In short
Applies to: Manufacturers who send goods for processing, and job workers
- The owner sends material for job work on a delivery challan without charging GST, and remains responsible for it.
- Inputs must return within one year and capital goods within three; otherwise the goods are treated as supplied on the day they were sent out.
- The job worker charges GST on the processing charge only: 5% for the listed kinds of work (among them pharmaceuticals, hides, skins and leather, and certain bricks), and 18% for job work on alcoholic liquor, bus body building and all other job work, which was 12% before 22 September 2025.
Job work is processing done on goods that belong to someone else: dyeing fabric, machining castings, hulling paddy, stitching shoe uppers. GST treats the material and the processing separately, and gives each side its own duties.
The material: no tax, with a time limit
- The owner (the principal) sends inputs or capital goods to the job worker on a delivery challan, without charging GST.
- The principal keeps the on those goods.
- Inputs have to come back, or be sold from the job worker's premises, within one year. Capital goods have three years. The Commissioner can extend these by up to one and two years on sufficient cause, and moulds, dies, jigs, fixtures and tools have no time limit.
- If they do not, the goods are treated as supplied on the day they were sent out, and tax with interest becomes due.
Moulds, dies, jigs, fixtures and tools sent to a job worker are not subject to the time limit.
The processing charge: the job worker's supply
The job worker charges GST on the processing charge alone, not on the value of the material. From 22 September 2025 the rates are:
| Kind of job work | GST |
|---|---|
| Textiles and textile products | 5% |
| Food and food products, including milling | 5% |
| Hides, skins and leather; leather goods and footwear | 5% |
| Other job work, including engineering goods | 18% |
A job worker below the registration limit for services does not charge GST. The principal can take credit for the GST it is charged, where its own output is taxable.
Who keeps the records
- The principal accounts for the goods and reports what was sent and received back in Form ITC-04: half-yearly where turnover is above ₹5 crore, yearly otherwise.
- The job worker keeps a record of material received, processed, returned and held, customer by customer.
- Waste and scrap from the process can be sold by the job worker if registered, on payment of tax; otherwise by the principal.
Where it goes wrong
- Material lying with a job worker past one year, unnoticed until an audit.
- Challans that do not match what was returned, so losses cannot be explained.
- The wrong rate on the charge after the September 2025 change.
- TDS () deducted by the principal from the processing charge as a contract payment, and not matched by the job worker with its tax statement.
Before relying on this article: rates depend on the kind of goods worked on, and are changed by notification. Check the current entry for your work.
Sources
- Notification 9/2025-Integrated Tax (Rate): GST rate schedules from 22 September 2025, CBIC
- Rule 45 of the CGST Rules: goods sent to a job worker and Form ITC-04, CBIC
- Circular of November 2017: milling of paddy as job work, CBIC
This article is for general information only and does not constitute professional advice. Please consult a qualified professional before acting on it.
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