Sec 2(72) – Manufacture

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Sec 2(72) – Manufacture 2017-04-14T03:54:54+00:00
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    #1341 |

    “manufacture” means processing of raw material or inputs in any manner that results in emergence of a new product having a distinct name, character and use and the term “manufacturer” shall be construed accordingly;

    Priya MadrechaPriya Madrecha
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    The meaning of the term “manufacture” comes with a great deal of significance in the current indirect tax regime, given that chargeability excise duty relies solely on whether an activity results in manufacture. However, in the GST regime, the triggering taxable event is a “supply” and tax is leviable whether or not the supply followed ‘manufacture’ of goods. Hence, the term loses its significance in the GST regime. However, a definition has been Provided as references to this term are inadvertently essential even in the GST law, listed below:
    •    Composition levy: The composition tax rate in case of manufacturers is different as compared to that of suppliers not being manufacturers (expected cap rate of 2% as against 1%, respectively, being the aggregate of central and State tax/ Union Territory tax). Further, manufacturers of certain notified goods would not be eligible to exercise the option to avail the benefit of composition scheme. Such a restriction is however, not placed on other classes of persons, say traders of the same notified goods.
    •    Concept of deemed exports: One of the pre-conditions for any such supply to qualify as deemed export is that the goods in question must be manufactured in India. Therefore, even where the goods are of the nature that are notified by the Government as goods that qualify as “deemed exports” on meeting certain conditions, if such goods are not manufactured in India (or, any processing performed on any imported goods does not result in manufacture), they cannot enjoy the benefit of the deeming fiction.
    •    Maintenance of accounts: A manufacturer shall be required to maintain a record of production/ manufacture of goods, in addition to recording the details of inward and outward supplies.

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