Get a Bonded Manufacturing License in India-Key Points

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Dated: 10.11.2019

Bonded manufacturing facility- Key Points

As the Govt. of India strives to make India as a hub of Manufacturing with programs like “Make in India”, it has also set foot on the path of achieving desired results for the Industry in terms of “Ease of Doing Business”. Recently the Central Board of Indirect Taxes & Customs (CBIC) is allowing import of raw materials and capital goods without payment of duty for manufacturing and other operations in a bonded manufacturing facility.

Whenever any raw materials or capital goods are imported, the import duty on them is deferred. If these imported inputs are utilised for exports, the deferred duty is exempted. Only when the finished goods are cleared to the domestic market, import duty is to be paid on the imported raw materials used in the production. Import duty on capital goods is to be paid if and when the capital goods are cleared to the domestic market.

 

Advantages of bonded warehousing

• Deferred duty on Capital Goods
• Deferred duty on Imported Raw Materials
• Seamless warehouse to warehouse transfer
• No fixed Export obligation

 

Ease of bonded manufacturing

Single point of approval- Commissioner of Customs acts as the single point of contact for all approvals

Common form- Common application cum approval form for a license for private bonded facility and permission for manufacturing and other operations

Unlimited period of warehousing- Capital and non-capital goods (raw materials, components, etc.) can remain warehoused until clearance or consumption

Geographical restriction- New manufacturing facility can be set up or an existing facility can be converted into a bonded manufacturing facility irrespective of its location in India

Easy compliance- Maintain all records of manufacturing and other operations digitally in a single format as per (Annexure B- download from the below given link)

 

Types of Beneficiary of this scheme

Manufacturer

• A leading Steel manufacturer intends to manufacture Finished goods in India
• They file an application for licensing a facility near Chandrapur, Maharashtra and import required inputs for production like raw materials and capital goods
• The duty on such imports is deferred, which provides additional working capital support to the manufacturer
• The manufacturer exports 70% of the total produced finished products and deferred duty on that portion is waived while deferred Custom Duty and IGST are paid on the remaining 30% finished goods at the time of their sale domestically across India
• The manufacturer benefits from deferred duty on imported inputs and from reduced production cost due to duty-free imports

 

E-commerce Service 

• A global online retailer envisages to set up a packaging and logistics hub near Kolkata, West Bengal
• Under a bonded facility, the retailer doesn’t worry about the permitted time to store warehoused goods with the advantage of unlimited storage
• The retailer pays duty on the imported inputs only when the finished goods are cleared from the facility to the domestic market

 

Steps to Start Manufacturing

Fill Online Application

Fill online application as per Annexure A (Download the form from below given link) along with the following details:

• Nature of manufacturing
• Particulars of imported inputs 
• Anticipated trade volume etc

 

List of documents required

• Certificate of Incorporation (For companies)
• MoO and AoA (For partnership firm)
• Partnership Deed (For partnership firm)
• Copy of ID proofs of proprietors/ partners/ directors
• Copy of Aadhar Card of Authorised Signatory
• Documents supporting property-holding rights, such as rent agreement
• Copy of warehouse license, if issued earlier
• Ground plan of the site with details
• Fire safety audit certificate

 

Execute a Bond

• Execute a bond as per Annexure C (download the format from below given link) and submit a physical copy to your Jurisdictional Commissioner of Customs
• Maintain detailed accounts as per Annexure B (Download the Copy from below link)

Note: Before execution of a Bond, a Customs Officer visits the facility to evaluate the compliances in order to issue the license

Grant of Sanction

• Commissioner of Customs grants the permission for manufacturing or other operations in the bonded facility

Permission also includes:

• Manufacturing process or other operations permitted
• Conditions regarding manufacturing

Start Manufacturing or Other Operations

Note: The processes for availing the license for a private bonded facility (as per Section 58) and for manufacturing or performing other operations (as per section 65) are combined under single application as per Annexure A

 

Clearance of Warehoused Goods

TO DOMESTIC MARKET FOR CONSUMPTION

When warehoused goods are used for manufacturing or other operations & finished goods are domestically consumed

TO A CUSTOMS STATION FOR EXPORT

When warehoused goods are used for manufacturing or other operations & finished goods are exported

TO ANOTHER BONDED MANUFACTURING FACILITY*

When warehoused goods are used as raw materials by another industry

 

Warehoused goods are permitted for clearance after:

• All compliances are met by the owner of goods as per executed Bond
• Deferred duty on imported raw materials or capital goods is paid
• GST is paid on the finished goods
• Any other compliance as per the Customs Act or any other applicable regulations are met

 

Follow Simple Steps to Transport Warehoused Goods

• Fill Form for Transfer of goods from a facility appended in Warehouse Goods (Removal) Regulations Act, 2016 to transport warehoused goods
• Licensee of the originating warehouse affixes a one-time-lock, unless permitted by the Commissioner of Customs to transport without the lock, depending upon the nature of goods or the manner of transport
• Produce ‘Acknowledgement’ received from the licensee of the recipient warehouse stating arrival of goods to Bond Officer of the originating warehouse
• Acknowledgement is to be produced in 1 Month

NOTE: *When goods are transferred from one bonded facility to another, incidence to pay deferred duty is also transferred to the owner of the new facility

 

Benefit from Bonded Manufacturing

Export goods

No duty is to be paid on imported raw materials or capital goods if the following are complied with:

• Documents of export declaration based on the mode of transportation (Shipping Bill/ Bill of Export/ Form prescribed) are produced
• Export duty, fines and penalties, if any, are paid
• Order of clearance of goods issued by the Customs Officer

Goods for home consumption

• Imported raw materials taxed as per Section 9 of the Central Goods & Services Act
• Duty also payable on imported raw materials through ex-Bond Bill of Entry at the time of supply of finished goods manufactured (record of this to be maintained as per Annexure B (Download the format from below link)

 

Waste/ refused goods

Exported Goods

In case of export of finished goods, the duty on waste is paid as if the waste was imported into India. Licensee can also get the duty remitted by destroying the waste generated

Domestically-consumed Goods

In the case of domestic consumption of finished goods, the import duty (customs duty + GST) is paid on the quantity of the imported goods contained in the waste and scrap

 

Requirements for Record-keeping

1. Maintenance of records

– Maintain detailed records of receipt, handling, storing and removal of goods into/ from the facility as per Annexure B

– Keep record of each activity, operation or action taken in relation to the warehoused goods

– Keep record of drawl of samples from the warehoused goods

Keep copies of the following documents:

• Bills of Entry
• Transport documents
• Forms for transfer of goods from warehouse
• Shipping Bills
• Bills of Export
• Any other documents indicating receipt/ removal of goods from the warehouse

 

2. Preservation of physical and digital records

– Update records and accounts accurately and preserve for a minimum 5 years from the date of removal of goods from the facility

– Preserve updated digital copies of records at a place other than the facility to prevent loss of records due to natural calamities

3. Filing monthly returns

– File monthly returns within 10 days of closing of the month.

Note: If licensees fail to comply with any of the provisions of these regulations, they shall be liable to a penalty in accordance with the provisions of the Customs Act, 1962

 

Download the Application Formats & Important Docs Here

1. Circular-No-34-2019- Bonded Manufacturing License

2. Customs Regu-Warehouse Custody Handling Goods

3. CGST-Section 9 Rules for Import Taxation

4. Template for Ground Plan-Bonded Mfg License

5. Annexure B- Bonded Manufacturing

6. Annexure B-Record Keeping Format

7. Annexure C for Bond Execution for Bonded Mfg Licensing

8. Form for Transfer of Goods from Warehouse

9. Proposed Goods Activity Template for Bonded Mfg License

 

 

Courtesy: CBIC, Govt of India/Invest India

Contact undersigned for seeking a seamless facilitation to set up Bonded Manufacturing unit under this scheme

M/s S.J. EXIM Services- Q-Freight Team
Contact Person: Ravi Shekhar Jha

Mob: +91-9999005379

Web: www.sjeximtech.com / www.q-freight.com

Email: intelconsul@gmail.com    /   ravi.jha@q-freight.com

 

Disclaimer: Please refer to official sources before effecting a decision