SECTION 143 OF THE CGST ACT — FACILITATING JOB WORK WITH DISCIPLINE

The Job Work Framework under GST — A Legislative Overview

Within the expansive GST framework, certain provisions are designed not merely to levy tax but to facilitate genuine business movement. Section 143 of the CGST Act, 2017, is one such carefully crafted provision. It recognises a core commercial reality — manufacturing and processing are frequently decentralised, and goods commonly pass through multiple hands before reaching their final form.

The law, therefore, adopts a calibrated balance. It permits the principal to send inputs or capital goods for job work without immediate tax incidence, thereby preserving working capital and operational flexibility. Simultaneously, it embeds defined timelines, documentation discipline, and accountability safeguards to prevent misuse.

Essentially, Section 143 reflects GST’s core value of “trust with timelines” — creating a supportive pathway for genuine business transactions that’s built on clear traceability and procedural responsibility.

Section 143(1) — Sending Inputs or Capital Goods without Payment of Tax

At the core of the job work mechanism is Section 143(1), which authorises a registered person (known as the principal) to dispatch inputs or capital goods to a job worker without the obligation to pay tax, provided certain prescribed conditions are met. This provision acknowledges contemporary manufacturing practices by permitting the transfer of goods not only from the principal to a single job worker but also between multiple job workers and through various processing stages without incurring immediate tax liabilities. Such a measure is a crucial facilitative step aimed at alleviating working capital constraints and promoting decentralised production frameworks. Nevertheless, the exemption is conditional — its operation is confined within a meticulously regulated time frame and disciplined compliance protocols, as stipulated in the Act and Rule 45.

This flexibility is particularly valuable in industries such as textiles, engineering, jewellery, and auto parts, where multi-stage processing across specialised units is crucial rather than problematic or unusual.

Illustration Disclaimer

The illustrations in this article are purely for academic understanding of the statutory mechanism, and all names used therein are fictitious. Facts are simplified for clarity and should not be treated as a substitute for the provisions of the CGST Act and Rules.

Illustration 1 — Sequential Job Work Chain
Anish Private Ltd. (principal) dispatches raw materials to Job Worker A for cutting, subsequently to Job Worker B for polishing, and ultimately to Job Worker C for finishing. In accordance with Section 143(1), the entire process may proceed without the necessity of GST payment at each stage of movement, provided that appropriate challans are maintained and all statutory time limits are adhered to.

Section 143(1)(a) — Option to Bring Back Goods

Clause (a) outlines the principals initial compliance option. It allows the principal to return inputs within one year and capital goods (excluding moulds, dies, jigs, fixtures, or tools) within three years of their original shipment. The law intentionally states “after completion of job work or otherwise, providing commercial flexibility — goods can be returned even if the processing is only partly finished or due to business needs.

Illustration 2 — Return within Time Limit

Inputs were dispatched to a job worker on 10 September, 2025 and received back after partial processing on 10 January, 2026. As the return occurs within one year of the date of dispatch, the transfer remains tax-neutral, and no deemed supply is triggered.

It is important for professionals to note that the statutory timeline commences from the dispatch date of the goods, and not from the date when the job work actually begins or finishes. In practice, numerous disputes arise from oversight of this seemingly straightforward trigger point.

Section 143(1)(b) — Option to Supply Directly from Job Worker’s Premises

Clause (b) presents a significant alternative by allowing the principal to supply processed inputs or capital goods directly from the job worker’s location instead of returning the goods. This can be done either by paying tax within India or, for exports, with or without tax payment. This approach helps avoid unnecessary double transportation and cuts logistics costs, especially when the job worker is closer to the customer or export port. The statutory timelines remain unchanged—one year for inputs and three years for capital goods—and maintaining strict compliance is essential to preserving the tax-neutral nature of the original movement.

Illustration 3 — Direct Supply from Job Worker

On 12 January 2026, Harpreet Ltd. (Principal) dispatches inputs to Job Worker P. After processing, Harpreet Ltd. delivers the finished goods directly from Job Worker P’s location to its customer on 18 February 2026, and GST is paid. Because this supply occurs within one year of the dispatch date, the conditions of Section 143 are met, and the initial movement does not qualify as a supply.

First Proviso to Section 143(1)(b) — Additional Place of Business

The law implements a key control mechanism. Generally, the principal can supply goods from the job worker’s premises only if that site is officially declared as an additional place of business. This requirement promotes transparency and clear jurisdiction. However, the statute relaxes this rule in two cases: first, when the job worker is registered under GST; second, when the principal deals with notified goods. The core idea is risk-based: if the job worker is already within the tax system, requiring an extra declaration is unnecessary.

Illustration 4 — When an Additional Place Declaration Is Not Required

Kirti Tools [Principal] dispatches goods to Job Worker R, who is properly registered under GST. Kirti Tools supplies the finished goods directly from R’s premises without designating that location as an additional place of business. The arrangement remains entirely compliant, as the job worker holds registration.

Principals should exercise caution here, as supplying goods directly from an unregistered job workers premises without a proper declaration is a common and preventable compliance mistake.

Second Proviso to Section 143(1) — Extension of Time Limits

Recognising that genuine commercial circumstances may sometimes delay the return or supply of goods, the second proviso empowers the Commissioner to extend the prescribed period upon demonstration of sufficient cause. The statute, however, maintains a structured framework by establishing limits for such extensions — up to one additional year for inputs and up to two additional years for capital goods. Consequently, the effective permissible retention period may extend to two years for inputs and five years for capital goods, provided formal approval is duly obtained.

Illustration 5 — Extension Scenario

Inputs are dispatched to a job worker on 11 January 2025, thereby establishing the original deadline as 10 January 2026. Owing to unforeseen production delays, the principal secures a one-year extension from the Commissioner. Provided that the goods are returned on or before 10 January 2027, the tax-neutral status of the initial dispatch remains preserved.

Section 143(1), therefore, operates as a carefully balanced facilitation mechanism — generous in permitting tax-free movement for genuine job work, yet uncompromising in enforcing time discipline and procedural traceability.

Section 143(2) — Responsibility for Proper Accounts

Sub-section (2) introduces a quiet but decisive shift in compliance. Following the provision of substantial operational flexibility under sub-section (1), the legislation explicitly assigns the obligation of maintaining accurate records of inputs and capital goods to the principal. In essence, although the goods may physically move through one or more job workers, the legal responsibility for compliance remains with the principal.

This provision exemplifies the fundamental principle of Section 143 — facilitation must not diminish accountability. The principal, as the owner of the goods and the primary beneficiary of the job work arrangement, is obliged to maintain a transparent and auditable record of the movement, processing, and eventual return or supply of such goods. Consequently, the law explicitly prohibits the principal from relying solely on the custody or operational control of the job worker as a shield.

Practically, it is generally expected that the principal maintains comprehensive records of:

• the quantity of inputs or capital goods dispatched,
• challan-specific movement to each job worker,
• goods received back or supplied directly, and
• the remaining quantity held by job workers at any given time.

Illustration 6 — Loss of Goods at Job Worker’s Premises

Shreyans Components Ltd. dispatches inputs valued at Rs. 30 lakh to Job Worker K for machining. During the process, a portion of these inputs is lost due to mishandling at the job worker’s premises. Since Section 143(2) assigns the responsibility of proper accounting to the principal, the tax implications arising from such a loss cannot be circumvented solely by attributing the incident to the job worker. The principal is obligated to properly account for the discrepancy and fulfil the tax liability where legally mandated.

This sub-section, therefore, functions as a vital reminder: while physical possession may change, the obligation to ensure compliance remains unchanged. Enterprises that regard job work solely as a logistical task, without implementing disciplined quantitative controls, often expose themselves to scrutiny from departments.

Section 143(3) — Deemed Supply of Inputs on Breach of Time Limit

Sub-section (3) prescribes the statutory consequence where the discipline of Section 143(1) is breached. While the law permits tax-neutral movement of inputs for job work, it embeds a self-correcting mechanism. If the inputs are neither received back nor supplied from the job worker’s premises within one year, they are deemed to have been supplied by the principal to the job worker.

The importance of this provision resides in the phrase “deemed to have been supplied… on the day when the said inputs were sent out.” In essence, the tax event is retroactively linked to the original dispatch date. This retrospective nature carries significant financial consequences, as the principal becomes liable not only for GST but also for applicable interest during the intervening period. Consequently, what initially appears to be a tax-neutral transaction can, if deadlines are overlooked, evolve into a taxable supply.

The provision should be interpreted in conjunction with Section 143(1)(a) and (b). The principal is granted two permissible exit routes within one year: either returning the inputs or supplying them directly from the job worker’s premises. Failure to adhere to either option within the specified timeframe will automatically activate the deeming fiction as outlined in sub-section (3).

Illustration 7 — Deemed Supply Due to Delay

Inder Engineering dispatches inputs to Job Worker Q on 19 August, 2024. The goods were subsequently returned on 4 November 2025. As the inputs were not returned within 1 year of dispatch, they are considered to have been supplied by InderEngineering to the job worker on 19 August, 2024. Consequently, the principal is obliged to remit GST, along with interest at 18 per cent, from the original date of dispatch.

From a compliance management perspective, this represents one of the most critical vulnerabilities within the job work framework. Corporations frequently monitor the physical return of goods but neglect to establish a time-triggered monitoring system. The law is indifferent to operational intent — once the timeline lapses, the deeming fiction operates automatically.

It is also important to recognise that the deeming provision is applicable even in cases where the delay is unintentional or commercially justified, unless the principal has formally secured an extension under the second proviso to sub-section (1). Therefore, robust internal controls, regular ageing analysis of goods held by job workers, and prompt follow-up mechanisms are essential for maintaining the tax-neutral nature of job work transactions.

In the comprehensive framework of Section 143, subsection (3) functions as a definitive reminder within the legislation that facilitation lacking adherence to time discipline is not consistent with legislative intent.

Section 143(4) — Deemed Supply of Capital Goods on Breach of Time Limit

Sub-section (4) extends the same discipline to capital goods. Although a three-year window is provided, the principle remains unchanged. If the capital goods (other than moulds and dies, jigs and fixtures, or tools) are neither returned nor supplied within this period, the original dispatch is deemed to be a supply by the principal to the job worker.

The legal consequence again functions retrospectively. Capital goods are considered to have been supplied on the date they were initially dispatched, thereby subjecting the principal to GST liability along with interest for the intervening period. The extended time frame should not generate a false sense of reassurance. The compliance expectations remain ongoing and vigilant throughout the three-year period.

It is equally important to acknowledge the statutory carve-out concerning moulds and dies, jigs and fixtures, and tools, which are explicitly exempt from the time-bound return obligation. The legislature has deliberately recognised the distinct commercial use of these items, which are frequently stationed at the job worker’s premises for prolonged periods as an integral component of the manufacturing ecosystem.

Illustration 8 — Deemed Supply of Capital Goods

Abhishek Arora Machines Ltd. dispatches a specialised capital goods machine to the Job Worker S on 19 September 2021 for precision operations. The machine is only received back on 4 November 2025. Since the capital goods were not returned within three years from the date of dispatch, they are considered to have been supplied by the principal to the job worker on 19 September 2021, and GST, along with interest at 18 per cent, becomes payable accordingly.

Together, sub-sections (3) and (4) constitute the enforcement framework of Section 143 — initially permissive in nature, yet decisively corrective in instances of deadline violations. The legislations message remains consistent and unequivocal: the entitlement to tax-free movement is maintained solely on the condition that temporal discipline is observed.

Section 143(5) — Supply of Waste and Scrap during Job Work

Sub-section (5) addresses the practical issue of waste and scrap generated during job work. Recognising that manufacturing inevitably produces residual waste, the law permits such scrap to be supplied directly from the job worker’s premises on payment of tax where the job worker is registered. Where the job worker is unregistered, the responsibility shifts to the principal.

This provision operates independently of the stipulations outlined in sub-sections (1) and (2), thereby establishing a self-sufficient mechanism for managing waste and scrap. The legislative intent is unequivocal: revenue should not be withheld solely because the initial inputs were dispatched pursuant to the job work procedure. Concurrently, the law links tax liability to the job workers registration status, thereby ensuring administrative efficiency.

Illustration 9 — Waste and Scrap supplied by Registered Job Worker

Aayra Metals Ltd. dispatches copper sheets to Job Worker T for cutting and shaping. During the process, scrap valued at Rs. 50,000 is produced. Since Job Worker T is registered under GST, he may supply the scrap directly from his premises upon payment of applicable tax. In such a case, the principal is not obligated to undertake the supply. Conversely, when the job worker is unregistered, the statutory responsibility for payment of tax shall shift to the principal, namely Aayra Metals Ltd.

Principals must carefully reconcile the quantities of inputs sent, received, and waste generated to ensure compliance. Since the input tax credit on the original goods is usually claimed by the principal, laws require a clear, transparent record showing that inputs are returned, supplied, or properly documented as waste or scrap.

Job work is classified as a supply of services under Schedule II of the CGST Act. Consequently, a job worker whose total turnover exceeds the prescribed threshold is mandated to obtain registration and to remit GST on job work charges independently. Nonetheless, the specific mechanism outlined in sub-section (5) ensures that the taxability of waste and scrap is addressed distinctly and remains unambiguous.

Within the overall framework of Section 143, sub-section (5) concludes the compliance cycle. While previous provisions emphasise the transportation and return of goods, this clause ensures that even residual by-products generated during the job work process are within the tax regulatory scope. It underscores a uniform legislative principle — every unit of input dispatched must be traceable, whether manifested as finished goods, returned materials, or taxable scrap.

Rule 45 — The Procedural Backbone of the Job Work Framework

While Section 143 provides the substantive permission for tax-neutral movement, the operational discipline of the job work framework is driven by Rule 45. The Rule functions as the procedural backbone, primarily governing movement documentation, ITC-04 reporting, and the consequences of non-return within prescribed timelines.

Rule 45(1) stipulates that inputs, semi-finished goods, or capital goods dispatched for job work must be accompanied by a delivery challan issued by the principal. This requirement applies even if the goods are sent directly to the job worker without first arriving at the principal’s premises. Furthermore, Rule 45(1) accommodates practical business considerations by permitting movement between job workers either under a new challan issued by the principal or through endorsement of the original challan by the originating job worker. This methodology ensures proper documentation flow while avoiding disruptions in multi-stage processing chains.

The delivery challan assumes critical importance from a documentation standpoint.  Rule 45(2) provides that it must include the required details under Rule 55, such as the description, quantity, taxable value, and identification information for both the consignor and the consignee. Typically, the strength of the challan record serves as the initial line of defence during departmental audits of job work transactions.

Illustration 11 — Movement through Endorsed Challan

Jyoti Components[Principal] dispatches inputs to Job Worker A via a delivery challan. Subsequently, Job Worker A, following partial processing, transfers the goods to Job Worker B by endorsing the original challan with the relevant quantity details. This movement remains entirely compliant with Rule 45, contingent upon the proper recording of the endorsement and the principals accurate documentation of the transaction.

Beyond mere physical movement, Rule 45(3) establishes a significant reporting obligation via FORM GST ITC-04. The principal is mandated to submit details of goods dispatched to job workers and goods received back within the designated timeframe. Over the years, the compliance framework has matured into a risk-based reporting system correlated with the principals total turnover. Larger principals are obliged to submit ITC-04 for each specified six-month interval, while smaller principals may do so annually. However, the said time limit for submission of ITC-04 may be extended by the Commissioner by a Notification issued in this regard. Functionally, ITC-04 acts as the statutory notification as intended under Section 143, offering the tax authorities insight into the inventory of goods in the course of job work.

One of the most important parts of Rule 45 is sub-rule (4), which strengthens the legal assumption in Section 143. If inputs or capital goods are not returned on time, the Rule mandates that the principal treat the initial dispatch as a deemed supply, report it in FORM GSTR-1, and pay the relevant tax and interest. This way, the Rule puts the legal consequence into effect and makes sure the monitoring system is practical, not just theoretical.

From a governance perspective, Rule 45 requires that principals uphold a live reconciliation system for goods dispatched for job work. Periodic ageing of goods held with job workers, prompt follow-up, and precise ITC-04 reporting are not merely procedural formalities but vital safeguards against inadvertent tax exposure.

When considered comprehensively, Rule 45 supplements the compliance framework established by Section 143. While Section 143 grants authorisation, Rule 45 introduces the requisite discipline; similarly, if the Act offers flexibility, the Rule ensures traceability. Enterprises that comprehend and respect this interplay are positioned to fully leverage the advantages of the job work facility without inviting unnecessary disputes.

The Last Word — Discipline Is the Price of Facilitation

Section 143 reflects a careful blend of commercial pragmatism and statutory discipline. It recognises modern manufacturing realities by permitting tax-neutral movement of goods for job work, thereby supporting working capital efficiency and decentralised production. Yet the facilitation is clearly conditional — every relaxation is balanced by timelines, documentation rigour, and principal-level accountability.

For the discerning professional, the message is both enabling and cautionary. The framework works seamlessly where businesses maintain real-time tracking, challan discipline, and timely ITC-04 reporting. But where monitoring becomes casual, and timelines drift, the same provision can swiftly convert convenience into unintended tax exposure through the deeming fiction.

In the final analysis, job work under GST is not merely procedural — it is a trust-based mechanism that rewards discipline and exposes complacency.

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CA. RAJ JAGGI AND KIRTI JAGGI