Purchase of finished goods from principal - contract manufacture

[pardeep bisht]

WE ARE A CONTRACT MANUFACTURE OPERATING UNDER LOAN LICENCE,CAN WE PURCHASE THE FG FROM OUR PRINCIPAL (PRODUCED ON BEHALF OF OUR PRINICPAL).IF YES,THEN HOW?CAN WE RAISE SELF INVOICE.

[Surender Gupta]

You mean, fist you would manufacture goods under loan licence on behalf of Principal and thereafter purchase such goods as independent buyer. Subject to the contrary in the licnence terms and conditins, I am of the view there is no restriction under the tax laws about this proposition.

[pardeep bisht]

can we adopt this practise on routine basis.(i.e purchasing from principal and selling to our customer after repacking).Will it be considered as manufacturing process.

AI Summary

Contract-manufacture purchase: contract manufacturer may acquire finished goods from principal unless the loan licence prohibits it. A contract manufacturer under a loan licence may purchase finished goods produced for the principal if the licence does not prohibit it; such purchases are commercially permissible under tax law subject to licence terms. Routine purchase-and-repack arrangements require assessment whether repacking amounts to manufacturing for tax purposes and whether procedural obligations, including issuance of a self-invoice, or other compliance requirements apply.