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Duty Benefits for Materials imported for export

Sachin (Student) (26 Points)

12 December 2008

If my business is doing the following -

1. Import raw material

2. Convert it into finished goods by a job work contractor

3. Export the finished goods

What are the applicable duties if i get the job work done by a contractor in EOU or otherwise? I think thta excise would also come into play if work is being done in DTA

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4 Replies

B.Nagesh (MBA- CS Execuitve) (151 Points)
Replied 12 December 2008

In general thing, below duty and taxes applicable.

1. Import raw material - Customs Duty- Freight Charges

2. Convert it into finished goods by a job work contractor - depends up on product or Goods

3. Export the finished goods - Excise Duty with freight charges

Ameet (L) (1678 Points)
Replied 27 December 2008

if job work done from EOU then it will be liable to Cutom Duty

Rajesh Kumar (Advocate- Tax) (7806 Points)
Replied 07 January 2009

When you are exporting the finished goods, you can get inputs (raw materials) without payment of excise duty under various schmes-

-Inputs free of custom duty, CVD, SAD etc. through Adance authorisation; locally you can procure without payment of Central excise duty under Rule 19(2) of Central Excise rules; you can also procure through invalidation of advance auhorisation.

-The other option is to procure on payment of duty and take back the duty through CENVAT, or refund of cenvat under Rule 5 of Cenvat Credit rules or taking rebate on inputs or export of goods after payment of duty and taking rebate under Central Excise Rule 18&19.

-Another option is to take back duty through drawback (AIR or brand rate or special brand rate), or through retrun of duty paid on deeming provision like DEPB or taking advance authorisation on post export basis.

The principles on these scheme is very same- goods should be exported and taxes should not be exported. Which scheme is to be opted depends upon the nature of goods exported, nature of manufacturing process and nature of inputs required. Say, for example if raw material is priced lower in India, no need to import raw material on advance authorisation. As consultants to the industry, we need to develop a understanding of the mechanism so that we can advice the industry and exporting community suitably.