Bonded Manufacturing Scheme for Manufacturing and Processing in a Bonded Facility

Highlights

Deferred duty on imported capital goods

Duty on capital goods used in manufacturing or other operations is deferred until their clearance from the bonded facility. Capital goods can be sold to foreign manufacturers after utilization and deferred duty can also be avoided.

Deferred duty on imported raw materials 

Duty on imported raw materials used in manufacturing or other operations is deferred until the clearance of finished goods. Deferred duty is waived in case finished goods are exported.

Warehouse to warehouse duty-free transfer allowed

Duty-free transfer of goods allowed from one warehouse to another.

No fixed export obligation
No limit on the share of clearance of finished goods for the domestic market. An entity may manufacture in a bonded facility and sell up to 100% of the output in the domestic market. 

Ease of bonded manufacturing

Single point of approval

Commissioner of Customs acts as the single point of contact for all approvals.

Common form

A popular application for the license and license for manufacturing and other activities in private bonded facilities.

Unlimited period of warehousing

Capital and non-capital goods can remain in stock until clearance and consumption (raw materials, components, etc.)

No geographical restriction

Capital and non-capital goods can remain in stock until clearance and consumption (raw materials, components, etc.)

Easy compliance

Maintain all records of manufacturing and other operations digitally in a single format as per Annexure.

Types of Beneficiaries

Via twin processing, customs exemptions on imported inputs used in the production of finished products for export can be made available to all types of businesses. When domestic consumption is applied, the duty on imported inputs will be delayed until finished goods are cleared to the national market.

To understand better, the following examples illustrate how a producer relies on bonded input.

Manufacturer

• A leading Japanese automaker wants to build cars in India.
• They submit a licensing application for the Nagpur, Maharashtra facilities, and import the requisite inputs for production such as airbags, transmission systems, and equipment.
• The duties on these imports are delayed and the producer is funded by more working capital.
• The manufacturer shall export 70 % of the total vehicles manufactured and deferred duties on that part, whereby delayed custom duties and IGST are charged domestically on the remaining 30% of the vehicles on sale in India.
• Thanks to duty-free imports, the producer gains from late tariffs on imported inputs and lowered production costs.

Steps to Start Manufacturing

Single point of approval

Commissioner of Customs acts as the single point of contact for all approvals.

Common form

Common application cum approval form for a license for private bonded facility and permission for manufacturing and other operations.

Unlimited period of warehousing

Capital and non-capital goods (raw materials, components, etc.) can remain warehoused until clearance or consumption.

No geographical restriction

A new manufacturing facility can be set up or an existing facility can be converted into a bonded manufacturing facility irrespective of its location in India.

Easy compliance

Maintain all records of manufacturing and other operations digitally in a single format as per Annexure.

Types of Beneficiaries

Via twin processing, customs exemptions on imported inputs used in the production of finished products for export can be made available to all types of businesses. When domestic consumption is applied, the duty on imported inputs will be delayed until finished goods are cleared to the national market.

To understand better, the following examples illustrate how a producer relies on bonded input.

Manufacturer

• In India, a leading Japanese automaker plans to produce cars.
• They submit a licensing application for the Nagpur, Maharashtra facilities, and import the requisite inputs for production such as airbags, transmission systems, and equipment.
• The duties on these imports are delayed and the producer is funded by more working capital.
• The manufacturer shall export 70 % of the total vehicles manufactured and deferred duties on that part, whereby delayed custom duties and IGST are charged domestically on the remaining 30% of the vehicles on sale in India.
• Thanks to duty-free imports, the producer gains from late tariffs on imported inputs and lowered production costs.

Steps to Start Manufacturing

The approved installations processes (as specified in Section 58) and the manufacturing processes (as described in Section 65) are combined according to a single application in accordance with Annex A.

Steps for Clearance of Warehoused Goods

TO DOMESTIC MARKET FOR CONSUMPTION

When warehoused goods are used for manufacturing or other operations & finished goods are domestically consumed.

Clearance of warehoused goods for home consumption

Warehouse products will only be used for domestic use or sold out if:

• The bill of the inscription has been presented in the specified form for house consumption for such goods;
• import duty leviable and all the fines, rent, interest, and other charges payable for such goods; and
• The appropriate officer has put an order to clear certain products for domestic consumption

Clearance of warehoused goods for Export

Without payment of import duty, warehouse products may be exported outside India if:

• In the specified form, a shipping bill or export bill for certain commodities was presented;
• the duty to export, fines, rent, interest, and other charges payable on such goods; and
• The proper officer has ordered the clearance of certain goods for export

Transport and receipt of goods from another warehouse specifications
Fill in the form for the transfer of goods from an enclosed facility to be transported in compliance with the Warehouse Goods (Removal) Regulation, 2016.

1. Unless the Commissioner of Customs permits the carrier to carry without lock depending on the type of the commodity or the mode of transport, the originating Warehouse License shall assign a single lock. This one-time lock was added to the load section of the transport to the storage to be verified on acceptance.
2. Produce 'Acceptance' from the receiving warehouse license confirming the arrival to the Bond Officer of the originating warehouse of the products. In the case that the once-lock is not found intact, the bond officer must be informed immediately and refuse to unload the goods.
3. Enable unloading if the one-time lock is intact and the obtained goods are tested
4. Note to the bond officer any difference in the volume of products in 24 hours.
5. Support the transfer form with obtained quantity from a warehouse and hold a copy thereof.
6. Receive and preserve a copy of the goods with the assistance of the transport document presented by the carrier of the goods.

If products are moved from a bonded establishment to another facility, the occurrence of late duty will also be transferred to the new facility owner. The owner of any warehoused goods, subject to any conditions stated for the proper entry of the stores in the warehouse to which the removal is allowed, may remove them by permission of the proper officer.

(Bonded Manufacturing Scheme)

Essentials to Benefit from Bonded Manufacturing

Export goods

No duty is to be paid on imported raw materials or capital goods if the following are complied with:

• Documents of export declaration based on the mode of transportation (Shipping Bill/ Bill of Export/ Form prescribed) are produced
• Export duty, fines, and penalties, if any, are paid
• Order of clearance of goods issued by the Customs Officer