Meaning of Semi-finished goods

What is Semi-finished goods, relevance of semi-finished goods in GST

 

This post explains about Semi-finished goods and relevance of semi-finished goods in GST.

Semi-finished goods

semi-finished goods are goods, such as partly finished goods, used as inputs in the production of other goods including final goods. A firm may make and then use intermediate goods, or make and then sell, or buy then use them.

Semi-finished goods are also called Intermediate goods or producer goods 

semi-finished products are goods, such as partly finished goods, used as inputs in the production of other goods including final goods. A firm may make and then use intermediate goods, or make and then sell, or buy then use them. In the production process, intermediate goods either become part of the final product, or are changed beyond recognition in the process.

Intermediate goods are not counted in a country's GDP, as that would mean double counting, as the final product only should be counted, and the value of the intermediate good is included in the value of the final good.

The use of the term "intermediate goods" can be slightly misleading, since in advanced economies about half of the value of intermediate inputs consist of services.

Examples of semi-finished goods

  • Steel – a raw material used in the production of many other goods, such as bicycles
  • Car engines - Some firms make and use their own, others buy them from other producers as an intermediate good, then use them in their own car
  • Paint, plywood, pipe and tube, and ancillary parts

 

Relevance of Semi-finished goods in GST

  1. As per Composition Rules, the person who wants to pay tax under Composition Scheme has to file FORM GST ITC-3 for within 60 days to identify and pay the amount of ITC to be reversed on the closing stock of finished goods, capital goods or inputs, semi-finished goods on which input tax credit has be availed.

 

  1. No Tax shall be payable by the manufactures or job worker if inputs or semi-finished goods are sent to job worker in accordance of the provisions of the earlier law before the appointed date.

 

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