How to Record Job Work / Subcontracting in Tally Prime

Job work — sending your raw materials or semi-finished goods to another business (a job worker) for processing, and getting them back as finished or partly-finished goods — is common in manufacturing, but it has a quirk: the materials you send out aren’t a sale, so they shouldn’t be invoiced like one, yet they still need to be tracked carefully, including under specific GST provisions for goods sent for job work.

This guide covers tracking materials sent for job work, monitoring what’s still outstanding, and recording the goods when they return.

What You Need Before You Start

• Tally Prime installed, with inventory features enabled — see our guide on how to manage inventory and stock in Tally Prime
• Stock items for both the materials being sent out and the finished/processed goods expected back
• A job worker ledger created, similar to a regular party ledger, to track this specific relationship

Step 1: Understand the GST Treatment of Job Work

Sending goods for job work generally isn’t treated as a taxable supply at the time of dispatch, provided the goods are received back (or supplied further from the job worker’s premises) within a notified time period. This means you typically don’t raise a tax invoice for goods sent purely for job work — instead, you track the movement using a Delivery Challan, with appropriate GST-related declarations as required under current rules. Always confirm current job work time limits and conditions, since these are specific provisions that matter for compliance.

Step 2: Create a Job Worker Ledger

1. Gateway of Tally, then Accounts Info, then Ledgers, then Create
2. Name the job worker (for example, “ABC Job Works”)
3. Group it appropriately — often under Sundry Creditors if you’ll eventually pay them a job work charge, or a dedicated group if you prefer separating job workers from regular trade creditors
4. Enter their GSTIN and address if applicable

Step 3: Record Goods Sent for Job Work Using a Delivery Note

1. Gateway of Tally, then Vouchers, then Delivery Note (Alt+F8)
2. Select the job worker as the party
3. Add the raw material or semi-finished stock items being sent, with quantities
4. Mark or configure this as a job work-related dispatch if your release has a specific option for this, distinguishing it from a regular sales-related delivery note
5. Save the voucher — this reduces your stock on hand for the items sent, while keeping track of the fact that they’re now with the job worker rather than sold

Step 4: Print the Delivery Challan

1. From the saved Delivery Note, press Alt+P to print
2. Ensure the challan clearly indicates this is goods sent for job work, not a sale, along with any other declarations required under current GST rules for job work movement
3. The job worker should have this challan as supporting documentation for the goods received at their end

Step 5: Track Outstanding Job Work Materials

1. Gateway of Tally, then Display More Reports, then Statement of Inventory, then look for a job work or order outstanding-type report relevant to tracking dispatched-but-not-returned materials
2. Periodically review what’s still with each job worker and for how long, since prolonged delays can create the GST compliance issue mentioned earlier if goods aren’t received back within the applicable time limit

Step 6: Record Goods Received Back from Job Work

1. Gateway of Tally, then Vouchers, then Receipt Note (Alt+F9)
2. Select the job worker as the party
3. Record the finished or processed goods received back, along with quantities
4. If the job worker also returns any unused raw material, or if there’s a normal yield/wastage difference between what was sent and what’s expected back, account for this based on your agreed terms with the job worker
5. Save the voucher — this increases your finished/processed goods stock

Step 7: Record the Job Work Charges

1. Once you receive the job worker’s invoice for their processing charges, record it as a regular Purchase voucher or Journal entry, treating it as a service expense
2. This is a standard taxable purchase transaction (subject to normal GST rules, including potential reverse charge in specific notified scenarios), separate from the earlier non-supply movement of your own materials

Step 8: Reconcile Quantities Sent vs Received

1. Periodically compare the total quantity of raw materials sent to a job worker against the quantity of finished goods received back, accounting for expected yield ratios or normal wastage agreed with them
2. Investigate significant unexplained differences, since this can indicate either a tracking gap in Tally Prime or an actual discrepancy with the job worker that needs addressing

Common Mistakes to Avoid

• Treating goods sent for job work as a regular sale and raising a tax invoice, when a Delivery Challan with appropriate job work declarations is typically the correct document
• Losing track of how long materials have been with a job worker, risking the goods exceeding the time limit allowed for non-supply treatment under GST job work provisions
• Not separately recording the job work service charge as its own taxable purchase transaction, missing the input tax credit you’d otherwise be entitled to claim on it
• Failing to reconcile sent versus received quantities, letting genuine material losses or job worker discrepancies go unnoticed
• Confusing job work outward movement (your goods going to someone else for processing) with job work received (processing services you perform for someone else’s goods) — these are mirror-image scenarios requiring different treatment

FAQs

Do I need to invoice the job worker for the materials I send them? Generally no — goods sent purely for job work are typically tracked via a Delivery Challan rather than invoiced as a sale, provided they’re returned within the applicable time limit under current GST job work provisions.

What if the job worker doesn’t return all the material, or there’s normal wastage? This should be addressed based on your commercial agreement with the job worker regarding expected yield and acceptable wastage levels, and reconciled against actual quantities received to confirm it’s within agreed tolerances.

Is the job worker’s processing charge subject to GST? Generally yes, job work services are typically a taxable supply of service from the job worker to you, subject to standard GST rules (with rates that can vary depending on the nature of the job work) — confirm the current applicable rate for your specific type of job work.

What happens if goods sent for job work aren’t returned within the allowed time limit? This can trigger a deemed supply under GST rules, with corresponding tax implications. Monitor job work outstanding periods carefully and consult your tax advisor if a return is delayed close to or beyond the allowed limit.

Can I do job work for someone else’s goods using the same setup in Tally Prime? Yes, the mirror-image scenario (receiving someone else’s goods for you to process) would similarly use Receipt Notes to track incoming materials and Delivery Notes when you return the processed goods, with your processing charge invoiced as your own taxable service supply to them.