Packing materials

749 views 4 replies

VIGNESH

Manager Finance &Accounts

327 Points Joined August 2008

Dear All,

We a Manufacturing Unit Registered under the Excise Law , Manufacturing the Excisable commodity having a NIL Rated Item.

Due to capacity constrain, we have a arrangement with one another manufacturer to produce our Finished goods.

The arrangement goes like this

1) We will supply our packing material and some Formula composition to the manufacturer.

Outsourced manufacturer manufacture the FG with the Formula which we gave and pack the same with Our packing material and supply the FG to us.

My question is

1) the packing material which we supply to out outsourced manufacture is an excisable commodity, if i transfer the PM to Outsourced manufactured whether it will attract Excice duty

we are not doing any value addition in Packing material , we are getting it from the vendor and just transfering to our outsourced manufacturer.

2) Whether the same will also attract Sales tax ?

Kindly clarify

Replies (4)

U S Sharma

glidor@gmail.com

21068 Points Joined January 2010

sales tax or vat is applicable on each transfer

input credit facility is available under state vat act

Madhukar N Hiregange

Chartered Accountant

39039 Points Joined September 2008

When the product is exempt the sending of raw/ packing material to him need not be on payment of duty. PM is trading item for you. If he is sending back the FG to you nbo question of paying any VAT. Send under stock transfer wothout VAT.

mohammad rasool baig

Management Consultant

1026 Points Joined August 2012

Packing material will not attract excise duty because there is no element of manufacture with respect to packing material

After manufacture of goods, if finished goods are received back by you then it will be works contract. In that case VAT will not be applicable for packing material.

If the original manufacturer (job worker) is selling outside on its own then VAT will be applicable on packing material.

As far as manufacture of finished good is concerned, excise duty will be applicable but it depends on the situation whether you need to pay or job worker needs to be paid.