Many manufacturing units send raw materials or semi-finished components to small job workers who operate below the statutory registration threshold. When the processed goods return with a labour bill or job work delivery receipt, accounts teams frequently wonder whether reverse charge mechanism (RCM) applies on the inward supply under Section 9(4). Understanding the exact statutory boundary between Section 9(3), Section 9(4), and recent TDS notifications prevents unnecessary tax payments and audit discrepancies.
Statutory framework: Section 9(4) and job work under Section 2(68)
Under Section 2(68) of the Central Goods and Services Tax (CGST) Act, job work is defined as any treatment or processing undertaken by a person on goods belonging to another registered person (CBIC Circular 126/45/2019-GST). The principal owner sends goods without payment of tax under Section 143(1), retaining title to the goods throughout the process.
Under Section 9(4) of the CGST Act, reverse charge applies only to specified categories of supplies received by specified classes of registered persons from unregistered suppliers, as notified by the Government. General job work services or manufacturing labour charges are not notified under Section 9(4). Therefore, when you receive job work services from an unregistered person, there is no generic reverse charge liability on the service charges.
However, specific product categories carry distinct reverse charge obligations. For example, Notification 06/2024-Central Tax (Rate) inserted Entry 8 into Notification 4/2017-Central Tax (Rate), imposing reverse charge on supplies of metal scrap under Chapters 72 to 81 when received from unregistered persons (Notification 06/2024-Central Tax Rate). If a job worker generates and sells scrap back to the principal, or if unregistered scrap is purchased, reverse charge applies under Section 9(4).
Common mistake: Confusing metal scrap TDS under Section 51 with unregistered RCM under Section 9(4). Notification 25/2024-Central Tax applies to registered sellers, while unregistered scrap purchases fall under RCM.
Distinguishing reverse charge from Notification 25/2024-Central Tax
A widespread misunderstanding arose following the October 2024 GST Council recommendations regarding Notification 25/2024-Central Tax. Accounts teams often confuse TDS notifications with reverse charge liability on unregistered job work or scrap receipts.
Notification 25/2024-Central Tax amends Notification 50/2018-Central Tax under Section 51 of the CGST Act. It mandates that any registered person receiving metal scrap falling under Chapters 72 to 81 from another registered person must deduct Tax Deducted at Source (TDS) at 2 percent (1 percent CGST plus 1 percent SGST, or 2 percent IGST) if the contract value exceeds ₹2,50,000. This is a TDS obligation between registered businesses, not a reverse charge levy.
In contrast, when you purchase metal scrap from an unregistered supplier, Notification 06/2024-Central Tax (Rate) mandates 100 percent reverse charge under Section 9(4). See our companion analysis on rcm on metal scrap purchase unregistered supplier and transport compliance under rcm on goods transport agency gta declaration for related reverse charge workflows.
Self-invoicing rules under Section 31(3)(f) and Rule 47A
Whenever a registered person is liable to pay tax under reverse charge on supplies received from an unregistered person under Section 9(4) or Section 9(3), the recipient must issue an invoice. Under Section 31(3)(f) of the CGST Act, the recipient issues an invoice in respect of goods or services received from the unregistered supplier (Section 31(3)(f), CGST Act).
Historically, taxpayers were expected to issue self-invoices on the date of receipt. With effect from 1 November 2024, Notification 20/2024-Central Tax inserted Rule 47A into the CGST Rules (Notification 20/2024-Central Tax). Under Rule 47A, the recipient liable to pay tax under Section 9(3) or Section 9(4) must issue the invoice within a period of thirty days from the date of receipt of the supply of goods or services.
Per CBIC e-invoice guidelines, self-invoices issued under Section 31(3)(f) do not require an Invoice Reference Number (IRN) on the e-invoicing portal (CBIC e-Invoice Portal FAQs). Under Rule 36(1)(b) of the CGST Rules, this self-invoice serves as the valid document to claim Input Tax Credit (ITC) after discharging the tax liability.
Payment in cash and return reporting in GSTR-3B and GSTR-9
Under Section 49(4) read with Section 2(82) of the CGST Act, balance in the electronic credit ledger can only be utilised towards payment of output tax (Section 49(4), CGST Act). Output tax explicitly excludes tax payable on a reverse charge basis. Consequently, all reverse charge liabilities must be discharged through the electronic cash ledger.
In Form GSTR-3B, report the taxable value and reverse charge liability in Table 3.1(d) ("Inward supplies liable to reverse charge"). Upon payment of cash through Table 6.1, claim the corresponding eligible ITC in Table 4(A)(3) ("Inward supplies liable to reverse charge") of the same tax period, provided the input or service is used in the course of business.
In the annual return Form GSTR-9, Table 6 captures details of ITC availed during the financial year. Table 6C and Table 6D capture reverse charge supplies under Section 9(4) and Section 9(3) respectively, reconciling with Table 4(A)(3) of Form GSTR-3B (GSTN GSTR-9 User Manual).
Job work tracking in Form GST ITC-04
Even though labour charges paid to an unregistered job worker do not attract reverse charge, the physical movement of inputs and capital goods must be accounted for under Section 143(1) of the CGST Act and Rule 45 of the CGST Rules (Section 143(1), CGST Act). Goods must be dispatched under a delivery challan issued under Rule 55.
Every principal sending goods to a job worker must file Form GST ITC-04 to declare goods dispatched to and received back from the job worker (Rule 45, CGST Rules). Under Rule 45(3), Form GST ITC-04 is filed:
- Half-yearly for taxpayers with an aggregate turnover exceeding ₹5 crore in the preceding financial year.
- Annually for taxpayers with an aggregate turnover up to ₹5 crore in the preceding financial year.
Under Section 143(1), inputs must be brought back or supplied from the job worker premises within 1 year, and capital goods within 3 years. If the principal fails to bring back goods within these statutory windows, the transaction is deemed to be a taxable supply on the date the goods were originally sent out.
Worked example: unregistered job work and scrap recovery
Consider Precision Auto Parts, a registered manufacturer in Pune, sending steel rods valued at ₹2,00,000 to an unregistered lathe workshop for turning and grooving on 10 October 2026 under a delivery challan.
The job worker charges ₹25,000 as labour fees and also returns ₹15,000 worth of turnings and metal scrap falling under Chapter 72. Precision Auto Parts accounts for both transactions in the October 2026 tax period:
| Transaction line | Taxable value | Applicable provision | Tax rate | Tax liability | Payment mode |
|---|---|---|---|---|---|
| Job work labour charge | ₹25,000 | General supply (not notified under 9(4)) | Nil RCM | ₹0 | None (unregistered supplier) |
| Metal scrap receipt | ₹15,000 | Entry 8, Notification 06/2024-CT(R) (Section 9(4)) | 18% (9% CGST + 9% SGST) | ₹2,700 | Electronic cash ledger |
For the scrap receipt, the tax computation is straightforward:
- CGST: ₹15,000 × 9% = ₹1,350
- SGST: ₹15,000 × 9% = ₹1,350
- Total cash payable in GSTR-3B Table 3.1(d): ₹2,700
Precision Auto Parts issues a self-invoice under Section 31(3)(f) on 28 October 2026 (well within the thirty-day limit allowed under Rule 47A). Precision Auto Parts pays ₹2,700 in cash in its GSTR-3B return and avails ₹2,700 as ITC in Table 4(A)(3). The job work movement of steel rods is reported in Form GST ITC-04.
Frequently asked questions
Does general job work received from an unregistered person attract RCM?
No. General job work received from an unregistered supplier does not attract reverse charge because Section 9(4) applies only to notified classes of goods, services, or recipients. Unless the transaction involves a specifically notified category, general unregistered job work has no RCM levy.
What is the distinction between RCM and Notification 25/2024?
Notification 25/2024-Central Tax amends Notification 50/2018-Central Tax under Section 51 of the CGST Act to mandate 2 percent TDS when receiving metal scrap from registered suppliers. In contrast, purchases from unregistered suppliers trigger reverse charge under Section 9(4) where applicable, not TDS.
Can RCM liability be discharged using balance in the electronic credit ledger?
No. Under Section 49(4) read with Section 2(82) of the CGST Act, electronic credit ledger balance can only be used to pay output tax, which explicitly excludes reverse charge liability. You must discharge RCM in cash through the electronic cash ledger.
What is the time limit for issuing a self invoice under Section 31(3)(f)?
Under Rule 47A of the CGST Rules, inserted by Notification 20/2024-Central Tax, where a recipient is liable to pay tax under Section 9(3) or Section 9(4), the recipient must issue the invoice within thirty days from the date of receipt of the supply.
Check your own GSTR-2B
Reconcile your purchase register against monthly GSTR-2B to identify vendor mismatches, blocked credits, and reverse charge discrepancies. Your GSTR-2B and purchase register files are read in your browser and never uploaded to any server.
Last checked: 22 October 2026. Sources: Section 9, CGST Act, Notification 25/2024-Central Tax, Notification 06/2024-Central Tax (Rate), GSTN GSTR-9 User Manual.