Manufacturing
The tax and finance issues that arise in auto component, engineering, pharmaceutical, food processing, electrical and chemical plants, and the work we carry out on them from Nashik.
Last reviewed 3 October 2026
Most of our work is for manufacturers. The principal has spent more than 40 years in industry, much of that time with manufacturing groups, working on their taxation, GST, transfer pricing, costing and group-company accounts.
In a factory, tax and finance problems usually start on the shop floor. Material sent to a job worker is not tracked, or consumption drifts away from the bill of materials. The bank, the books and the GST returns may each count stock differently, and invoices between group companies are sometimes priced for convenience. By the time a notice or a stock audit arrives, the cause is often several months old, and the interest has been running since.
This page sets out the issues we see in six sectors and how we work on them, and it shows where they connect. Separate pages treat auto components, engineering, pharmaceuticals, food processing, wine, agriculture and exporters. The page describes types of work and names no clients.
The issues, sector by sector
Most manufacturing in Satpur, Ambad, Sinnar and the surrounding belts falls within six sectors. The issues differ by sector, although the cost of neglecting them is usually of one kind: interest on a GST or income tax demand raised two or three years after the event. The notes below describe the law as it stands at 1 October 2026. They are general and should not be read as advice on your facts.
Auto and auto components
See also the auto components page. Machining, forging, sheet metal, castings and assemblies are supplied to vehicle makers and their tier-one suppliers. Four issues dominate. Price revisions: annual price-downs and retrospective revisions arrive months after dispatch. Each one needs a credit or debit note under section 34 of the CGST Act, issued within its time limit, and the customer must make a matching adjustment to its credit. The Finance Act, 2026 changes the conditions for post-sale discounts in section 15(3)(b) and section 34; until the Government notifies the date, the old conditions apply. Customer-owned tooling: the value of moulds and dies that an OEM provides free of cost is excluded from the value of the parts, unless the contract made the tooling the supplier's own cost (CBIC Circular 47/21/2018-GST). Job work in both directions falls under section 143 of the CGST Act, with its one-year and three-year limits. Scrap: turnings, borings and runners are sold every month. Tax is collected at source on scrap sales under section 394(1) of the Income-tax Act, 2025 (section 206C(1) of the 1961 Act), and the Finance Act, 2026 set the rate at 2% from 1 April 2026. Customers often pay in 60 to 90 days, although micro and small suppliers must be paid within 45.
Engineering
See also the engineering page. The sector covers fabrication, special-purpose machines, pumps and valves, with heat treatment, plating and general machining. A large part of the work is job work. Since 22 September 2025, most engineering job work has carried GST at 18%, so the rate on each process should be checked against the notified entry; old invoices are not a reliable guide. Material sent to a job worker in another state needs an e-way bill whatever its value. Machine builders deal with advances, milestone billing and retention money that may be held for a year or more. They must also decide when revenue and GST arise on a machine that has been dispatched but not yet commissioned.
Pharmaceuticals
See also the pharmaceuticals page. Formulations, bulk drugs and contract manufacturing. Loan licence and third-party manufacturing divide one product between two businesses. The contract decides who owns the material and who bears the loss, and it governs what each invoice should carry. Exports run under a Letter of Undertaking with refunds of unused credit, and a slow refund holds working capital. A related party abroad brings transfer pricing documentation and the accountant's report each year. Free samples: credit on goods given away as free samples is blocked by section 17(5)(h) of the CGST Act. In Apex Laboratories (2022), the Supreme Court held that gifts to doctors given in breach of medical council regulations are not deductible business expenditure.
Food processing
See also the food processing and wine pages. Grape, onion, dairy, fruit and vegetable processing, cold storage and wineries operate in Dindori, Niphad and Vinchur. GST rates on many food products changed on 22 September 2025, and classification needs checking product by product. Farmers supply raw material in a short season, which leaves large stocks, pledge or seasonal limits from the bank, and valuation questions at the year end. A winery sells alcoholic liquor for human consumption, which is outside GST and subject to State excise; credit on common inputs and services must therefore be split between taxable and non-GST supplies. Where tax on inputs is higher than tax on output, a refund of the accumulated credit may be available.
Electrical and electronics
Switchgear, panels, motors, transformers, controllers and electronic assemblies. Many components are imported, so customs duty, IGST on imports and the credit for that IGST form part of the cost of every product. Project supplies to utilities and EPC contractors involve milestone billing and retention money, and liquidated damages may apply. Warranties need a provision based on actual claim history. For income tax, that provision follows the accounting only where it is reliably estimated from past experience (Rotork Controls, Supreme Court, 2009).
Chemicals
Speciality and bulk chemicals, intermediates, paints and resins. One process often yields a main product and one or more by-products, and the joint cost has to be divided between them on a defensible basis for costing and for stock valuation. Raw material prices move with crude and with imports, so the year-end stock valuation can shift the reported margin by a large amount. Sales of spent solvents, waste and scrap need the correct classification, and tax is collected at source on scrap. Export-oriented units add refunds and, often, a foreign related party.
How we work with manufacturers
Work begins at the record where the problem arose. In most factories that is the stock register or the job-work challans; elsewhere it is the cost sheet, or the invoices between group companies.
GST and job work
We track job-work material and prepare ITC-04, keeping credit in the correct unit. Transfers between registrations are valued under the rules, and notices receive written replies. See GST.
Costing
Cost sheets are rebuilt from the bill of materials, the routing and actual rejection, so that a price-down negotiation starts from a figure the plant can support. See manufacturing finance.
Stock, working capital and the bank
Inventory is valued and physical counts are reconciled to the books, and stock statements are prepared to agree with the accounts. Projections and CMA data for renewals are also prepared.
Income tax for the business and its owners
Year-end tax computation, the MSME payment rule, tax collected and deducted at source, assessments and notices. See taxation.
Groups with a foreign link
For exporters and for Indian subsidiaries of foreign companies, we set arm's length prices, prepare the documentation and issue the accountant's report. See transfer pricing.
MIS
MIS by product, customer and plant, drawn from the books. See business advisory.
Where the issues meet
In most factories these issues are connected. A price-down alters the cost sheet and the credit note together, and the customer's credit and the year-end stock value move with them. If a job worker holds material beyond the time limit, a stock discrepancy becomes a GST demand with interest. A sister company that buys at a convenient price affects both income tax and GST valuation, and the bank may then assess the two companies differently. Our work keeps the records and returns consistent with the accounts.
Much of this work is done at the factory, with the staff who keep the stores, production and dispatch records. We visit clients in Nashik district. For clients elsewhere in Maharashtra, whom we serve from our Nashik office, visits are planned around the work, as described on the Maharashtra page.
Where we are a company's statutory auditor, section 144 of the Companies Act, 2013 does not allow us to keep its books, run its internal audit or provide management services to it, or to its holding or subsidiary company. Other work for that company, such as tax, GST and transfer pricing, needs the approval of its board or audit committee.
Common questions
Our customer has revised prices for the last two quarters. What do we need to do?
Credit notes or supplementary invoices are issued under section 34 of the CGST Act against the affected invoices, within the time limit. The customer must adjust its credit to match. The revision also alters the cost sheet and may alter the value of stock on hand.
Our OEM has given us moulds free of cost. Do we add their value to our invoices?
Their value is excluded if the moulds belong to the OEM and the contract does not make them your cost, as stated in CBIC Circular 47/21/2018-GST. If the contract made the tooling your cost and the OEM supplied it anyway, its amortised cost is added.
We sell machining scrap every month. What do we need to watch?
Tax must be collected at source on scrap sales under section 394(1) of the Income-tax Act, 2025 (section 206C(1) of the 1961 Act), and deposited and reported on time. GST is charged on the scrap at the rate for its classification. The quantity sold should agree with the scrap that production records show as generated, because a stock auditor or a GST officer will ask about any gap at an early stage.
We have plants in Maharashtra and Gujarat. How should common costs be handled?
Each plant holds its own GST registration and is a distinct person. Credit on services used by both plants, such as head-office costs or shared software, has to be distributed through an Input Service Distributor registration, which has been compulsory since 1 April 2025. Material moved between the plants is a supply and must be invoiced and valued under the rules for distinct persons.
Do you work only with large manufacturers?
Many of the businesses we work with are owner-managed units with one or two plants and an in-house accountant. The issues described on this page arise at every size.
Other industries: Auto components, Engineering, Pharmaceuticals, Food processing, Wine, Agriculture and agri-business, Exporters, Traders and distributors, Family businesses
Where we work: Chartered Accountants in Nashik, Chartered Accountants for businesses across Maharashtra, Chartered Accountants for businesses in Satpur, Chartered Accountants for businesses in Ambad, Chartered Accountants for businesses in Sinnar, Chartered Accountants for businesses in Pune, Chartered Accountants for businesses in Chhatrapati Sambhajinagar