Import of Raw Trading material with job work, Customs - Exim - SEZ

[sagar arbole]

Hi Sir/Madam,

we would like to Import of some trading material after customized pre fabricated job work with the same vendor.

and he would like to invoice separately for material cost & job work cost.

in this case, What will be our custom duty?

Custom duty on only on material and Service tax on job work?

or

Custom duty on both the invoices ?

Thank You.

Posts / Replies

[raghunandhaanan r vi]

Gentleman,

You need not pay any customs duty on importation of materials for job work. Only thing is that the materials should be supplied on free of cost by supplier for job work against execution of export order.

The relevant notification No. 32/97 customs may be referred for details

The main condition is that the resultant product and imported goods if any should be re-exported to the supplier or any other person which the supply may specify within six months from the date of import or within such extended period that may allow by customs.

Futher, the FOB value of export should be more than 10% of CIF value of imported goods.

Job work should be undertaken in accordance with the procedure set out in Custms( Import of Goods at Concessional rate of duty for Manufacture of excisable goods) Rules 2016.

[Kishan Barai]

Respected Sir,

How practically it is possible ?

If goods are supplied free of cost, then how FOB would be 10% more then CIF value ? In this case CIF value of import would be "0" (Free of Cost) & how to determine 10% more FOB value for Exports ?

Even goods are supplied free of cost, the importer have to pay import duty, so custom will arrive at A.V and charge accordingly.

please enlighten.

Thanks in Advance

[raghunandhaanan r vi]

Sir,

Even though goods supplied free of cost, invoice with cost of materials must be given by mentioning " Free of cost, Value declared for customs purpose" There is no duty by way of notification mentioned in above mail.

tnx

[Kishan Barai]

Thanks a lot sir,

But suppose I import a goods of rupees 5,00,000 INR CIF value for job work, I do not have to pay import duty & cost. From above example following question arise in my mind.

Q. Goods is bought free of cost so which Bill of Entry would be filed ?? B/E for Home Consumption or B/E for Warehouse / Exbond ?

Q. As per norms there should be rise in 10% of invoice value in FOB so what would be the value 5,50,000 ?? or Other ?? Hear goods are received free of cost, so how we can arrive at that value ??

Q. What would be the security of the person staying abroad supplying goods to us for free??

[raghunandhaanan r vi]

My answers to your questions are as follows:

Q. Goods is bought free of cost so which Bill of Entry would be filed ?? B/E for Home Consumption or B/E for Warehouse / Exbond ?

Ans : Home consumption Bill of Entry would be filed

Q. As per norms there should be rise in 10% of invoice value in FOB so what would be the value 5,50,000 ?? or Other ?? Hear goods are received free of cost, so how we can arrive at that value ??

The rule is that FOB value of the resultant product to be exported is at least 10% more of the CIF value of all goods imported to make the resultant products. That means you have to achieve minimum 10% value addition. Hence the FOB value you have mentioned by you in your query is 10% more of CIF value of imports and satisfied the condition of notification. Working formula for arriving value Value addition is A – B / B *100

A = FOB value of Exports

B = CIF value of Imports

Q: What would be the security of the person staying abroad supplying goods to us for free??

Supplier should have a valid contract for job work with importer and should have all conditions shall be mentioned in the contract to safeguard the interest of both parties.

[Kishan Barai]

Thanks a lot for such a great valuable help.

I am very sorry that I am asking Que on this over and over again but.

Still as per above scenario goods are received free of cost & CIF value would be marked 5,00,000 INR

Now, Export of goods is done on FOB value of 5,50,000 INR.

Now actually goods belong to importer, it was bought to India only for Job work, Now Exporters exports on FOB value of 5,50,000 i.e 10% VA

Exporter has received in Free of Cost & he exports in Cost + 10% VA

So how this is possible ?

Exporter will rec goods in free of cost & he will export with 10% VA and earn 5,50,000 INR

Importer will become so sad.....

Please reply,... please help sir.

[Kishan Barai]

Please reply sir, how much profit would be earned by person in India doing job work ??

For eg. He has received free of cost goods worth 500000 INR & does 10% VA now value is 5,50,000.

Now at what price he will return back the goods ?

It is not possible by exporter to make invoice of 5,50,000 FOB because the ownership of goods belongs to importer

Please explain sir....

[diwakar bhatt]

Dear sir,

Can we take DBK benefits on re-export items (import being done under jobbing)

[raghunandhaanan r vi]

Dear Sir,

You cannot avail duty drawback under section 75 of customs act as no customs duty suffered on the

export of resultant product. Import duties are fully exempted under Notification No. 32/1997.

Thanks

[Kishan Barai]

Please reply sir, how much profit would be earned by person in India doing job work ??

For eg. He has received free of cost goods worth 500000 INR & does 10% VA now value is 5,50,000

Now at what price he will return back the goods ?

It is not possible by exporter to make invoice of 5,50,000 because the ownership of goods belongs to importer. So please explain invoicing in job work by giving Approximate example.

Thank You

[raghunandhaanan r vi]

Sir,

Job worker will receive only the fee for job work from the buyer as per the agreement terms. Hence the job worker profit is already fixed as he receive only job work cost alone. Raw materials are supplied on free of cost by the buyer

there is no need to furnish GR /SDF / FEMA declaration as such declaration is exempted as per provisions of FEMA

The export price normally includes the conversion / job work cost which is minimum of 10% or more of CIF price of import

Thanks