EOU - Sub - Contract Production Process and Production

[SARAVANAN RENGACHARY]

Dear Experts,

Please Clarify what is the difference between Sub-Contracting of Production Process and Sub Contracting of Production.

FTP 2015-2020:

6.14 Sub-Contracting (a) (i) EOU/EHTP/STP /BTP units, including gems and jewellery units, may on the basis of annual permission from Customs authorities, sub - contract production processes to DTA through job work which may also involve change of form or nature of goods, through job work by units in DTA.

(ii) These units may sub – contract upto 50% of overall production of previous year in value terms in DTA with permission of Customs authorities.

As per our understanding:

Sub-contracting of production process - means sending the goods for job work and receiving.

Sub-contracting of Production - means turnkey production from outside unit and simple bought out.

please clarify.

regards

Saravanan.

[YAGAY andSUN]

Please check para 6.14 Sub-Contracting of FTP and Para 6.21 Sub – Contracting of HBP in this regard.

[SARAVANAN RENGACHARY]

Dear YAGAY and SUN,

Thanks for your suggestion.

As per para 6.14 (a) there is no restriction for EOU sending goods to DTA for job work. But, as per para (b) there is a restriction for 50% of previous year production.

As per 6.21 of HBP, there is no restriction at all in value terms but only one condition that goods should be returned to EOU unit after job work.

Our question is if we (EOU) send the raw materials to DTA unit and bring back the goods in assembled form back to EOU, is there any restriction in value terms i.e. 50% of previous year production.

regards

Saravanan.

AI Summary

Sub-contracting of production processes requires customs permission and may attract a value cap; return of job-worked goods required. EOU units may sub contract production processes to DTA by job work with Customs permission under para 6.14 of FTP 2015-2020, which permits change in form or nature of goods but limits such subcontracting in value to fifty percent of previous year's production; para 6.21 of the HBP lacks a value cap but requires goods returned to the EOU after job work, raising a compliance question when raw materials are sent to DTA for assembly and brought back as finished goods.