unregistered job workers)

During job work period:

Maintain a register of all goods with each job worker (quantity, date dispatched)
Monitor the 1-year or 3-year return deadline
Chase returns before the deadline — don't wait

On return:

Reconcile returned quantity against dispatched quantity
Account for wastage (should be reasonable and documented)
Receive the job worker's invoice for processing charges plus GST
Claim ITC on job work GST paid

For direct supply from job worker:

Ensure job worker's premises is declared or job worker is registered
Issue tax invoice from your GSTIN for the onward supply

Common Mistakes and How to Avoid Them

Not maintaining a delivery challan. Many small manufacturers send goods to job workers on a verbal basis. Without a challan, you have no legal record that the goods are your property. If the job worker closes down, you have no claim.

Losing track of return deadlines. One year passes quickly when you're busy. Set a reminder two months before the 1-year mark for every job work dispatch. If the goods aren't back, either recover them or restructure the arrangement.

Unregistered job workers and direct supply. If your job worker is unregistered under GST and you want to supply directly from their premises, you must first add their address as your additional place of business in your GST registration. Skipping this step makes the direct supply non-compliant.

Not claiming ITC on job work charges. The GST on processing charges is legitimate ITC if your final goods are taxable. Many small manufacturers pay this GST and forget to claim it back. Check with your CA.

How to Track Job Work in Your Factory Software

Managing job work on paper or in Excel leads to the most common problems — missed return deadlines, lost challan records, and reconciliation headaches.

A manufacturing operations system should let you create a job work challan directly from a production order, track total quantity dispatched per job worker, see aging of open job work (how long since dispatch), alert when a return deadline is approaching, and record returned quantities with shortage flagging.

FactoStack's procurement and vendor management module tracks job work dispatches, open quantities, and expected return dates — with automated challan generation linked to your production orders.

Job Work Tracking in FactoStack

Create GST-compliant job work challans, track material sent to vendors, and get alerts before return deadlines — all linked to your production orders.

See how it works →Book a demo

Job Work Under GST: Rules Every Manufacturer Must Know