Custom Bonded Warehouse(Private)-liability of duty

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SEEMA SHAH (Querist)
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07 September 2022 One of Co. dealing in manufacturing of particular product, in manufacturing process certain imported products used as raw material, now after receiving imported raw material before process and after process certain scrap is generated. before manufacturing some packing material as scrap and after process certain waste scrap generated.

what is taxability of duty in case of imported good as wastes and local goods as waste in case of they have opted for bonded warehouse?
kindly guide me with section.

Thanking you in advance.

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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06 July 2024 In the context of customs duty and taxation on imported goods used as raw materials that result in waste or scrap in manufacturing processes, here are some key points and considerations:

1. **Customs Duty on Imported Goods**:
- **Imported Raw Materials**: When raw materials are imported into a country, customs duty is typically levied at the time of importation. This duty is based on the classification of the goods under the Customs Tariff Act and the applicable rates.
- **Bonded Warehouse**: If the company has opted to store imported goods in a bonded warehouse, customs duty is deferred until the goods are removed from the warehouse for use or consumption. This allows the company to delay the payment of customs duty until the goods are actually used in manufacturing.

2. **Treatment of Waste or Scrap**:
- **Generated Scrap**: During the manufacturing process, if imported raw materials result in waste or scrap, the tax treatment can vary:
- **Duty Paid on Imported Goods**: If customs duty was paid on the imported raw materials when they entered the country, any waste or scrap generated from these materials typically does not attract additional customs duty. The duty has already been paid on the imported goods.
- **Re-Export or Destruction**: In some cases, if the waste or scrap cannot be utilized or is re-exported, procedures may exist to claim duty drawback or seek exemption from customs duty on such materials. This varies by jurisdiction and the specific regulations in place.
- **Local Goods as Waste**: Similarly, waste or scrap generated from locally sourced materials (not imported) would generally not attract customs duty, as these materials have not been subject to import duties.

3. **Legal Provisions**:
- **Customs Act**: The provisions related to the treatment of imported goods and waste or scrap generated are typically governed by the Customs Act of the respective country.
- **Bonded Warehouse Regulations**: Regulations governing bonded warehouses also outline the procedures for handling imported goods and the conditions under which duty is deferred or exempted.

4. **Consultation and Compliance**:
- It is advisable to consult with a customs expert or a tax advisor familiar with customs laws and bonded warehouse regulations in your jurisdiction. They can provide specific guidance based on the type of imported goods, the manufacturing process, and the treatment of waste or scrap in accordance with local laws and regulations.
- Documentation and compliance with customs requirements are crucial to ensure that the company adheres to all legal obligations and maximizes benefits such as duty deferment or exemption where applicable.

Given the complexity and variation in customs laws across jurisdictions, seeking professional advice tailored to your specific situation is essential to ensure compliance and optimize tax and duty implications related to imported raw materials and waste or scrap in manufacturing processes.