MM Sub contracting

[former_member1186946]

This is related to CIN.

I am sending a material to vendor & the vendor is adding few more components to it.The material is received inside the plant.Now the vendor sends an invoice for the material he has added.The vendor considers it as production in his plant.He wants to claim Excise benefit for the same. My company also wants to claim excise benefit.

How to map this scenario?

[binoy_vargis1 · Accepted solution]

Subcontracting as per Indian scenario is exempt from tax until 180 days. In your plant the scenario will be

1) PO with item category L and components inside BOM and subcon charges(Include the amount of materials also if known) as price.

2) Issue components through MB1B with ref. to Subcontracting PO.

3) Subcontracting Challan in J1IF01 with reference to MB1B document.

4) Goods Receipt in MIGO with 101 movement for finish product and 543 for components.

5) Reconciliation of challan in J1IFQ

6) Completion of challan in J1IF13

7) MIRO for Subcontracting charges.

As per my knowledge he can take credit for the raw materials and avail it against his sales.

At the subcontractor end he can take credit of raw materials he has purchased while procuring.

If he has to pass on that credit to you he has to reduce that credit availed by doing J1IS or J1IH-Other adj.

You can use J1IH-Additional entry to add credit in your account.

Regards

Binoy

[former_member192897]

If you procure Subcontracting Components from different / Same Subcontracting vendor then please create a Purchase order for Components and in Purchase order item details in Delivery address tab enter the Subcontracting vendor name and check against "SC vend" option. You can even second line item in the Same Subcontracting purchase order with Standard item category...

Now when you make goods receipt for this Purchase order components will be updated at Subcontractors end. The same can be seen in MBLB or ME2O transaction. Since you are not transferring goods to Subcontractor through 541 movement type, Please create a Subcontracting challan with respect to this 101 O Material document if required..

Movement type 101 O has to be assigned in Subcontracting attributes in CIN configuration for this pupose. Now Create another subcontracting Purchase order with parent material and ensure all the components are maintained correctly.

Could you run this scenario and let us know your findings on the same.

[Former Member]

Hi,

You can create subassembly material instead of raw material. Create BOM with this material and add  your raw material which you want to send to your vendor. then make the subcontracting PO make DC and send the material to vendor. For Example Subassembly material is A and BOM item is B(raw material). Material B will go in DC and when vendor send the material back it will come as A along with addition material with ed bill...

Hope I have answered you question...