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how to claim Input tax credit on Job work
Input Tax Credit under GST has some less-explored areas. In this article, we will be throwing some light on one such topic of ‘How to claim Input Tax Credit under GST on Job Work’.

Job Work is an inevitable part of the Indian economy.

Many businesses outsource some of their tasks to other manufacturers. It’s a big industry and hence, the Input Tax Credit applicable to this sector becomes necessary to address.

We will also discuss in brief the ITC-04 form which is required to claim Input Tax Credit on ‘Job-Work’.

What does Job-Work mean? & How to claim Input Tax Credit ?

Job work
  • According to Section 2(68) of the CGST Act, 2017 job work can be defined as ‘any treatment or process undertaken by a person on goods belonging to another registered person.
  • It simply means processing or working on the raw materials or semi-finished goods supplied by the manufacturer directly to the job worker.
  • For Example:

    A furniture manufacturer ‘Jai Mata Di Furniture’ outsources some of its work to small scale manufacturers.

    Suppose, they are preparing a table out of wood, they cut the wood and do the necessary processes and give it the shape and form of a table.

    This trader then gives the table for painting to some other manufacturer named ‘Sai Traders’.

    In this case, according to the definition in the CGST Act of 2017,

    Jai Mata Di Furniture is the Principal &

    Sai Traders is the Job Worker.

    Here, ‘Jai Mata Di Furniture’ is a registered business.

    ‘Sai Traders’ has taken on the goods from this registered person to carry some further processes of painting and polishing.

    This makes ‘Sai Traders’ a ‘Job Worker’ as it has taken a job from a GST registered business.

    Understanding How to claim Input Tax Credit on this Job-Work

    Section 19 of the CGST Act throws light on the process of claiming Input Tax Credit where ‘Job-Work’ is involved.

    According to Section 19 of the CGST Act, the ‘Principal’ shall be eligible to take credit on the Input Tax paid on the inputs he has sent to the ‘Job-Worker’.

    This provision also makes clear that the 'Principal' shall be eligible to take the credit even if the goods have been directly supplied to the ‘Job-Worker’ without bringing them to the 'Principal's place of business.

    Is there a specific time duration during which the principal should receive the goods back?

  • Yes. There is a pre-defined time frame as follows:
  • For Capital Goods – It is 3 years from the effective date
  • For Input Goods – 1 year from the effective date.
  • How is the effective date calculated?

  • If the goods are sent to the job worker from the Principal’s place of business, then the effective date is the date when these goods were sent out.
  • If the goods are sent from the Principal's seller to the job-worker directly, then the effective date becomes ‘date of receipt of goods by the job-worker.
  • How to claim Input Tax Credit with Form ITC-04?

    input tax credit

    Form ITC-04 is necessary to claim Input Tax Credit on the Job-Work.

    We will see some details about this form in this section.

    Major highlights of form ITC-04

    Must be submitted by the ‘Principal' quarterly. The Principal should furnish challan details of the following transactions:

    • Goods sent to the job-worker
    • Goods received from a job worker
    • Goods transferred from one job worker to another.

    Due Date details of form ITC-04

  • ITC-04 is filed quarterly.
  • It should be filed on or before the 25th day of the month which falls after the quarter on GST portal.
  • For example:  For the quarter of April’21 – June’21, the due date is 25th July 2021.
  • What details are required for ITC-04 & understand How claim Input tax credit?

    When there’s a job-work involved there are two main things which are considered:

    • Goods sent to the job worker
    • Goods received from the job worker.

    Following is a snapshot of the GST ITC-04 form:

    1. Goods Sents for Job work:

    Job work ITC claim

    You have to furnish the details of the goods sent to the job-worker.  Some of the details include:

    • GSTIN
    • Challan number
    • Description of goods
    • Types of capital goods
    • Rate of tax

    2. Details of the goods received back from the job-worker

    input tax credit on job work

    In this column, you will have to furnish the details of the goods received by the principal or sent them to another job-worker directly.

    To Summarize

    As the number of job-workers & outsourcing activities in the Indian economy is very large, it would be very important for this section to understand the details about How to claim Input Tax Credit on this job-work.

    Input Tax Credit overall is a dearest subject for all the taxpayers. It is at the same time difficult as incorrect reconciliations may block your working capital.

    You can try out GSTHero’s superfast ITC reconciliation tool!

    Connect with us for a quick demo at:

    Email: info@gsthero.com

    Phone: +91 8007700800

    Until the next time…


    About the author

    Gaurav is an Engineer by training with a deep interest in Economics & Finance. He has been associated with the Fin-Tech industry for quite some time now. He writes for GSTHero for topics including GST Compliance, GST Structure, etc & aims to break down complicated technical jargon into simple terms for the taxpayers. His expertise includes GST Laws, Corporate Finance & Macro-Economics.

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