Search for how to handle job work in a manufacturing system and you get two kinds of result: SAP developer documentation about movement type 541, and chartered accountant forum threads about Rule 55. Both are correct. Neither was written for the person who actually has the problem, which is usually a stores manager at a ₹120 crore plant watching 900 kg of material leave the gate and wondering how much of it comes back.
So here is the version for that person.
How should a factory track job work?
Why this gets lost, specifically
Job work is the one process that leaves your premises. Everything else in a plant happens where you can see it, which means your controls are physical as much as procedural: somebody would notice. Once material is at a processor twenty kilometres away, you are relying entirely on paperwork, and the paperwork is usually a challan book.
Three things then go wrong in sequence. The challan records what went out but not what should return, so there is no expectation to compare against. The return gets booked as a receipt without being tied to the challan that sent it. And the loss, which is real and normal, never gets attributed to the processor who caused it, so nobody can tell a good vendor from a careless one.
What the document has to carry
Under GST, goods sent for job work move on a delivery challan under Rule 55, in triplicate, and the challan is what makes the movement non-taxable rather than a supply. Older hands still call it a 57F4, which was the excise-era form, and the habit is harmless as long as what you actually issue is a compliant delivery challan.
The fields that matter operationally rather than legally are the ones people skip: the expected return quantity, the expected return date, and the process the material is going out for. Without those three, you have a despatch note rather than a control.
| On most challans | What makes it a control |
|---|---|
| Item, quantity sent, date | Expected return quantity, allowing for normal process loss |
| Job worker name and GSTIN | Expected return date, so an overdue item surfaces by itself |
| Value for the e-way bill | The process being done, so loss can be compared like with like |
| Vehicle number | The link back to the job or order the material belongs to |
The 180-day thing that catches people
Inputs sent for job work have to come back within a year, and capital goods within three years, or the movement is treated as a supply on the day it went out, with interest. Most plants know this and still get caught, because nobody is watching the clock on a challan issued nine months ago for a die that is sitting at a vendor who has gone quiet.
An overdue-challan list is a small report that prevents a genuinely expensive problem. If your system cannot produce one, you are relying on somebody remembering.
Reconciling loss so it means something
Some loss is normal. Galvanising, machining, dyeing and heat treatment all consume material, and the honest question is not whether there is loss but whether this processor's loss is in line with the others doing the same process.
Booked per challan, per process, per vendor, that becomes a number you can act on. A vendor running four percent on a process where two others run two percent is either less careful or less honest, and either way it is a conversation you can have with evidence rather than a suspicion you carry around.
"We always knew we lost something at the plater. What we didn't know was that one of the three was losing twice what the others did, on the same part. Nobody had ever put the three next to each other."Fastener manufacturer, Ludhiana
What to ask in a demo
Ask to watch it, not to hear about it. Material out against a challan with an expected return. Partial return. A second partial return against the same challan. The overdue list. Loss per vendor per process. Most systems handle the first and stumble somewhere in the middle, which is exactly where your money goes.
This is question one on our ERP evaluation scorecard for a reason. It is also the thing to test hardest in a global product, where Indian job work tends to arrive through a localisation layer rather than the core, which we go into on Facto vs NetSuite.
Facto treats job work as a first-class movement rather than an adjustment: challan out, expected return, partial receipts against it, overdue list and loss per vendor per process. If you want to see it against your own processes, talk to our team.
