Metal fabrication job-work ERP: Section 143 challans, sheet scrap, and heat numbers

GST Section 143 job-work compliance: avoiding the deemed supply trap#

Under Section 143 of the CGST Act, a principal manufacturer can dispatch capital goods or input materials to a job-worker without paying GST, provided the transaction is covered by a valid Delivery Challan (FORM GST ITC-04).

• Strict Statutory Return Period: Raw materials and inputs must return to the principal's factory within one year from the date of dispatch. Capital goods (such as dies or fixtures) have a three-year return limit.
• The Deemed Supply Penalty: If goods do not return within 365 days, the law deems the original dispatch as a taxable sale on the very day the delivery challan was issued. The manufacturer must pay GST, plus 18% annual interest from day one.
• Scrap Accounting: Any process scrap generated at the job-worker's premises must either be returned to the principal or sold directly by the job-worker with GST paid.

naffo.tech provides an automated aging tracker for all open Section 143 delivery challans. At 60, 90, and 300 days, the ERP alerts procurement managers of outstanding job-worker inventory, preventing accidental deemed-supply tax liabilities.

Off-cuts vs skeleton scrap: stopping prime steel margin leakage#

When a CNC laser cutter nests brackets onto a 2,500 mm × 1,250 mm × 6 mm mild steel plate, the plate rarely gets 100% utilized. In typical production runs, nesting software achieves 78% to 85% material utilization.

The remaining 15% to 22% of sheet metal falls into two completely distinct commercial categories:

When a workshop throws usable off-cuts into the scrap pile or lets them lean against the factory wall without logging them in the ERP, thousands of kilograms of prime steel get sold to scrap dealers for half their value. In naffo.tech, when a laser job card closes, the operator records the remnant plate dimensions, generating a trackable child inventory item.

Heat number and Mill Test Certificate (MTC) traceability#

In pressure vessel fabrication, structural steel frames, and defense contracting, parts cannot be shipped without complete material traceability. Inspectors demand to know the exact steel mill, ladle chemistry, and tensile yield strength of the raw plate used for every bracket.

1. 1Plate Inward & MTC Verification

   When steel coils or plates arrive from Tata Steel, JSW, or Jindal, the heat number stamped on the plate edge is entered into naffo.tech alongside the scanned Mill Test Certificate PDF.

2. 2Laser Nesting Job Assignment

   The production supervisor selects specific heat numbers for critical customer jobs. The ERP links the work order number to the plate heat code.

3. 3Part Marking & Hard Stamping

   Parts cut on the laser carry etched or hard-stamped component part numbers and heat abbreviations.

4. 4Final Inspection Dossier Generation

   When generating the final inspection report and dispatch invoice in naffo.tech, the software compiles the complete heat certificate trail with a single click.

Worked costing example: heavy industrial conveyor bracket#

Let us examine the complete production cost for a batch of 50 heavy duty brackets manufactured from 10 mm IS 2062 E250 structural steel plate:

By separating the ₹4,420 off-cut credit from the ₹1,440 melting scrap credit, the company costs each bracket at ₹696.15 instead of ₹784.55. This accurate baseline allows the sales engineering team to win competitive tenders while maintaining healthy profit margins.

Reconciling job-worker material weight and process losses#

When dispatching metal parts for external heat treatment, zinc plating, or machining, how do you verify that the subcontractor didn't misplace your parts or dilute chemical baths? In conventional workshops, parts return with rough delivery slips showing only part counts.

In naffo.tech, job-work receiving slips require dual verification: part count and total gross weight. If parts return from zinc plating with 3% less weight than expected, the software highlights the variance before the invoice is approved for payment.

Managing tooling, dies, and fixtures sent to vendors#

Engineering fabricators frequently send specialized bending dies, punch tooling, or welding fixtures to subcontracting machine shops. Unlike raw materials, these tools are capital assets and must not be consumed as production expenses.