Manufacturing in a bonded manufacturing facility.

The Central Board of Indirect Taxes (CBIC) is allowing import of raw materials and capital goods without payment of duty for manufacturing and other operations in a bonded manufacturing facility.

The Custom Duty is exempted, if the Imported raw materials or Capital Goods are utilised for Manufacturing of Goods for Export. 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.*When finished goods are exported, in addition to the waiver of BCD + IGST on the imported goods used, the GST on the finished goods can be zero-rated.

Through bonded manufacturing, all types of businesses can avail exemption on customs duty on imported inputs used in the production of finished goods to be exported. In the case of domestic consumption, the duty on imported inputs is deferred until the finished goods are cleared to the domestic market.

Means Whatever % of duty free Input applied on finished goods which are cleared for domestic market, the Duty+ IGST will be applied on that % of Goods  and exemption will be valid on remaining  goods which are exported.

• The manufacturer benefits from deferred duty on imported inputs and from reduced production cost due to duty-free imports.

You may find details about the process through here Bonded manufacturing facility.

The above details are posted with information available on http://www.investindia.gov.in