Aatma Nirbhara Bharat is recent mission of the Central Government to promote manufacture in India. This is to ensure that India will be self-reliant and generate employment. Under the Invest India Scheme, the Central Government has introduced a facility called Bonded Manufacturing.

Bonded manufacturing allows the manufacturer to import the raw materials and capital goods without payment of customs duty and IGST. Where the finished goods or the processed goods are exported, there will be no need to pay the customs duty and IGST on the raw materials imported. Where the finished goods or the processed goods are sold domestically wholly or partly, the customs duty and the IGST on the imported raw materials attributable to the goods so sold domestically shall be paid. This facility is applicable not only for manufacture but also for any processing on the imported goods, like repacking etc. The customs duty and IGST on capital goods is to be paid only if the capital goods are removed for home clearance. If the capital goods are re-exported, even after its shelf life, no need to pay customs duty and IGST.

1. What is bonded manufacturing?

  • Declare your factory as private bonded facility.
  • Import the raw materials or capital goods without payment of customs duty and IGST.
  • Carry out the manufacturing or processing using these raw materials or capital goods.
  • Export the manufactured goods or processed goods.
  • Pay customs duty and IGST on the raw materials attributable to goods cleared for home consumption, in addition to applicable GST.
  • No export commitments.

2. What are the advantages of bonded manufacturing?

  • Cashflow advantage-No customs duty & IGST paid at the time of import. Import duties are to be paid only when manufactured/ processed goods are cleared domestically.
  • To the extent of exported, exemption from customs duty and IGST on imported goods.
  • No customs duty and IGST to be paid on capital goods so long as it is not cleared domestically, not payable if exported subsequently. A huge benefit.
  • Single application, simple procedure and simple compliance.
  • Not time limit for the benefit, no renewals.
  • No regular visits by customs officers.

3. Who should go for it?

  • If you are importing substantial quantity of raw materials and also engaged in exports.
  • If you are importing machineries.
  • If a foreign company wants to set up their factory in India.
  • JV with a foreign entity to set up facility in India.
  • E-Commerce activity which involves importing, packing and selling abroad.
  • Importing in bulk, re-packing and exporting/selling.
  • Import in bulk and use it for domestic consumption over the period.

4. What are the compliances required?

  • Single online application, giving the nature of manufacturing, inputs to be imported, anticipated trade volume etc.
  • Documents required includes, MoA, AoA or partnership deed, PAN of the entity, PAN & Aadhaar of the directors/partners/Authorised Signatory, rental agreement/property documents, ground plan and fire safety audit certificate.
  • A bond in the prescribed format is to be executed and submitted to the jurisdictional commissioner of customs.
  • At the time of granting the permission, the officer shall visit the premise once.
  • Simple records are to be maintained in the prescribed form.
  • A monthly return is to be filed
  • Facility of moving goods from one place to other place is also provided.

The above scheme may be very useful to the many manufacturers or entrepreneurs where there will be substantial working capital facility is inbuild in the scheme by way of waiver or deferment of customs duty and IGST. It is also promised that the government shall extend all the necessary help required for this scheme. This could be game changer to attract more manufacturing activities to India. Present exporter could also use this as an alternative which could be simpler.

Disclaimer

The views expressed herein are the views of the article writer and cannot be used in framing of opinions or devising methodologies for the purpose of compliance without an independent evaluation– vasant.bhat@hiregange.com.

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4 Comments

  1. ujjwal kumar says:

    Under point no 3 -who should go for it ?
    Last subpoint is- Import in bulk and use it for domestic consumption over the period.
    Will this category get the exemption?

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