Job work: the rate, Section 143 and the classification overlap
A process performed on someone else's goods. Three things decide the tax: whose goods, what process, and whether the goods came back in time.
Job work is defined in Section 2(68) as any treatment or process undertaken by a person on goods belonging to another registered person. Section 143 permits a principal to send inputs or capital goods to a job worker without payment of tax, subject to their return within one year for inputs and three years for capital goods, failing which the despatch is deemed to be a supply from the date it was sent. The rate on job work services depends on the entry applicable to the sector, and the classification of the process is frequently contested.
The Section 143 procedure
The principal sends goods under a delivery challan containing the prescribed particulars, and declares the movement in the prescribed return.
Inputs must return within one year and capital goods within three years, extendable in the manner prescribed. Moulds, dies, jigs, fixtures and tools are outside the return requirement.
Where the goods do not return within the period, the despatch is deemed to be a supply on the day it was sent, which means tax and interest run from that date and not from the expiry of the period.
Goods may be supplied directly from the job worker's premises where the job worker's place is declared as an additional place of business, or where the job worker is registered.
The principal remains accountable for the goods, and the reconciliation is the principal's obligation.
Job work or supply of goods
The distinction turns on ownership. Where the process is performed on goods belonging to the principal, it is job work and the consideration is a service. Where the processor buys the inputs and sells the output, it is a supply of goods.
Departments contend that where the job worker adds substantial inputs of its own, the arrangement is a supply of goods rather than job work. The answer is documentary: the ownership of the principal inputs, the challans, and the accounting treatment.
The rate entries for job work services differ by sector and have changed with the rationalisation. Verify the entry for the sector and the period.
Where the process amounts to manufacture of a distinct product, the job work characterisation still holds if the goods belong to the principal; manufacture and job work are not mutually exclusive.
The controls
A job work register per job worker: challan number, date of despatch, quantity, process, due date of return, actual return, and the balance outstanding.
A monthly ageing report of outstanding job work stock, flagged at nine months for inputs.
A reconciliation of job work stock to the books and to the job worker's confirmation at least quarterly.
For capital goods and tools, a separate register, because the periods and the treatment differ.
What to do on Monday
Maintain a job worker wise register with due dates and an ageing report flagged at nine months.
Reconcile job work stock with each job worker's confirmation quarterly.
Keep a separate register for capital goods and tools sent out.
Verify the job work rate entry for your sector after every rate change.
This page states the general position. A reader with a specific question on their own facts may write to the GST practice at AMLEGALS.
Write to the GST practiceQuestions we are asked on this
What happens if goods are not returned in one year?
The despatch is deemed to be a supply from the date the goods were sent, with tax and interest from that date. That backdating is what makes the ageing report essential.
Do moulds and dies have to come back?
The return requirement does not apply to moulds, dies, jigs, fixtures and tools, though the ownership and valuation questions remain.
Can the job worker supply directly to our customer?
Yes, where the job worker's premises are declared as an additional place of business or the job worker is registered, and the invoicing follows the prescribed route.
Is job work always taxed at the concessional job work rate?
The entry depends on the sector and the process, and the entries changed with the rationalisation. Verify for the period.
What if the job worker adds its own material?
Job work survives where the principal goods belong to the principal, but substantial addition invites the supply of goods argument. Keep the ownership and challan record clean.
In this cluster
- GST 2.0: two slabs did not end classification litigation, they moved the battle line
- Rate change transition: time of supply, credit notes and stock in hand
- Classification disputes under GST: the principles the courts apply
- Westinghouse Saxby: the sole or principal use test and the end of easy classification
- HSN, common parlance and the General Rules of Interpretation
- Composite supply versus mixed supply: the test, and the tax
- Principal supply in bundled contracts: getting the rate right
- Food, beverages and the restaurant service rate maze
- Textiles and apparel: the rate structure and the disputes it produces
- Pharmaceuticals and medical devices: the concession and its boundaries
GST Insights is published by AMLEGALS for general information. Law stated as on 3 September 2026. Not advice on any particular set of facts; not an advertisement or a solicitation under Rule 36 of the Bar Council of India Rules. Readers with a question on their own facts may write to the GST practice of their own accord.