Classify the equipment before starting a return clock
CGST Act section 19(7) excludes moulds and dies, jigs and fixtures, or tools sent out to a job worker from the deeming rules in sections 19(3) and (6). Section 143(4) likewise excludes those listed items from its capital-goods deemed-supply rule. A qualifying mould does not become a supply merely because it has remained with the job worker for more than three years. The same shipment may include ordinary capital goods that need a separate deadline.
Read the applicable text: India Code: CGST Act sections 15, 19 and 143 CBIC: CGST Rule 45 Notification 35/2021–Central Tax: reporting periods Circular 38/12/2018-GST: job work and tooling valuation.
Identify the asset by its function
Use design drawings, the purchase order, the production contract and the serial number to distinguish an actual mould or fixture from a machine carrying it. Do not treat the complete production line as a tool because one accessory is a fixture. Likewise, an accounting classification as capital goods alone does not decide whether the exception applies. For direct delivery to a worker, link the supplier invoice and principal's challan to actual receipt and identify the correct starting date for any time-limited item under section 19. For ordinary capital goods, section 19(6) normally counts three years from dispatch, but counts from receipt by the job worker when the goods are sent directly to that worker. Check section 143 separately for permitted supply from the worker’s premises and any valid extension.
Keep the challan trail alive
The exception concerns the statutory time limit. It does not remove the principal's account-keeping responsibility in section 143(2), or the relevant challan and ITC-04 work under rule 45. Record dispatch, serial number, receipt, onward movement, return or other final disposition. Reconcile physical confirmations separately from accounting depreciation. For ITC-04 use the rule 45 specified period: half-yearly where preceding-year aggregate turnover exceeds ₹5 crore, otherwise annual. The ordinary deadline is the 25th of the following month, subject to applicable extensions. The six-month periods begin on 1 April and 1 October.
Treat the service and later sale as different events
For job-work service valuation, section 15(2)(b) requires analysis of who was liable for an amount the recipient incurred and whether it is already in the price. CBIC Circular 38/12/2018 discusses tooling in that context; do not simply add the asset's purchase cost to every invoice or infer that every free issue is excluded. A later sale, transfer or scrapping requires its own analysis of supply, seller, document and any capital-goods credit consequences. Use the circular's valuation discussion with the governing law; its historical references to reverse charge do not decide current liability.
Maintain one register with different exception codes
Carry ordinary capital goods with dispatch and receipt evidence and an applicable statutory review date, including any valid extension. Carry qualifying tooling with a periodic physical confirmation date and no automatic three-year deemed-supply trigger. Escalate unresolved differences rather than treating a missing asset as either an automatic sale or automatically exempt.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: One challan, two populations
Eight qualifying moulds and three ordinary machines are sent out. Of 11 items, three enter the ordinary capital-goods deadline population. The other eight remain in the custody register with the tooling exception recorded.
Illustrative example 2: Tooling confirmed after four years
Four qualifying dies remain with the worker four years after dispatch. No deemed supply arises solely from elapsed time under the cited tooling exceptions. If three are confirmed on site, one die remains unresolved.
Illustrative example 3: A fixture travels separately from the machine
Asset documentation shows an ordinary machine costing ₹18 lakh and a separately identified fixture costing ₹2 lakh. The combined register is ₹20 lakh. If the fixture qualifies, only the ₹18 lakh machine belongs in the ordinary deadline population; this is a classification check, not tax valuation.
Illustrative example 4: Keep custody through worker changes
Opening custody is 12 fixtures. Four transfer from worker A to worker B and two return from A to the principal. Closing external custody is six at A and four at B, or ten in total.
Illustrative example 5: Check the ITC-04 boundary
A principal's preceding-year turnover is ₹5 crore exactly. The normal specified period is one financial year. A principal at ₹5.01 crore uses two six-month periods for a full year; the second exceeds the threshold by ₹1 lakh.
Illustrative example 6: Reconcile disposal without assuming tax value
A site initially has nine qualifying tools. One returns and two are disposed of under separate documented transactions. Six remain at the site. The two disposal entries require their own tax analysis rather than a three-year trigger.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify the principal and worker | Registrations and job-work agreement |
| 2 | Record each asset separately | Asset tag, description and technical evidence |
| 3 | Assign the statutory exception by item | Sections 19 and 143 classification memo |
| 4 | Verify supplier-direct deliveries | Invoice, principal challan and worker receipt |
| 5 | Record ordinary asset review dates | Dispatch or receipt evidence and any order extending time |
| 6 | Document onward movement | Endorsed or fresh challan as applicable |
| 7 | Reconcile external custody | Worker confirmations and count differences |
| 8 | Determine the ITC-04 period | Preceding-year aggregate turnover and filing calendar |
| 9 | Review job-work service valuation | Contract, tooling obligation and pricing schedule |
| 10 | Close actual returns or dispositions | Receipt, disposal documents and retained tax analysis |
Sixteen practitioner FAQs
1. Does every machine used for job work qualify as a tool?
No. Identify whether the particular item falls in the listed categories.
2. Does a qualifying die need an extension after three years?
No extension is required merely to avoid the time-triggered deemed supply from which it is excluded.
3. Can the exception cover production inputs on the same challan?
No. Classify and track inputs under their applicable rules.
4. Does a common invoice make the machine and fixture one category?
No. Inspect identification, function and commercial documentation.
5. Does depreciation move the GST review date?
No. Accounting depreciation is separate from the statutory event.
6. What if the supplier delivers straight to the job worker?
Keep the principal's evidence and apply section 19 to the relevant receipt and credit facts.
7. Who keeps proper job-work accounts?
Section 143(2) places that responsibility on the principal.
8. Can a return from one worker be recorded as a fresh purchase?
Use the movement history and custody evidence to avoid recording the same asset twice.
9. Does the exception remove ITC-04 obligations?
No. Check the applicable challan reporting requirements independently.
10. Is the turnover threshold met at exactly ₹5 crore?
No. Half-yearly periods require preceding-year turnover exceeding ₹5 crore.
11. Can a report use current-year turnover instead?
Use the immediately preceding financial year's aggregate turnover for this rule.
12. Does free issue always raise the job-work service value?
No. Test the supplier's obligation and whether the amount is already included under section 15(2)(b).
13. Is a worker confirmation proof that the tool qualifies?
It supports location and custody; classification needs technical and legal evidence.
14. Does a disposal have the same treatment as continuing custody?
No. Analyse the actual disposition and any applicable tax.
15. Can a missing tool be written out of the register immediately?
Investigate the location and disposition and retain the evidence before closing the entry.
16. What is the central reconciliation?
Tie opening custody plus dispatches less returns and supported dispositions to verified closing custody by location.
Official sources
India Code: CGST Act sections 15, 19 and 143 CBIC: CGST Rule 45 Notification 35/2021–Central Tax: reporting periods Circular 38/12/2018-GST: job work and tooling valuation