India Jobbing under Customs

Underlying legal reference: Notification 32/1997-Customs, dated 1 April 1997 as amended from time to time

Key benefit: Full exemption from Basic Customs Duty

Conditions to the import of goods for jobbing:

• The goods are allowed to be imported under the exemption notification for execution of jobbing order placed on the importer by the supplier of the imported goods (foreign principal) free of cost
• The resultant goods and the imported goods are required to be re-exported within six months or within such extended period as the Assistant/ Deputy Commissioner of Customs may allow
• The bond and procedural aspects to be followed as provided under IGCR Rules, 1996.
• The notification is not applicable to prohibited goods as per Foreign Trade Policy
• The import of goods under the Jobbing notification is allowed from specified seaports, airports and ICDs only. Commissioner of Customs is empowered to grant permission for import from any other customs station.
• The goods imported under the said notification must be used exclusively for discharge of export obligation and no part thereof shall be disposed of in any other manner
• There should be minimum 10 percent value addition i.e. the FOB value of the resultant products shall be at least 10 percent more than the C.I.F. value of the imports (The value addition criterion is not applicable to textile and clothing goods covered under chapter 50 to chapter 63 of the customs tariff)
• The Notification apparently does not cover all the capital goods supplied free of cost by the foreign supplier
• Goods in the nature of patterns, drawings, jigs, tools, fixtures, moulds, tackles and instruments can be retained subject to payment of duty of customs leviable at the time of import without any depreciation.
• If the project involves substantial import of capital goods other than mentioned above (i.e. not entitled for exemption under this notification) then this notification is not feasible as availing EPCG as well may not be possible considering the fact that labour/ job charges is the only value representing export eligible for discharging export obligation on account of EPCG. For more on such doubts over feasibility and comparison with other schemes, please contact us.
• The Notification does not define the terms, ‘jobbing’. However, a circular no. 18/ 2004 dated 20 February 2004 has clarified that the field formations should take a broad view of the definition of the jobbing. Further, it is clarified that the definition of the erm jobbing may be derived from the scope of the term” jobwork” clarified by the Hon. Supreme Court in Para 17 of the judgement in the case of prestige engineering (I) Ltd. Vs. CCE Meerut. It is also clarified that the use of indigenous materials in the jobbing work will not take the process undertaken out of the “jobwork” in jobbing.
• Wastage generated during the process of jobwork as per SION and where SION is not prescribed then such wastage can be disposed of in the manner specified by the jurisdictional Customs AC/ DC.

Coverage:

• Raw materials
• Components
• Parts
• Packing material
• Hangers for garments
• Patterns
• Drawings
• Jigs
• Tools
• Fixtures
• Moulds
• Tackles
• Intermediates
• Semifinished goods
• Consumables
• Instruments
• Computer hardware and software

Extent of exemption:

• Basic customs duty
• Additional duty of Customs leviable in terms of Section 3 of the Customs Tariff Act, 1975 in lieu of Central Excise duty, State Excise duty and value added tax.
• Exemption from AIDC, IGST, SWS, ADD, etc. is not provided for in the said Notification. Notification 11/2021 dated 1 February 2021 exempts specified goods and such notification under which imports are exempt from BCD as exempt from AIDC. Notification 11/ 2021 does not specify Notification 32 of 1997.
• IGST is not exempt and the same can be availed as ITC. However, the GST authorities may raise question on ITC availment of IGST owing to the FoC nature of the import
• Though exemption from SWS is not provided for in the Jobbing Notification, CBIC Circular no. 3/22 dated 1 February 2022 provids de facto exemption in line with BCD payable
• Exemption from ADD is not provided for the imports under Notification 32 of 1997. Since the imports are for export purpose the levy of ADD can be represented against on case-to-case basis. Such a representation can be made when the ADD investigation is in progress.

Limitations under the jobbing provision:

• Exemption from IGST is not provided for in the said Notification. GST authorities may raise objection to ITC availment of IGST paid on such FoC imports
• Notification 32/1997-Customs, dated 1 April 1997 does not override the restrictions imposed by the FTP. For e.g., if the imported product is timber log and the export product is sawn timber, such exports will also be subject to the restrictions under the Foreign Trade Policy which includes a condition that the value addition of exports shall be not less than 30%. If the value addition is less than 30% or if any of the other conditions are not fulfilled, sawn timber cannot be exported legally. Restrictions like this one under the FTP framed under the Foreign Trade (Development and Regulation) Act, 1992 do not get modified by the Customs exemption notification.

• If the project involves substantial import of capital goods other than mentioned above (i.e. not entitled for exemption under this notification) then this notification may not be viable as availing EPCG for the disentitled capital goods may not be possible considering the fact that labour/ job charges is the only value representing export eligible for discharging export obligation on account of EPCG

Optitax’s offering:

• Assistance in feasibility check vis-à-vis other schemes like AA, EPCG, DBK-AIR, DBK-(S)BR, MOOWR, etc.
• Port and bond registration
• Follow-up and representation with authorities