Advance Authorization and GST

[Kaustubh Karandikar]

XYZ Ltd. Importing raw material under ‘Advance Authorization’. These goods will be directly sent to PQR (Supporting manufacturer) to manufacture finished goods. These finished goods will be purchased by XYZ from PQR where PQR will be charging 0.1% GST since XYZ will be exporting these goods as merchant exporter. XYZ will be showing these exports as fulfillment of export obligation against Advance authorization against which the raw material was imported by them. Is this transaction correct?

[Rajagopalan Ranganathan]

Sir,

In my opinion the procedure followed by XYZ is correct.

[DR.MARIAPPAN GOVINDARAJAN]

In my view also it is correct.

[MUKUND THAKKAR]

First check the application done by XYZ and need to showing the supporting manufacturer PQR in application. if directly sending material to PQR. if basic condition is meet than XYZ can eligible for claim export obligation.

XYZ need to mention name of supporting manufacturer in shipping bill.as per application details with the DGFT.

[YAGAY andSUN]

4.35 Facility of Supporting Manufacturer/ Jobber/co- licensee

(a) Imported material may be used in any unit of holder of Advance Authorization subject to condition of paragraph 4.10 of this Handbook or jobber / supporting manufacturer provided same is endorsed on authorization by Regional Authority. If applicant desires to have name of any manufacturer or jobber added to authorization, he may apply. Such endorsement shall be mandatory where prior import before export is a condition for availing Advance Authorization scheme and authorization holder desires to have material processed through any other manufacturer or jobber.

(b) Upon such endorsement made by Regional Authority, authorization holder and co-authorization holder shall jointly and severally be liable for completion of EO. Any one of co-authorization holders may import goods in his name or in joint names. BG/LUT shall also be furnished in their joint names.

(c) If authorization holder is registered with Central Excise, he has an option of getting names of jobber endorsed by Central Excise as per Central Excise Rules in lieu of Regional Authority’s endorsement. In case manufacturer exporter holding authorization is not registered / not required to be registered with Central Excise authority, job work may be allowed as per Central Excise Rules and regulations without insisting for endorsement of supporting manufacturer’s name. However, authorization holder shall be solely responsible for imported items and fulfillment of EO.

AI Summary

Advance authorization endorsement requirement ensures supporting manufacturer's name and joint liability for export obligation on shipping bill and authorization. Advance Authorization permits direct supply of imported inputs to a supporting manufacturer only where the supporting manufacturer is endorsed on the authorization or allowed under Central Excise rules; the authorization holder and co-holders are jointly and severally liable for completing the export obligation and must furnish Bond/LUT in joint names, and shipping documentation should name the supporting manufacturer as per the authorization.