ITC 04 Filing - Process, Benefit, Exemption and Penalties

The introduction of Goods and Services Tax (GST) has transformed business compliance in India, particularly for Micro, Small, and Medium Enterprises (MSMEs). Among the various GST filings, Form ITC-04 plays a critical role, specifically for MSMEs engaged in job work. This form tracks the movement of goods sent to job workers and received back, ensuring seamless input flow and better supply chain management.

This guide provides a step-by-step approach to understanding, filing, and benefiting from ITC-04. We’ll cover its process, filing frequency, exemptions, penalties, and practical tips to simplify compliance.

What is GST ITC-04 Form?

GST ITC-04, or the “Goods Sent to Job Work and Received Back Form,” is a periodic return that MSMEs must file to report the movement of goods sent to job workers for processing, assembly, or manufacturing. It ensures transparency in the supply chain and enables claiming Input Tax Credit (ITC).

Key Features of ITC-04

1. Tracks the movement of raw materials and semi-finished goods.
2. Facilitates claiming ITC for job work processes.
3. Enhances GST compliance and transparency in supply chain operations.

Who Needs to File ITC-04?

MSMEs engaged in job work must file Form ITC-04 if they:

• Send goods to job workers for processing, assembly, or manufacturing.
• Receive processed goods back or move them to another location.

ITC-04 Filing Process

Steps for Filing ITC-04:

1. Collect Information:
   • GSTIN of job workers.
   • Description and quantity of goods sent and received.
   • Date of dispatch and receipt.
2. Compile Data:
   • Use accounting software or spreadsheets for accurate documentation.
3. Login to GST Portal:
   • Navigate to Services > Returns > ITC-04.
4. Fill in the Form:
   • Enter details such as job worker’s GSTIN, type of goods, and transaction dates.
5. Verify and Submit:
   • Use a digital signature or Aadhaar-based OTP for submission.
   • Submit the form online before the due date.

Filing Frequency and Turnover Limits

Annual Turnover	Filing Frequency	Due Dates
Above ₹5 crore	Half-Yearly (Apr-Sep, Oct-Mar)	25th October, 25th April
Up to ₹5 crore	Yearly	25th April

Relaxation Under Rule 45(3) of CGST Rules:

• MSMEs with annual turnover up to ₹5 crore can file ITC-04 annually instead of half-yearly.
• Maintain proper records to claim this relaxation.

Benefits of ITC-04 Filing

1. Ensures Compliance:
   • Filing ITC-04 ensures adherence to GST regulations.
2. Input Tax Credit (ITC):
   • Enables MSMEs to claim ITC, reducing tax liability.
3. Improves Supply Chain Efficiency:
   • Tracks goods movement, minimizing bottlenecks and enhancing production.
4. payer will need to adjust the ITC in their next ITC-04 return.

Turnover Limits and Exemptions

• Turnover Limits: Filing frequency depends on the annual turnover of the business.
• Exemptions:
  • ITC claims are restricted in cases where:
    • Goods are used for exempt or non-taxable supplies.
    • Goods are not returned within 12 months.
    • Goods are damaged or destroyed during job work.

Explore more: Threshold Limit for GST Registration

Penalties for Non-Compliance

While there is no specific late fee for ITC-04, non-compliance can attract penalties under Section 125 of the GST Act:

• Penalty: Up to ₹25,000.
• Additional Consequences:
  • Demand for tax payment and interest.
  • Suspension of GST registration.

Tips to Avoid Penalties:

1. File ITC-04 on time:
   • Half-Yearly: 25th October and 25th April.
   • Yearly: 25th April.
2. Use GST-compliant software to automate filings.
3. Maintain accurate and up-to-date records.

How MSMEs Can Streamline ITC-04 Filing

1. Maintain Records:
   • Keep detailed records of goods sent for job work, including GSTIN, descriptions, and dates.
2. Automate Processes:
   • Use accounting software to track and record transactions.
3. Schedule Timely Updates:
   • Update records regularly to avoid last-minute rushes.

Practical Example

Let’s say ABC Manufacturing sends 1,000 units of semi-finished goods to XYZ Job Works for assembly. After processing, XYZ returns 900 units within 12 months, and 100 units are scrapped. ABC Manufacturing must:

• Record the transaction details.
• File ITC-04 to claim ITC for the returned 900 units while excluding the scrapped ones.

FAQs

1. What happens if goods are not returned within 12 months?
   • ITC claimed on such goods must be reversed in the next ITC-04 return.
2. Is ITC-04 mandatory for all job work transactions?
   • Yes, it is mandatory if goods are sent for job work.
3. How to rectify errors in ITC-04 after submission?
   • Amendments can be made in the subsequent filing period.

Conclusion

The GST ITC-04 form is vital for MSMEs engaged in job work, ensuring compliance and operational efficiency. By maintaining accurate records, leveraging automation tools, and adhering to filing deadlines, businesses can simplify the process and unlock the benefits of Input Tax Credit.

Streamline your GST compliance today and drive growth with seamless supply chain operations.

Related blog:- Types of Services Under the GST Regime in India