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Abroad warehouse

Bhavesh Jain (Student) (208 Points)

21 January 2012

Hello,

I have been doing audit of a company (export oriented) wherein the concerned auditee is first exporting the goods from India to a warehouse been maintained in Germany and than Affecting the sale from Germany. In this case the abroad warehouse have no role to play. i.e It is merely an intermidate body with nothing to do.

My questions...

1) Is the auditee getting any benefit of opening the warehouse at germany?

2) The warehouse is been considered as a branch. And accounting is done as per branch accounting.Why?

3) When the goods are imported in germany they too have to pay some dties . Right?

Someone pls help me.

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1 Replies

Yogesh Shah (Managing Corporate Finance) (1051 Points)
Replied 23 January 2012

Hi Bhavesh,

IN MY OPINION (other friends - kindly rectify me if Im wrong) - purpose of warehouse and branch is different. Warehouse is just to store the goods and supply it as per demand. No profit element is involved. Whereas, in case of branch, goods are supplied to them at cost and such goods are sold by branch after adding their profit.

In respect of your first question - whether auditee have warehouse / branch in Germany, doesn't matter, it will definitely be benefited to company. However, 'Cost Benefit Analysis' has to be made.

In respect of second question - if warehouse is considered as branch and accounting is also done, then it must be for internal control purpose.

In respect of third question - in Germany, duties will be imposed (subject to their respective customs acts) but in India, it will be treated as exports and duty will be NIL.