Dyeing & Printing Job-Work TDS — Section 393(1) Code 1023 for Textile

A Surat synthetic fabric mill’s finance controller opens the FY 2026-27 Q3 TDS reconciliation and finds forty-two dyer PANs on the deduction register — thirty-eight tagged under Income-tax Act 2025 Section 393(1) Sl. 4 code 1023 for wet-processing job-work with material supplied, three tagged under code 1024 for occasional purchases of pre-dyed finished fabric from converters, and one flagged as exception where the dyer invoice references both a Rule 55 delivery challan (principal-supplied grey fabric) and a purchase order for dyer-sourced specialty fabric in the same billing period. The exception has to be split — the conversion portion attracts code 1023 at 2 percent, the goods-supply portion attracts code 1024 at the same 2 percent but sits under a different Form 26Q reporting classification. The Form 26AS reconciliation at each dyer’s PAN must land the credit at the correct code, and the ₹5,28,000 monthly bill from the largest partner dyer means the single-payment ₹30,000 threshold is crossed on invoice one every month while the cumulative ₹1,00,000 aggregate-per-FY threshold is meaningless — for the principal-scale relationships, threshold analysis is bookkeeping, but for the twenty smaller specialty dyers on the register, the aggregate test is the trigger that decides whether TDS becomes deductible mid-year. This is dyeing printing job work TDS Section 194C code 1023 textile reconciliation at production scale, and the discipline that closes it cleanly maps every conversion charge to the correct code, the correct rate, and the correct Form 26AS credit at the deductee’s PAN.

Quick reference

The reconciliation in one paragraph

Section 393(1) Sl. 4 of the Income-tax Act 2025 (the successor taxonomy to legacy Section 194C) splits job-work TDS into two payment codes based on who supplies the raw material. Payment code 1023 applies where the principal supplies the raw material to the job worker — the standard textile chain for dyeing, printing, weaving, cutting, and stitching, because fabric, yarn, and cut panels remain principal-owned throughout. Payment code 1024 applies where the raw material is not supplied by the principal — the job worker sources its own material and charges an integrated price. The deduction rate under both codes aligns with the contractor slabs: 1 percent for Individual or HUF payees, 2 percent for other resident payees. The threshold under both codes is a two-limb test — ₹30,000 on a single payment or ₹1,00,000 in aggregate per PAN per FY, whichever is crossed first. TDS is deducted on the conversion charge, deposited to the government by the 7th of the following month, reported deductee-wise on Form 26Q every quarter, and the dyer’s TDS credit is claimed on Form 26AS at the dyer’s PAN with Form 16A as the paper certificate. The reconciliation must chain every deduction from the dyer invoice through the Form 26Q line to the Form 26AS credit — a broken chain surfaces as a Form 26AS mismatch that the dyer will query.

What the dyeing and printing job-work looks like in India

Wet-processing job-work — the umbrella term for dyeing, printing, bleaching, mercerising, calendaring, and finishing — is the highest-value hop in the multi-hop textile conversion chain. A grey polyester fabric arrives at the dyer weighing 200 grams per square metre; a finished dyed and printed fabric leaves the dyer weighing 210 to 215 grams per square metre after chemical uptake and finishing agents. The conversion adds visible commercial value — colour, print design, hand feel, dimensional stability — that transforms a saleable-only-to-converters grey fabric into a saleable-to-garment-makers finished fabric. The dyer’s invoice covers the chemical consumption, water and effluent treatment cost, machine hours, and skilled labour — not the fabric itself, which remains principal-owned throughout under the Rule 55 delivery challan that accompanied its dispatch.

Illustrative principals running wet-processing job-work at scale include Surat-cluster synthetic fabric mills such as Filatex India, Garware Technical Fibres, and Sutlej Textiles; Bhilwara-cluster suiting principals such as Banswara Syntex and Donear Industries; Panipat home-textile principals such as Welspun India, Indo Count Industries, and Himatsingka Seide; Tiruppur knitwear exporters such as KPR Mill, Shahi Exports, Gokaldas Exports, and Pearl Global Industries; Ludhiana winter-knitwear principals such as Vardhman Textiles and Trident Ltd; and integrated apparel principals such as Raymond, Arvind Ltd, Aditya Birla Fashion and Retail (Pantaloons, Allen Solly, Van Heusen), Page Industries (Jockey), Lux Industries, Rupa and Co, Dollar Industries, Siyaram Silk Mills, and Bombay Dyeing. The dyer counterparties are typically partnership firms, LLPs, or private limited companies clustered around the same geographic hubs — Sachin GIDC and Pandesara in Surat, Balotra and Pali in Rajasthan, industrial estates in Panipat, dyeing units in Tiruppur South and Karur.

The commercial pattern varies by fabric type. A Surat synthetic fabric mill sending polyester or nylon fabric to a Sachin GIDC dyer typically negotiates a per-metre or per-kilogram wet-processing rate of ₹18 to ₹32 depending on the shade complexity, print design intricacy, and finishing schedule (soft, resin, water-repellent). A Panipat home-textile principal sending cotton bed-linen fabric to a partner dyer might negotiate a per-yard rate for solid-shade dyeing at ₹8 to ₹14 or a per-square-metre rate for reactive printing at ₹22 to ₹42. A Tiruppur knitwear principal sending combed cotton knit fabric to a dyer typically pays ₹32 to ₹58 per kilogram for reactive dyeing and finishing. The billing frequency is usually monthly, with the invoice covering the fabric processed in the preceding calendar month and payment terms of 30 to 45 days from invoice date. TDS is deducted on the conversion charge before payment and deposited to the government by the 7th of the following month.

The regulatory overlay — Section 393(1) Sl. 4 codes 1023 versus 1024

The material-supplied test is the boundary between code 1023 and code 1024, and the test operates at the invoice level, not at the vendor-relationship level. A single dyer can supply the principal with services under both codes in the same billing period if the underlying transactions are of different shapes.

Under code 1023, the principal has dispatched grey fabric to the dyer under a Rule 55 delivery challan (Form GST INS-01) that carries the principal’s GSTIN, the dyer’s GSTIN, HSN and description of the grey fabric, quantity, and declared taxable value. The fabric moves without any GST supply — Section 143 CGST covers the tax-free movement. The dyer processes the fabric using its own dyes and chemicals and returns the finished fabric under a return-inward Rule 55 challan referencing the principal’s original outbound challan. The dyer separately raises a service invoice for the wet-processing conversion charge — this is a taxable supply of service, GST is charged (typically 5 percent on textile job-work under HSN 9988), and TDS at 1 or 2 percent (code 1023) is deducted on the conversion charge portion before payment. Both the fabric movement and the service invoice tie to the same Rule 55 challan pair, and the ITC-04 quarterly filing shows the fabric dispatch and return in the appropriate columns.

Under code 1024, the dyer sources its own fabric — either from its own stock or from a third-party supplier — dyes it, and sells the finished fabric to the principal at an integrated price. There is no Rule 55 delivery challan from the principal to the dyer because no principal-owned material moves. The dyer raises a supply-of-goods invoice for the finished fabric, charging GST at the finished-fabric rate (typically 5 percent on cotton fabric, 12 percent on synthetic fabric), and the principal deducts TDS on the total invoice value under code 1024. This is less common in high-value textile chains because it converts what would be a service transaction into a purchase transaction — with different GST rate treatment, different customs implications on subsequent export, and different Rule 89(5) inverted-duty implications on the principal’s downstream refund position.

The mis-classification risk sits in three specific patterns. First, the general-contractor code 1002 is sometimes applied by a payables clerk who does not distinguish job-work from a broader contract — the code 1002 deduction is at the same 2 percent rate but under a different payment classification, and the dyer’s Form 26AS shows a code-mismatched credit that will require a Form 26Q correction. Second, a converter that used to source its own fabric and has recently switched to a principal-supplied model is sometimes left on the code 1024 mapping in the payables system when it should be re-classified to 1023 — the code-boundary exception report catches this as a switch from historical 1024 to a Rule 55-challan-supported invoice. Third, an integrated invoice that covers both conversion service on principal-supplied fabric and a small quantity of dyer-supplied specialty fabric in the same billing period must be split into two lines — 1023 on the service portion, 1024 on the goods portion — and the split test is the boundary the reconciliation platform must enforce at invoice ingestion.

Sitting alongside the direct TDS reconciliation is the GST-side overlay. Section 143 CGST governs the 1-year clock on the principal-to-dyer dispatch — the dyed fabric must return to the principal (or ship directly from the dyer’s premises under a Direct Supply from Job Worker declaration) within one year of the original outbound Rule 55 challan. Rule 89(5) governs the inverted-duty refund on the principal’s own procurement — dyes and chemicals at 18 percent input GST versus finished fabric at 5 percent output GST creates a claimable inverted-duty position, but the dyer’s conversion charge (an input service) sits outside Net ITC for refund purposes per Notification 14/2022. The RoDTEP scheme (Appendix 4R for DTA exports, Appendix 4RE for Advance Authorisation, EOU, or SEZ exports) reimburses embedded taxes on the finished fabric export, and the RoSCTL scheme runs alongside for garments and made-ups under Chapters 61, 62, and 63.

A worked example — a Surat synthetic fabric mill and its partner dyer

Illustrative — the following figures represent the operating pattern of a representative Surat-cluster synthetic fabric mill of the scale that a specialist tier-2 principal such as Sutlej Textiles or Filatex India operates. Public disclosures do not reveal internal dyer conversion rates or per-invoice TDS deductions; cross-verify against your own payables register or Form 26Q draft before action.

A Surat synthetic fabric mill dispatches 24,000 metres of grey 200-gsm polyester fabric to a partner dyer, Rakesh Dyeing LLP (illustrative), on 1 October 2026 (start of Q3 FY 2026-27). The Rule 55 delivery challan (INS-01) is issued in triplicate — the principal and the dyer both in Gujarat, so the movement is intra-state, and an intra-state e-way bill is generated for the transport leg. The challan carries the principal’s GSTIN, Rakesh Dyeing LLP’s GSTIN, HSN 5407 (polyester fabric), quantity 24,000 metres, declared taxable value ₹36,00,000 (fabric cost at ₹150 per metre), and challan reference DYE/26-27/00312. Rakesh Dyeing LLP acknowledges receipt on 2 October 2026.

Rakesh Dyeing LLP processes the fabric — reactive dyeing to specification shades, followed by resin finishing — and returns 24,000 metres of finished fabric on 22 October 2026 (200 gsm to 210 gsm after chemical uptake, so 25,200 kg gross weight up from 24,000 metres at 200 gsm). Rule 55 return-inward challan DYE/R/26-27/00156, HSN 5407, quantity 24,000 metres, declared taxable value ₹41,28,000 (₹36,00,000 fabric value carried forward plus ₹5,28,000 conversion charge accrued at ₹22 per metre). Rakesh Dyeing LLP separately raises a service invoice INV-DYE-1024 dated 22 October 2026 for the wet-processing charge of ₹5,28,000 plus 5 percent GST (₹26,400) — total invoice value ₹5,54,400.

The principal’s payables team ingests the invoice and applies TDS. The invoice is tagged to Rule 55 challan DYE/26-27/00312 (material supplied by principal — code 1023), Rakesh Dyeing LLP is a partnership LLP (not Individual or HUF — 2 percent rate applies), and the single-payment ₹30,000 threshold is crossed on this invoice on its own. TDS at 2 percent on the ₹5,28,000 conversion charge (not on the GST portion) equals ₹10,560. The payables entry: gross bill value ₹5,54,400 (conversion ₹5,28,000 plus GST ₹26,400); less TDS deducted at 2 percent code 1023 ₹10,560; net payment to Rakesh Dyeing LLP ₹5,43,840; TDS deposited to government by 7 November 2026 with challan reference CHL-TDS-26-27-1023-00089.

This monthly pattern repeats for Q3 (October-December 2026):

Form 26Q for Q3 FY 2026-27 (October to December) is due 31 January 2027. The Rakesh Dyeing LLP line item reports: deductee PAN (Rakesh Dyeing LLP’s PAN), deductee name, three invoices, gross amount ₹15,84,000, TDS amount ₹31,680, payment code 1023, section reference (successor to 194C), three deposit challan references (November, December, January deposits), and BSR code. Form 16A is generated on TRACES within 15 days of the 31 January due date — by 15 February 2027 — and issued to Rakesh Dyeing LLP as the paper certificate for the TDS credit.

Rakesh Dyeing LLP checks its Form 26AS on the income-tax portal at the end of February 2027 and finds the credit landed correctly at its PAN with payment code 1023, the principal’s TAN as deductor, and the gross amount of ₹15,84,000 with TDS of ₹31,680 for Q3. The reconciliation ties out cleanly.

Now consider the failure modes. Change the invoice ingestion — the payables clerk mis-tags one of the three monthly invoices under code 1002 (general contractor) instead of 1023 (job-work with material supplied). The Form 26Q filing carries one line for Rakesh Dyeing LLP at code 1023 (₹10,56,000 gross, ₹21,120 TDS across two months) and a second line at code 1002 (₹5,28,000 gross, ₹10,560 TDS for one month). Rakesh Dyeing LLP’s Form 26AS shows two payment codes for the same vendor relationship — the code 1002 credit is technically valid (same rate, same PAN, same TAN) but it raises a query from Rakesh Dyeing LLP’s own accountant because the historical pattern is 1023, and the dyer files a Form 26AS query with the principal asking for a Form 26Q correction. The principal must file a revised Form 26Q re-classifying the December deduction from 1002 to 1023, wait for the TRACES processing cycle to reflect the change, and re-issue an amended Form 16A.

Change the payment threshold — a smaller specialty dyer, Meera Textile Prints (illustrative), receives a single invoice of ₹28,000 for a small consignment of specialty printing in November 2026. The single-payment threshold of ₹30,000 is not crossed, and no TDS is deducted on this invoice. But if Meera Textile Prints receives a second invoice of ₹78,000 in February 2027 for a follow-on order, the aggregate ₹1,00,000 threshold is crossed on the February invoice. The principal must deduct TDS on the ₹78,000 invoice at 2 percent (₹1,560), and additionally deduct TDS on the earlier ₹28,000 invoice retroactively (₹560), for a total deduction of ₹2,120 against the February payment. The reconciliation platform’s cumulative-threshold tracker at the PAN level surfaces this trigger and prevents the missed-deduction exposure that would otherwise attract Section 201(1A) interest and Section 40(a)(ia) disallowance.

Common reconciliation breakages

Five breakages recur across textile principals running dyeing and printing job-work TDS reconciliation, and each maps to a specific control failure.

• Code 1023 versus 1024 misclassification at invoice ingestion. When the payables system routes every dyer invoice through a default code (usually 1023 for a principal-supplied-material shop) without the Rule 55 challan cross-reference check, occasional purchases of dyer-sourced specialty fabric leak into the 1023 pool. The Form 26Q filing reports the goods purchase under a service code, and the dyer’s Form 26AS carries a code-mismatched credit that will be queried.

• Code 1002 leakage from general-contractor mapping. Payables teams that maintain a generic “contractor” vendor category route dyer invoices through code 1002 (general contractor) at the same 2 percent rate. The deduction rate is correct, but the payment code is wrong. Form 26AS shows the credit under 1002 rather than 1023, and the dyer’s return-filing accountant queries the mismatch. A quarterly code-boundary audit across the vendor register catches this early.

• PAN typos in Form 26Q filing. A 10-character PAN like AAACR1234K is easy to fat-finger — a single character error routes the credit to a wrong PAN in Form 26AS, and the dyer’s PAN shows a short credit. The reconciliation platform’s PAN validation at invoice ingestion (checksum and format validation) prevents the typo from reaching the Form 26Q filing.

• Threshold-crossing miss on cumulative aggregate. Small specialty dyers on the register who receive invoices below the ₹30,000 single-payment threshold accumulate untouched by the deduction routine — until the cumulative ₹1,00,000 aggregate crosses. If the payables system does not track running FY aggregate per PAN, the crossing invoice does not trigger a deduction, and the earlier untouched invoices are not caught up in the crossing deduction. The exposure is interest under Section 201(1A) from the deduction date to the actual deposit date plus disallowance under Section 40(a)(ia).

• Form 26AS mismatch not caught until year-end. Dyers who file quarterly TDS credit claims against Form 26AS see a shortfall well before year-end; principals that do not run per-PAN per-quarter Form 26AS reconciliation only surface the shortfall at the annual return-filing cycle in July or August of the following FY. By that point, TRACES corrections are cumbersome and the dyer’s tax-filing timeline is compressed. Quarterly reconciliation running from the principal’s Form 26Q filing to the dyer’s Form 26AS credit closes the loop before the shortfall escalates.

How a reconciliation platform handles this

A purpose-built textile TDS reconciliation platform ingests every dyer invoice, cross-references the Rule 55 delivery challan on the outbound fabric dispatch, routes the invoice into the correct payment code (1023 for material supplied by principal — the standard textile case; 1024 for material not supplied — the exception), applies the correct rate based on the dyer’s PAN status (1 percent Individual or HUF; 2 percent other resident), and tracks the running-FY cumulative for the ₹1,00,000 aggregate threshold at PAN level. The platform generates the Form 26Q line item with deductee PAN, gross amount, payment code, and challan reference, queues Form 16A generation within the 15-day SLA after the return due date, and runs quarterly Form 26AS reconciliation against the dyer’s PAN to catch code-mismatch, PAN-typo, and shortfall variances well before the year-end audit. The platform’s code-boundary exception report surfaces any invoice tagged 1024 where the dyer’s historic pattern is 1023 (probable material-supplied test error), and the threshold-crossing alert triggers when cumulative payments to a small specialty dyer approach ₹90,000 (imminent aggregate-threshold trigger). Match rate improvement of 51 to 88 percent on the challan-invoice-Form 26Q chain, combined with ISO 27001:2022 posture and DPDP Act 2023 aligned data handling, is what makes the platform an infrastructure investment rather than a per-vendor spreadsheet substitute.

Cross-cluster bridges and where to read next

Dyeing and printing job-work TDS sits inside the broader textile multi-hop reconciliation surface. For the full 5-hop chain reconciliation from yarn to finished garment under Section 143 CGST, read the Multi-hop job-work reconciliation textile India walkthrough. For the quarterly GST filing surface that runs alongside every TDS deduction, the ITC-04 quarterly return textile job-work reconciliation article covers the three-part filing and closing-balance tie-out. For the movement document mechanics that establish the material-supplied test, read Rule 55 delivery challan for textile job-work movement. For the 1-year clock and deemed-supply mechanic that runs from the principal-to-dyer dispatch, read Section 143 deemed-supply 1-year rule for textile job-work. Free-issue reconciliation for consumables, dyes, and packing inputs sits in Free-issue yarn and fabric job-work reconciliation. The RoDTEP and inverted-duty overlays that run parallel to every dyer relationship are covered in RoDTEP claim reconciliation textile India and Rule 89(5) inverted-duty refund textile India. For related job-work TDS analogs in other verticals, the FMCG cluster’s Section 194C contract manufacturing reconciliation shows the same code 1023 taxonomy applied outside textiles. The 45-day MSME payment rule that governs the dyer payment cycle sits in the auto-components cluster’s Section 43B(h) MSME payment reconciliation and the MSME 45-day payment compliance tracker. The commercial pillar for the entire textile cluster is Textile reconciliation software India; the broader authority is reconciliation software India.

The five FAQs below address the operational questions Indian textile controllers ask most often when implementing structured dyeing and printing job-work TDS reconciliation under Section 393(1) Sl. 4 code 1023.

Terra Insight Editorial Team Reconciliation Infrastructure

Content authored by practitioners with experience at Amazon India, Intuit QuickBooks, and the Tata Group. Meet the team →

Published 6 July 2026

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Ex Amazon India · Intuit QuickBooks · Tata nexarc

ISO 27001:2022 Patent Pending Incorporated 2024