Central Board of Indirect Taxes and Customs (CBIC) has issued Circular No. 38/2018-Customs to clarify the procedure to be followed in cases of manufacturing or other operations undertaken in bonded warehouses.
Key points of the Circular are:
- To undertake any manufacturing process or other operations in bonded warehouses the applicant shall file an application in form as prescribed in Annexure A (forming part of attached circular) before the jurisdictional Principal Commissioner / Commissioner of Customs.
- The applicant desirous of manufacturing or carrying out other operations in a bonded warehouse must also have the premises licensed as a private bonded warehouse. The form of application in Annexure A has been so designed that the process for seeking grant of license as a private bonded warehouse as well as permission to carry out manufacturing or other operations stands integrated into a single form. The warehouse in which the said permission is granted shall also be declared by the licensee as the principal/additional place of business for the purposes of GST.
- The licensees manufacturing or carrying out other operations in a bonded warehouse shall be required to maintain records for the receipt, processing and removal of goods in the form as prescribed in Annexure B (forming part of attached circular)
- The owner of the warehoused goods are required to execute a triple duty bond for the warehoused goods, such bond shall be executed in the form as prescribed in Annexure C (forming part of attached circular)
- To the extent that the resultant product manufactured or worked upon in a bonded warehouse is exported, the licensee shall have to file a shipping bill and follow the procedure prescribed under the Warehoused Goods (Removal) Regulations 2016 for transport of goods from the warehouse to the customs station of export. A GST invoice shall also be issued for such removal. In such a case, no duty is required to be paid in respect of the imported goods contained in the resultant product.
- To the extent that the resultant product whether emerging out of manufacturing or other operations in the warehouse is cleared for domestic consumption, such a transaction squarely falls within the ambit of “supply” of the Central Goods and Service Tax (CGST) Act,2017. It would therefore be taxable in terms of the CGST Act, 2017 or Integrated Goods and Services Tax Act, 2017 depending upon the supply being intra-state or inter-state. The resultant product will thus be supplied from the warehouse under the cover of GST invoice on the payment of appropriate GST and compensation cess, if any. As regards import duties payable on the imported goods contained in so much of the resultant products are concerned, same shall be paid at the time of supply of the resultant product from the warehouse for which the licensee shall have to file an ex-bond Bill of entry and such transactions shall be duly reflected in the accounts prescribed under Annexure B.
- For waste or refuse arising out of manufacture and other operations in relation to the resultant products cleared for home consumption, import duty on the quantity of the warehoused goods contained in such waste or refuse shall be paid as per provisions of the Customs Act.
- For waste or refuse arising out of manufacture and other operations in relation to the resultant products cleared for export, where import duty on the waste or refuse is paid as per provisions of the Customs Act , the same shall be deposited manually through a Challan. The records maintained as per Annexure-B would be sufficient for accountal of such goods.
For further information please refer the attached document.
Source: Central Board of Indirect Taxes & Customs