Job work: the delivery challan, the clock, and what happens if goods do not come back

Short answer: goods sent for job work move on a delivery challan without tax, and it is not a supply — provided they return within one year (inputs) or three years (capital goods). Miss that and the supply is deemed to have occurred on the date of despatch, with interest from then. Separately, the rate on the job worker's invoice changed on 22 September 2025, and for general engineering work it went up.

The relief, and its condition

The procedure exists because job work would otherwise be absurd: every movement of work-in-progress between a principal and a processor would be a taxable supply, taxed and credited back repeatedly through a production chain.

So goods sent to a job worker move on a delivery challan, without tax, and the despatch is not treated as a supply.

The relief is conditional on return. It is not an exemption for job work movements generally — it is a deferral that becomes permanent only if the goods come back in time.

The clock

Both periods are extendable in prescribed circumstances, which is worth knowing before the deadline rather than after it.

The last row is regularly missed in both directions. Tooling left permanently at a job worker's premises is common and legitimate; treating it as an overdue input creates a liability that does not exist, while treating genuine inputs as tooling conceals one that does.

What happens when the clock runs out

This is the part that makes the rule expensive.

If the goods are not returned within the period, it is deemed that they were supplied to the job worker on the day they were originally sent out.

The consequence is entirely backdated:

• Tax is payable as of the original despatch date.
• Interest runs from that date, not from when the lapse was discovered.
• The liability sits with the principal, whatever the reason for non-return.

A consignment sent in April and noticed as missing eighteen months later carries eighteen months of interest. Nothing about discovering it late improves the position, and nothing about a commercial dispute with the job worker suspends it.

The practical implication is that this is an ageing problem, not a filing problem. A principal who ages goods lying with job workers monthly sees the deadline coming. One who reconciles annually finds out after it has passed.

Direct despatch from the job worker

Finished goods can be supplied directly from the job worker's premises to the principal's customer — which is usually the commercially sensible route — provided either:

• the job worker's premises are declared as an additional place of business of the principal, or
• the job worker is registered.

Where neither holds, the direct despatch creates a problem that a single declaration made in advance would have avoided entirely. This is worth checking against the actual physical flow rather than the intended one, since despatch practice often drifts from what was originally set up.

The rate on the job worker's invoice changed

Distinct from the challan procedure above, and easy to miss because it affects the job worker's invoice rather than the principal's compliance.

From 22 September 2025, the 12% slab was removed from job work services under SAC 9988 and the structure moved to 5% and 18%, with one retained special entry:

The last two rows are the ones that cost money. General engineering and fabrication job work moved from 12% to 18% — a six-point increase falling on the residual category, which is where most industrial job work sits. A job worker still invoicing at 12%, or a principal still expecting it, is working from the pre-September 2025 structure.

Two practical consequences:

• For a registered principal the increase is largely a credit and cash-flow matter, not a cost — but the invoice still has to be right, and short-charged tax is recoverable from the job worker later.
• Where the principal is unregistered, 18% applies and there is no credit to take, so it is an absolute cost.

For a manufacturer using the concessional 5% categories, the reduction from 12% is a genuine saving that should be reflected in what job workers are invoicing.

The paperwork that carries it

The delivery challan does the work here, and it has to contain the prescribed particulars. It is not an invoice and it is not optional — goods moving without one lose the benefit of the procedure at the outset, before any question of the return period arises.

Movements are also reported in the prescribed periodic statement, which is what the department reconciles against. Goods despatched and never shown as returned are visible without anyone visiting the premises.

A practical checklist

1. Is a compliant delivery challan raised for every outward movement?
2. Are goods with job workers aged monthly against 1 year or 3 years as applicable?
3. Are tooling items separated from inputs in that ageing?
4. Where goods are despatched directly to customers, is the job worker's premises declared or the job worker registered?
5. Does the periodic statement agree with the challan register?
6. Is the rate on the job worker's own invoice correct for your category under the post-September 2025 structure — 5%, 12% or 18%?

For how the credit side interacts with this, see input tax credit and GSTR-2B.

Scrap arising at the job worker's premises is its own supply question, with a reverse charge and a 2% TDS to consider — see GST on scrap sales.

This is a working reference, not the statute. For anything you are relying on, confirm the section, rule and rate text directly.