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Former Member
Dec 08, 2008 at 10:12 AM

subcontracting

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Hi Gurus,

Here is an exploration required on subcontracting. We start with a case where we send a material A for subcontracting to make the material B. Let us say 100 kg of A is required for making 80 kg of B.

In this subcontracting process, the material A undergoes a heat treatment and loses its moisture.

Now I create a purchase order for B with item catagoy L. I create a transfer posting with movement type 541. I create a subcontracting challan as well. I take a goods receipt agaist a purchase order. Here I am to book the consumption of A.

My question is when I send 100 kgs of an excisable material A and I receive 80 kg of B. Will I have to reverse the cenvat credit for 20 kg ? If yes, will I have to book consumption at GR of 80 kg of A

and will have to reverse cenvat for remaining 20 kg at subcontracting vendor?

Views are welcome.

regards,

Pradeep Bhandari