ERP for job work and subcontracting in India

Under GST, job work is treatment or processing of goods belonging to another registered person, the principal. The principal sends inputs or capital goods to the job worker on a delivery challan, not a tax invoice, and the job worker charges GST on the job work service. The principal reports goods sent to and received from job workers in Form ITC-04. Time limits, thresholds and filing frequencies change, so confirm the current rules on the GST portal rather than relying on a vendor's summary. The ERP's job is to keep the challan, the quantities out and back, and the charges in one place.

The stock control problem is that material leaves the building without being sold. The clean way is to treat the job worker's premises as a warehouse: the challan is a transfer out, the balance there shows what is still outside, and the receipt back is a transfer in of the processed item. Short returns and scrap at the job worker are posted as movements, so the loss is visible rather than buried. Linking the challan to a work order and its routing step shows which jobs are waiting on which outside operation, which is what the planner actually needs to know on Monday morning.

The job worker's bill is a cost of the job, not an overhead. Record it against the work order so the job cost shows material at issue cost, in-house labour at the work-centre rate, and the subcontract charge for the outside step. Then a per-unit cost on the day the job closes is honest and quotes for the next order are based on it.

• A routing step marked as outside or subcontracted
• Challan quantities linked to that step
• The vendor bill allocated to the work order
• Scrap at the job worker recorded as a movement
• ITC-04 data available as a report or export

Ask the vendor to show a complete cycle: challan out, stock at the job worker, receipt back with a short quantity, the job worker's bill with GST, the cost on the work order, and the ITC-04 data. Check that the challan prints with the fields your auditor expects and that the GSTIN of both parties is on it; bring your own last challan to compare. If any of these steps is handled in a spreadsheet beside the ERP, the system does not really support job work.