ITC-04 Filing for Job Work: Step-by-Step Guide for Indian Manufacturers

In Indian manufacturing, subcontracting (job work) is ubiquitous. Automobile component makers send castings for CNC machining; garment makers send fabric for dyeing and embroidery; electronics manufacturers send bare PCBs for wave soldering. Without subcontracting, specialized capital equipment costs would crush SME economics.

Under GST, sending goods to a job worker is not treated as a sale, provided the legal protocols under Section 19 and Section 143 of the CGST Act are strictly observed. To ensure accountability and prevent tax evasion, the government mandates that principal manufacturers file Form GST ITC-04, reporting every kilogram, meter, and unit sent, received, or supplied directly from job workers' premises.

The CBIC rationalized ITC-04 filing frequencies under Notification No. 35/2021-Central Tax:

• Annual Turnover Above ₹5 Crores: Half-Yearly filing:
  • Period 1 (April 1 to September 30): Due on or before October 25
  • Period 2 (October 1 to March 31): Due on or before April 25
• Annual Turnover Up to ₹5 Crores: Annual filing for the entire financial year due on or before April 25.

The most dangerous statutory trap for Indian factory owners lies in the strict return timelines enforced under Section 143 of the CGST Act:

The Deemed Supply Penalty: If goods cross the 1-year threshold without returning or being sold from the job worker's location, the transaction ceases to be exempt job work. It is deemed a taxable B2B sale dating back to the exact day the goods originally left your factory. You must issue a tax invoice, pay output GST, and pay 18% annual interest calculated from the original date. For high-value metal components, this interest penalty can wipe out months of operating profit.

Goods cannot move to or from a job worker on an invoice. They must move under a Statutory Delivery Challan complying with Rule 55 of the CGST Rules, containing:

1. Consecutive serial number (unique for each financial year).
2. Date and number of the delivery challan.
3. Name, address, and GSTIN of the consigner (Principal) and consignee (Job Worker).
4. HSN code and complete technical description of goods.
5. Quantity, provisional taxable value, tax rate, and tax amounts (CGST, SGST, IGST) calculated purely for disclosure.
6. Place of supply and vehicle registration details.

If the consignment value exceeds ₹50,000, an E-Way Bill generated against the Delivery Challan must accompany the vehicle.

When sending 1,000 kg of raw steel bars for CNC turning, the job worker may return 880 kg of finished machined pins and generate 120 kg of steel swarf and turnings. If your ERP does not account for Contracted Conversion Scrap Ratios, your ITC-04 returns will show 120 kg of unaccounted missing material, triggering GST scrutiny.

Werkora tracks scrap tolerances agreed in vendor purchase orders. When inward delivery challans are received, the system reconciles returned parts plus scrap allowance against the outward raw material balance, closing the loop with zero residual balance discrepancy.

Werkora streamlines outside processing and subcontractor inventory management with practical shop-floor workflows:

• Standardized Rule 55 Challans: Storekeepers generate compliant delivery challans with item descriptions, HSN codes, and transport details directly from dispatch.
• Vendor Material Balances: Track outward shipments against inward receipts to monitor pending material balances at each vendor facility in real time.
• Aging & Return Tracking: Review dispatch dates and material return status to monitor aging inventory before statutory Section 143 deadlines approach.
• Clean Reconciliation Data: Access organized material movement logs, challan numbers, and conversion yields to simplify statutory reporting and accounting reconciliations.