Imagine Rajesh & Co. Pvt. Ltd. manufactures leather bags. They send raw leather (inputs) to a small stitching unit (the job worker) for cutting and stitching, and later receive the finished goods back. The big question in GST is: can Rajesh & Co. still claim Input Tax Credit (ITC) on those inputs even though they're sitting at someone else's premises? Section 19 says: yes, absolutely — with conditions.
The person who sends goods to a job worker is called the principal. Section 19 gives the principal ITC on both inputs (raw materials, components) and capital goods (machinery, equipment) sent for job work. Better still, the principal can claim ITC even if the goods go directly from the supplier to the job worker's place — they don't need to first pass through the principal's factory. This is a huge practical relief for manufacturers who source directly from vendors and route straight to job workers.
But there's a strict time-limit rule you must remember for exams. If inputs are sent to a job worker and are not returned within 1 year, GST treats it as if the principal sold those inputs to the job worker on the original dispatch date — this is called a deemed supply, and the principal must pay GST on it. For capital goods, the time limit is longer — 3 years — because machinery takes longer to use and return. The clock for both starts from the date the job worker receives the goods (if sent directly), not the date of dispatch by the principal.
One important exception: moulds and dies, jigs and fixtures, and tools sent to a job worker are completely exempt from this deemed-supply rule. They can stay at the job worker's place indefinitely without triggering any tax consequence. This makes sense because tooling is often permanently kept at the job worker's end for ongoing production runs.
This section is asked frequently as a 4-mark or 6-mark question — either as a direct theory question ('State the time limits under Section 19') or a scenario-based problem ('Determine if a deemed supply has occurred and the date of such supply').
📊 Worked example
Example 1 — Inputs with deemed supply triggered
Meenakshi Textiles (principal) sends cotton yarn worth ₹5,00,000 to a weaving job worker on 1 April 2024. The job worker receives it on 5 April 2024. The woven fabric is neither returned nor supplied from the job worker's premises by 4 April 2025 (1 year from receipt by job worker).
Working:
- Time limit for inputs = 1 year from date of receipt by job worker
- Date of receipt by job worker = 5 April 2024
- Deadline = 4 April 2025
- Goods not returned by deadline → Deemed supply triggered
- Date of deemed supply = 1 April 2024 (original date of sending out by principal)
- Meenakshi Textiles must pay GST on ₹5,00,000 as on 1 April 2024, along with applicable interest for the delay
Answer: Deemed supply of ₹5,00,000 arises on 1 April 2024. GST + interest payable by Meenakshi Textiles.
---
Example 2 — Capital goods, no deemed supply
Mr. Sharma's engineering firm sends a CNC machine (capital goods) worth ₹12,00,000 directly from the machinery supplier to a job worker on 10 June 2023. The job worker receives it on 15 June 2023. The machine is returned on 20 May 2026.
Working:
- Time limit for capital goods = 3 years from date of receipt by job worker
- Date of receipt = 15 June 2023
- Deadline = 14 June 2026
- Machine returned on 20 May 2026 → before the deadline
- No deemed supply triggered
- Mr. Sharma retains full ITC on the capital goods
Answer: No deemed supply. Mr. Sharma's ITC of ₹12,00,000 is safe.
⚠️ Common exam mistakes
- Confusing the start of the time limit: Students often count 1 year / 3 years from the date the principal dispatches the goods. Wrong — when goods are sent directly to the job worker, the clock starts from the date of receipt by the job worker.
- Applying the 1-year limit to capital goods: The 1-year rule is only for inputs. For capital goods, it is 3 years. Don't mix these up — examiners deliberately swap them in MCQs.
- Forgetting the moulds/dies/jigs/fixtures/tools exception: Many students apply the deemed-supply rule to these items. Section 19(7) explicitly excludes them — they can stay at the job worker's place forever without any GST consequence.
- Thinking ITC is blocked if goods go directly to job worker: Section 19(2) and 19(5) clearly override Section 16(2)(b) — ITC is available even on goods dispatched directly to a job worker. Don't block ITC in such cases.
- Getting the date of deemed supply wrong: The deemed supply is treated as occurring on the date of original dispatch by the principal (not the deadline date, not today's date). This matters for calculating interest on late payment of GST.
📖 Bare Act text — Section 19, CGST Act 2017
(click to expand)
(1) The principal shall, subject to such conditions and restrictions as may be prescribed, be allowed input tax credit on inputs sent to a job worker for job work.
(2) Notwithstanding anything contained in clause (b) of sub-section (2) of section 16, the principal shall be entitled to take credit of input tax on inputs even if the inputs are directly sent to a job worker for job work without being first brought to his place of business.
(3) Where the inputs sent for job work are not received back by the principal after completion of job work or otherwise or are not supplied from the place of business of the job worker in accordance with clause (a) or clause (b) of sub-section (1) of section 143 within one year of being sent out, it shall be deemed that such inputs had been supplied by the principal to the job worker on the day when the said inputs were sent out:
Provided that where the inputs are sent directly to a job worker, the period of one year shall be counted from the date of receipt of inputs by the job worker.
(4) The principal shall, subject to such conditions and restrictions as may be prescribed, be allowed input tax credit on capital goods sent to a job worker for job work.
(5) Notwithstanding anything contained in clause (b) of sub-section (2) of section 16, the principal shall be entitled to take credit of input tax on capital goods even if the capital goods are directly sent to a job worker for job work without being first brought to his place of business.
(6) Where the capital goods sent for job work are not received back by the principal within a period of three years of being sent out, it shall be deemed that such capital goods had been supplied by the principal to the job worker on the day when the said capital goods were sent out:
Provided that where the capital goods are sent directly to a job worker, the period of three years shall be counted from the date of receipt of capital goods by the job worker.
(7) Nothing contained in sub-section (3) or sub-section (6) shall apply to moulds and dies, jigs and fixtures, or tools sent out to a job worker for job work.
Explanation.––For the purpose of this section, ―principal‖ means the person referred to in section 143.
Test yourself
Practice questions on this section, AI-graded with citations.
⚡ Practice now →