Job Work and ITC-04: A 2026 Guide for Indian Manufacturers

If you make anything more complicated than a single-piece product, you almost certainly send material out for processing. Plating, heat-treatment, powder-coating, machining, sub-assembly — the moment any of these happens at a vendor instead of in-house, you are doing job-work under GST. And the moment you do that, you owe GSTN a quarterly (or half-yearly) accounting of what went out, what came back, and what is still sitting at the job worker’s premises.

Every Indian factory we have onboarded onto OEMup so far — pumps, plastics, fabrication, food processing, chemicals — was tracking job-work in some combination of Excel, a printed challan register, and a small notebook the supervisor carries. None of them had a clean ITC-04 in their first quarter with us. By the second quarter they all did. The difference is not effort — it is having the workflow in one place.

What is job work under GST?

Section 2(68) of the CGST Act defines job work as “any treatment or process undertaken by a person on goods belonging to another registered person.” The party that owns the material is the principal manufacturer. The party doing the work is the job worker. The material legally remains the property of the principal throughout — while it travels, while it sits at the job worker’s shop floor, and while it travels back.

That ownership distinction is the entire point. Because the material is still yours, you do not pay GST when you send it out (it is not a supply). You do not lose input tax credit either. But because the material has moved, GSTN wants visibility on it — which is what ITC-04 provides.

What is ITC-04?

ITC-04 is the prescribed return at the GST portal where a principal manufacturer declares:

• Inputs / capital goods sent to job workers during the period (Table 4)
• Inputs / capital goods received back from job workers during the period (Table 5A)
• Inputs / capital goods sent from one job worker to another (Table 5B)
• Inputs / capital goods supplied directly from the job worker’s premises (Table 5C)

It is filed at gst.gov.in under Returns → ITC Forms → ITC-04. The form accepts a JSON upload or manual entry; for any factory with more than ten challans per quarter, JSON upload is the only sane option.

When do you file ITC-04 in 2026?

The filing frequency depends on your previous year’s aggregate turnover:

Even if you have zero job-work activity in a period, a nil return is technically required if you have ever sent goods out in the past. In practice most factories skip the nil filing without consequence, but the safer path is one minute on the portal.

The three documents every job-work flow needs

This is the part Excel-based tracking gets wrong most often. Every single movement of material in a job-work cycle — out, return, sometimes a transfer between two job workers — needs three documents to be defensible in an audit. Miss one, and the officer will treat the move as a regular supply.

1. Rule-55 Job-Work Challan

A challan issued under Rule 55 of the CGST Rules, with all 14 prescribed fields:

• Serial number of the challan and date
• Name, address, GSTIN of the principal manufacturer
• Name, address, GSTIN (if registered) of the job worker
• HSN code, description and quantity of the goods
• Taxable value, tax rate, tax amount (CGST, SGST, IGST, UTGST, cess)
• Place of supply and signature

Note the tax fields. Even though you are not paying GST on this movement, the challan must show what would have been the tax. This trips up first-timers who think they can leave the tax columns blank.

2. E-Way Bill (when applicable)

If the consignment value is above ₹50,000, an e-way bill is mandatory — same as any other movement. For inter-state job-work moves, many states (Maharashtra, Gujarat, Karnataka, Tamil Nadu) require an e-way bill regardless of value. The safer rule: always generate one. The cost is zero. The cost of not having one when stopped is the entire consignment value being treated as a supply.

3. Conversion-Charges Invoice (on return)

When the goods come back, the job worker raises a normal GST invoice for the labour / conversion charges. This is a regular B2B supply — you claim ITC on it. The invoice must reference the original challan (most job workers don’t do this voluntarily; you have to ask) so the ITC trail and the ITC-04 entries reconcile.

The time limits that catch factories out

Material sent to a job worker must come back within a defined window. The clock starts on the day the material leaves your premises — not the day work begins, not the day the challan is created.

• Inputs: 1 year
• Capital goods: 3 years
• Moulds, dies, jigs, fixtures, tools: No time limit

If material does not return within the window, GST is deemed payable on the original removal date, with interest. We have seen factories find this out only at audit, two years later, with a six-figure tax demand for a forgotten consignment of raw aluminium that the job worker quietly scrapped. The ERP needs to track the clock, not the staff.

Five mistakes GST officers flag in 2026 audits

How an ERP automates the entire flow

The reason job-work is painful is not that any individual step is hard — it’s that the steps span four different documents, two different GST forms (ITC-04 and the conversion-invoice ITC trail in GSTR-2B), and an internal stock journal that needs to keep the material on your books even though it’s physically elsewhere. Excel cannot keep all four in sync. A purpose-built manufacturing ERP can.

In OEMup the flow looks like this:

1. You create a Job Work Order from a production routing or directly. Material is auto-allocated.
2. The system generates the Rule-55 challan with all 14 fields, prompts for the e-way bill if needed, and updates stock to a “Material at Job Worker” bin (still yours, not in the main godown).
3. A timer starts on the one-year / three-year clock. You get reminders at 75% and 90%.
4. On return, scanning the challan reduces the job-worker stock and adds the converted good to inventory. The job worker’s conversion invoice is auto-matched.
5. On the 25th of the month after the quarter (or half-year), one click generates the ITC-04 JSON with all four tables populated.

The Excel disappears. The supervisor’s notebook becomes a phone screen. The CA stops asking for last quarter’s challan register at 11 pm on the 24th.

The bottom line

Job-work compliance is not complicated — it is just several things to keep in sync. The factories that get audit notices are not the ones doing something wrong; they are the ones doing things in three different places. Get the challan, the e-way bill, the conversion invoice, the time-limit clock, and the ITC-04 form into one system, and the entire problem shrinks to a one-click monthly task.

If you are running on Tally + Excel today and any part of this guide felt familiar, you have outgrown the setup — not failed at it. The companion read is 5 Things Tally Cannot Do That a Manufacturing ERP Can for the operational case, and OEMup vs Tally for the side-by-side. For the step-by-step on the GST e-invoice side, see How to Generate a GST E-Invoice in 2026.

FAQ

Do I have to file ITC-04 if I never send anything to a job worker?

No. ITC-04 only applies to principal manufacturers who actually send goods out. If everything happens in-house, the return does not apply to you.

What if my turnover is below the ₹5 crore threshold — can I still file quarterly?

Yes. You can voluntarily file quarterly even if half-yearly is permitted. Some CAs recommend it because four smaller filings are easier to reconcile than two larger ones. The portal will accept the more-frequent filings without question.

Can the job worker be unregistered?

Yes — an unregistered job worker is allowed under Section 143. You simply leave their GSTIN field blank on the challan and ITC-04. The principal remains fully responsible for the GST treatment of the goods. Direct supply from an unregistered job worker’s premises (Table 5C) is not allowed unless you have declared their address as an additional place of business.

What happens if material does not return within the time limit?

GST is deemed payable on the original removal date, with interest at 18% per annum from that date. The principal also reverses any ITC that was claimed on the inputs. If the material later does come back, the GST can be reclaimed but the interest is not refunded.

Are moulds and dies treated the same as capital goods?

No. The proviso to Section 143 specifically exempts moulds, dies, jigs and fixtures, and tools from the time-limit requirement when sent for job work. They can stay at the job worker indefinitely.

Where does ITC-04 fit with GSTR-1 and GSTR-3B?

It does not feed into either. ITC-04 is a standalone return that lives alongside the regular GSTR cycle. The conversion-charges invoice from the job worker, however, appears in your GSTR-2B as an inward supply and you claim ITC on it in GSTR-3B like any other purchase.

Primary sources cited

• gst.gov.in — GSTN portal, ITC Forms → ITC-04
• Section 143, Central Goods and Services Tax Act, 2017
• Section 2(68), Central Goods and Services Tax Act, 2017 (definition of job work)
• Rule 55, Central Goods and Services Tax Rules, 2017 (delivery challan)
• Notification 35/2020-Central Tax (job-work return frequency and turnover threshold)