Customer Free of charge supply - scheme to be mentioned in Shipping bill - Reg

[Ganesh K]

Hi All,

Need support in below scenario :

A customer wants to provide material free of charge (Say Rs.20/- worth material) to build a equipment, we are planning to import the same by paying import duty (We don't want to have obligation of sending the Finished equipment within specific time, so dint opt for jobbing or equivalent scheme - so planning to pay the duty).

We will procure material (Say Rs.80/-) and add our overhead and profit (Say Rs.20/-) and export the shipment. Customer will issue PO for Rs.100/- and we will make invoice for Rs.100.

We want to avail drawback and RODTEP benefits. We want to know the following

1) What should be the export invoice price. Option #1 : Invoice value : Rs.100/- and net payable Rs.100 (or) Option #2 Invoice value Rs.120 & free of charge item : Rs.20/- , Net payable Rs. 100/-

2) How we should make Shipping bill :

Option #1 : SB rate : Rs.100/- FOB price : Rs. 100/- , and mention the free of charge material imported BOE details in remarks.

Option #2 : SB rate : Rs. 120/- and deduction : Rs.20/- and FOB price will be Rs.100/- ,and mention the free of charge material imported BOE details in remarks.

3) We want to capture in government records that free of charge materials has been reexported. is the above method correct (or) do we have any other method.

Thanks for your feedback in advance.

[Narayana Chambers]

Hello Ganesh-ji, 

Since you have imported the goods on FOC basis, its value will not constitute part of overall cost structure. In our opinion, you can treat the import duty paid, as input cost. Thus, you can invoice goods with actual cost + import duty paid. 

[raghunandhaanan rvi]

You have received input free of cost with duty paid on it. As a result, your exported product costs Rs. 120, which includes the taxes paid on the inputs.

Therefore, in my view, the price on the export invoice should be shown as follows:

Price of export goods: Rs. 120.00

Less free-of-cost material provided by the buyer: Rs. 20.00

Net payable: Rs. 100.00

Export promotion incentives will be provided based on the rates prescribed in the respective rules for the FOB value realized in free foreign exchange, which is Rs. 100.

[Ganesh K]

Thanks sirs,

But how to put on records that the imported materials has been exported back. 

Is it ok to do as follows

Invoice:

Invoice : rs.100

Free of charge supply :20

Net payable : 100

Shipping bill:

And in shipping bill, will put export rate as 100

And in comments, will all all free of charge supply BOE for reference. 

Question:

Is it enough to prove that imported materials has been reexported. 

We both are related party so want to keep all in records. 

Thanks again. 

[raghunandhaanan rvi]

Sir,

You can issue a commercial invoice for Rs. 100. However, in the description of goods column, you should declare, "Goods manufactured include the use of the item [description of goods] received from the buyer free of cost via invoice No. [invoice number] dated [date] B/E No. [Bill of Entry number] dated [date]." This will serve as proof of the export of goods manufactured from the goods supplied by the buyer free of cost. Thanks