ITC-04 in ERPNext — Complete Guide to
Subcontracting GST Compliance for
Indian Manufacturers

What is ITC-04 and Why Does it Matter?

If your manufacturing company sends raw materials or semi-finished goods to an outside job worker for processing — cutting, bending, plating, machining, stitching, dyeing, painting — you have a legal obligation under GST that most manufacturers handle manually and incorrectly.

Form ITC-04 is the quarterly GST return that every registered manufacturer must file when they use job workers. It is mandated under Section 143 of the Central Goods and Services Tax (CGST) Act, 2017.

The return captures four things:

• Table 4: Details of goods sent to job workers — challan number, date, job worker GSTIN, description, quantity and value
• Table 4A: Details of goods received back from job workers during the quarter
• Table 4B: Goods sent directly from job worker's premises to a customer
• Table 5: Goods sent for rework (returned to job worker for further processing)

The due date for ITC-04 is the 25th of the month following each quarter end — April 25, July 25, October 25 and January 25. Late filing attracts ₹50 per day penalty (up to ₹5,000).

How Indian Manufacturers Handle ITC-04 Today — And Why it Fails

In our experience implementing ERPNext for manufacturers across India this is how most companies track ITC-04 before ERPNext:

• Material sent to job worker recorded in a separate Excel register — not in Tally
• Challans maintained physically — a stack of delivery challan copies in a folder
• At quarter end, accounts team manually reconciles the register against goods received — a 2–3 day exercise
• Outstanding material calculated by hand — missed challans, wrong quantities common
• The 1-year return limit breached without anyone realising until a GST audit

ERPNext Subcontracting Workflow — Step by Step

ERPNext handles the complete subcontracting cycle from Purchase Order to ITC-04 filing. Here is the exact 7-step workflow PS Digitise configures for Indian manufacturers.

ERPNext v16 — What's New in Subcontracting (January 2026)

ERPNext v16 made significant improvements relevant to ITC-04 compliance:

• Inward Subcontracting (new in v16): Now tracks both directions — outward (you send to job worker) and inward (you are the job worker). Both are ITC-04 compliant.
• Multi-level subcontracting: Handles cases where your job worker outsources further. Each level tracked separately, appears correctly in Table 5.
• Auto e-Way Bill on material transfer: Stock Entry for material sent to job worker auto-triggers e-Way Bill when value exceeds ₹50,000.
• Subcontracting Tracker Report: New dedicated report — all outstanding material at all job workers with ageing and days remaining before 1-year limit.

Before ERPNext vs After ERPNext — ITC-04 Comparison

Common ITC-04 Mistakes — How ERPNext Prevents Them

Mistake 1: Not capturing the job worker's GSTIN

ITC-04 requires the GSTIN of every job worker. ERPNext enforces GSTIN capture at Supplier setup and flags unregistered job workers (annual turnover below ₹40L) appropriately in the ITC-04 report.

Mistake 2: Treating job work material as a sale

Raw materials sent to a job worker are NOT a sale — they are a stock transfer. They remain your stock. ERPNext handles this correctly — material moves to the job worker's virtual warehouse in your own stock ledger, never leaving your ownership until finished goods are received back.

Mistake 3: Missing challan linkage

ITC-04 Table 4 requires the delivery challan number and date for every lot sent. In ERPNext, the Stock Entry and Delivery Challan are created from the same document — the challan number auto-populates in every report. No separate challan register needed.

Mistake 4: Not tracking partial returns

A job worker may return goods in multiple batches — 200 pieces this week, 300 next week against a challan for 500 pieces. ERPNext tracks each Subcontracting Receipt separately and calculates the balance outstanding against each challan, preventing over-claiming in ITC-04.

ITC-04 Configuration Checklist — ERPNext

PS Digitise follows this checklist for every manufacturing implementation that includes subcontracting:

• Suppliers: Add each job worker with GSTIN, address and supplier type (Service)
• Warehouses: Create virtual warehouse per job worker — [Job Worker Name] - WH
• BOM setup: Mark raw materials as Sourced by Supplier: Yes, add Service Item for processing charges
• India Compliance app: Install and configure — required for ITC-04 report and e-Way Bill
• GST Settings: Enable Send e-Way Bill with Subcontracting
• ITC-04 Settings: Enable ITC-04 reporting in India Compliance → GST Settings
• Test cycle: Run one complete Subcontracting Order → Transfer → Receipt → verify ITC-04 report captures it before go-live

Frequently Asked Questions