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Selling to excsiable unit by non-excsiable unit

Raja (Proprietor) (24 Points)

22 December 2015

Hello!

We are non-excisable manufacturing unit at Gujarat & have no detailed idea about excise norms.

We manufacture and supply components used by various industries in their final products.

One of our new client is excisable unit. Can we sell the goods to them under our normal non-excisable invoice which only shows 2% CST against C-Form.

If yes, can they avail the cenvat/modavat credit based on our invoice as we being non-excisable unit have not obtained any such benefit or can we charge them extra in cost for the tax benefit of ours after having understaind with them for the same?

In short, I would like if we non-excisable unit can transaction with excsiable unit or not and how to carry out the invoce and tax amount.

Thanks.

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1 Replies

Madhukar N Hiregange (Chartered Accountant) (38934 Points)
Replied 23 December 2015

Non excisable units can charge either cst/ vat and excise cannot be passed. Cusotmer cannot claim cenvat. An alternative is that the cusotmer buys the raw material and supplies it to you under job work. Regular pre numbered commercial invoice is sufficiant.

Suggestion: Since you are a manufacturer supplier to units who can avil the cenvat credit unless your growth prospects are not good, you should voluntarily register under central excise much before you reach the 150 L limit. Assuming that your raw material cost is 60% then you are losing 7% margin as the duty charged by your suppliers is a cost to you. In addition, the central excise duty on your capital goods and inputs services is also being lost. This would help you to add margin to your profit or/ and make you competitive to the extent of about 8% in total.