GST ITC-04: Why Manufacturers Need to File This Form for Job Work Transactions
- adityas41
- Feb 24
- 7 min read
If you're a manufacturer in India, you're likely familiar with the concept of job work - sending inputs or semi-finished goods to another registered person for further processing.
But did you know that there's a specific GST form for declaring these job work transactions? It's called GST ITC-04, and filing it is crucial for maintaining compliance and avoiding penalties. In this post, we'll dive deep into GST ITC-04, understand its purpose, and learn how to file it correctly.
What is Job Work?
Before we get into GST ITC-04, let's first clarify what job work means under GST. Job work refers to any treatment or process undertaken by a person (the job worker) on goods belonging to another registered person (the principal). The job worker undertakes this process on the goods as per the principal's specifications and returns them after completion.
Some common examples of job work are:
A garment manufacturer sending fabric to a dyer for coloring
A steel manufacturer sending steel sheets to a fabricator for cutting and shaping
A jewelry maker sending gold ornaments to a polisher for finishing
In these cases, the principal sends the goods to the job worker without payment and receives them back after the agreed-upon work is done.
What is GST ITC-04?
GST ITC-04 is a quarterly return that needs to be filed by principal manufacturers who send goods for job work without payment of tax. It's a declaration of the details of inputs or capital goods dispatched to a job worker and received back from them.
Think of GST ITC-04 as a logbook that keeps track of your goods' movement to and from job workers. It helps the GST authorities monitor these transactions and ensure that the goods come back to the principal within the specified time limit.
Why is Filing GST ITC-04 Important?
You might be wondering, if the goods are simply sent for processing without any supply, why is there a need to declare them in a GST return? Here's why filing GST ITC-04 is crucial:
Availing Input Tax Credit (ITC): As a principal, you can send inputs or capital goods to a job worker without paying GST and still claim the input tax credit on them. However, to avail of this ITC, you must declare the details of such goods in GST ITC-04.
Maintaining Compliance: Filing GST ITC-04 is mandatory under GST law. Failure to do so can attract penalties and legal action. Regular filing helps you stay compliant and avoid any issues during GST audits or assessments.
Tracking Goods Movement: GST ITC-04 helps you keep track of the goods sent for job work and ensures they are returned within the prescribed time limit (1 year for inputs, 3 years for capital goods). It acts as a control mechanism to prevent any diversion or misuse of goods.
Facilitating Reconciliation: The details declared in GST ITC-04 can be matched with your GST returns (GSTR-1, GSTR-2) and the job worker's returns to ensure accuracy and consistency. This reconciliation helps avoid discrepancies and potential disputes.
In short, filing GST ITC-04 is not just a legal requirement but also a beneficial practice for manufacturers to track their job work transactions and claim ITC seamlessly.
Who Needs to File GST ITC-04?
Now that we understand the importance of GST ITC-04, let's see who is required to file this return:
Registered Principal: Any registered person who sends taxable goods for job work without payment of tax needs to file GST ITC-04. This includes manufacturers, importers, and other suppliers.
Goods Sent to Registered Job Worker: The goods must be sent to a registered job worker for the transaction to be declared in GST ITC-04. If the job worker is unregistered, the principal needs to pay GST on the goods' value.
Goods Returned within Specified Time: The goods sent for job work must be returned within 1 year (for inputs) or 3 years (for capital goods) from the date of dispatch. Else, it will be treated as a supply and GST will be payable on the value.
It's important to note that even if you don't have any job work transactions in a particular quarter, you still need to file a nil GST ITC-04 for that period.
What Details are Declared in GST ITC-04?
GST ITC-04 requires you to provide the following details of your job work transactions:
GSTIN of Job Worker: The 15-digit GST Identification Number of the job worker to whom goods are dispatched.
Challan No. & Date: The reference number and date of the delivery challan issued for dispatch of goods to the job worker.
Description of Goods: Brief description of the inputs or capital goods sent for job work.
Quantity: The quantity of goods dispatched, along with the unit of measurement (UOM).
Value: The taxable value of the goods sent for job work.
Rate of Tax: The applicable GST rate (CGST+SGST/UTGST or IGST) on the goods.
Job Work Return Challan No. & Date: The reference number and date of the challan issued by the job worker for the return of processed goods.
Quantity of Goods Returned: The quantity of goods received back after job work, along with the UOM.
You need to provide these details for each job work transaction separately, along with a total summary of goods dispatched and received back during the quarter.
When and How to File GST ITC-04?
GST ITC-04 is a quarterly return that needs to be filed by the 25th of the month succeeding the quarter. For example, for the July-September quarter, the due date is 25th October.
The return can be filed online through the GST portal by following these steps:
Login to GST Portal: Access the GST portal with your registered username and password.
Navigate to Services > Returns > ITC: Select the option for filing GST ITC-04 under the 'Returns' menu.
Select Financial Year and Quarter: Choose the relevant financial year and quarter for which you're filing the return.
Fill in GSTIN Details: Provide the GSTIN of your business and the job worker to whom goods were sent.
Enter Challan Details: Fill in the delivery challan number, date, description of goods, quantity, value, and tax rate for each job work transaction.
Declare Goods Returned: Provide the challan details of goods received back from the job worker after processing.
Verify and Submit: Check all the details carefully, declare that the information is true and correct, and submit the return using a Digital Signature Certificate (DSC) or Electronic Verification Code (EVC).
Once submitted, you'll receive an acknowledgment number for your records. You can also download a copy of the filed return from the GST portal.
Consequences of Not Filing GST ITC-04
Failing to file GST ITC-04 can have serious implications for your business, such as:
Losing ITC: If you don't file GST ITC-04, you may lose the input tax credit claimed on the goods sent for job work. The ITC will be added to your output tax liability, along with interest.
Penalty: A late fee of Rs. 200 per day (Rs. 100 each under CGST and SGST/UTGST) can be imposed for delayed filing of GST ITC-04, subject to a maximum of Rs. 10,000.
Demand and Recovery: The GST authorities may issue a notice asking you to file the return within a specified period. If you fail to do so, they can initiate demand and recovery proceedings against you.
Goods Treated as Supply: If the goods sent for job work are not received back within the prescribed time limit (1 year for inputs, 3 years for capital goods), it will be treated as a supply from the principal to the job worker. You'll be liable to pay GST on the value of such goods.
To avoid these consequences and maintain a clean compliance record, it's crucial to file GST ITC-04 regularly and on time.
Job Work Transactions - An Example
Let's understand GST ITC-04 better with a simple example.
Suppose ABC Garments, a clothing manufacturer, sends 1000 meters of fabric worth Rs. 1,00,000 to XYZ Dyers for dyeing. The applicable GST rate is 5%. ABC Garments issues a delivery challan with number 001 dated 1st July for this dispatch.
After dyeing, XYZ Dyers returns 950 meters of the dyed fabric vide challan number 101 dated 15th July. In GST ITC-04 for the July-September quarter, ABC Garments will report these details:
Goods sent for job work:
GSTIN of job worker - XYZ Dyers' GSTIN
Challan no. & date - 001, 1st July
Description of goods - Fabric
Quantity - 1000 meters
Value - Rs. 1,00,000
Rate of Tax - 5%
Goods received back:
Challan no. & date - 101, 15th July
Quantity - 950 meters
This way, ABC Garments declares the movement of fabric to and from the job worker and can claim ITC on the same.
How Fiscal Flow Can Help
Filing GST ITC-04 accurately and on time is essential for manufacturers dealing with job work transactions. But keeping track of all the details and complying with the various rules can be overwhelming. That's where Fiscal Flow comes in.
Our team of GST experts and chartered accountants can help you:
Identify Job Work Transactions: We'll review your purchase and sales records to identify any job work transactions that need to be reported in GST ITC-04.
Maintain Delivery Challans: We'll help you issue and maintain delivery challans for goods sent and received from job workers, as required for GST ITC-04.
Track Timelines: We'll keep track of the timelines for receiving back the goods (1 year for inputs, 3 years for capital goods) and alert you in case of any delays.
Prepare and File GST ITC-04: Our team will gather all the necessary details, prepare GST ITC-04 accurately, and file it on your behalf before the due date.
Reconcile with GST Returns: We'll match the details of GST ITC-04 with your GSTR-1 and GSTR-2 to ensure consistency and accuracy.
Handle Queries and Notices: In case of any queries or notices from the GST authorities regarding job work transactions, we'll handle them on your behalf and provide the necessary clarifications.
With Fiscal Flow, you can be assured that your GST ITC-04 compliance is taken care of, allowing you to focus on your core manufacturing business.
Conclusion
GST ITC-04 may seem like just another compliance requirement, but it plays a crucial role in tracking job work transactions and claiming input tax credit. By understanding the purpose and process of filing GST ITC-04, manufacturers can ensure smooth operations and avoid any legal or financial pitfalls.
Remember, filing GST ITC-04 is not just about staying compliant; it's also about maintaining a transparent and efficient supply chain. Timely filing helps build trust with your job workers and ensures a seamless flow of goods and services.
If you're unsure about handling GST ITC-04 on your own, don't hesitate to seek expert help. Fiscal Flow's dedicated team is here to assist you at every step, from identifying job work transactions to filing accurate returns.
Take control of your GST compliance and unlock the benefits of seamless job work transactions with GST ITC-04. Your business deserves the best, and Fiscal Flow is here to help you achieve it.
