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

Loan License Allows Self-Invoice for Finished Goods; Routine Repacking May Not Qualify as Manufacturing Process A contract manufacturer operating under a loan license inquired about purchasing finished goods from their principal, which were produced on behalf of the principal. They asked if they could issue a self-invoice for such transactions. A respondent clarified that, unless restricted by the license terms, there is no tax law prohibition on this practice. The inquirer further asked if routinely purchasing goods from the principal, repacking, and selling them to customers would be considered a manufacturing process.