Set up subcontracting for India

Business Central has included Subcontracting Feature to Indian Localization.

Subcontracting process is common in manufacturing organizations. Organizations adopt the job work process due to their capacity constraints, lack of resources or due to machine breakdowns. In Subcontracting, a delivery challan is used to send the raw items to the subcontractor from the company. With some value addition by the subcontractor, the finished items are sent back to the company.

While receiving the finished items in the company against a subcontracting order, it's mandatory to apply received material against the delivery challan to knock off the raw items at subcontractor end.

As far as the costing of finished item is concerned, it consists of raw material cost, subcontracting cost along with the other charges such as freight etc.

For taxable components subject to a job work return period, the functionality supports creating GST liability for overdue delivery challans and adjusting it when materials are received. Configure the return period and tax treatment for your applicable requirements. Liability creation is a separate action, not an automatic result of the period expiring.

Multiple subcontracting orders

Subcontracting feature also enables you to send the raw items to subcontracting vendor for multiple subcontracting orders against a single Delivery Challan. Delivery Challan shows the details of all subcontracting orders for which the raw material components have been sent to subcontracting vendor.

Stock register for job work

Stock register for job work gives the details of delivery challan sent to the subcontractor. This register shows all the transaction against a delivery challan and at any movement it also shows the status of delivery challan along with GST liability if any.

Subcontracting setup

Following setups are required for Subcontracting:

Subcontracting location setup

You need to create a setup for subcontracting location. Raw item needs to be transferred from company location to subcontracting location.

[!INCLUDE [open-search](../../includes/open-search.md)] Enter Locations, and then choose the related link.
On the Tax Information FastTab, enable the boolean in the Subcontracting Location field to make this location as a Subcontracting Location.

Set up subcontracting vendor

You need to set up a vendor as a subcontractor. Same vendor can be the prime vendor and a subcontracting vendor. Each subcontracting vendor needs to be attached with the subcontracting location.

[!INCLUDE [open-search](../../includes/open-search.md)] Enter Vendors, and then choose the related link.
On the Tax Information FastTab, enable the boolean in the Subcontractor field to make this vendor as a Subcontractor.
Select the subcontracting location by clicking on Vendor Location look up field.
Enter Commissioner's Permission No. if required for your process. This value is copied to the delivery challan.

Set up subcontracting item

The finished item needs to be identified as a subcontracting item.

[!INCLUDE [open-search](../../includes/open-search.md)] Enter Items, and then choose the related link.
On the Cost & Posting FastTab, enable the boolean in the Subcontracting field to make this Item as a subcontracting item.
Select the subcontracting location by clicking on Sub. Comp. Location look up field. This is the location from where you send the raw material to the subcontractor.

Set up job work return period

Set the return period used to calculate the last return date on delivery challan lines. Review overdue eligible lines on Create GST Liability.

[!INCLUDE [open-search](../../includes/open-search.md)] Enter Inventory Setup, and then choose the related link.
On the Numbering FastTab, enter the return period for which you want to create GST liability in the Job Work Return Period field.
Select the Sub. Component Location from lookup list. This sub component location is used to transfer the raw items to the subcontracting location through delivery challan.

Set up source code

As per statutory requirement, you need to define the source code in the source code setup window. This source code is mandatory if subcontractor doesn't Return the item within job work Return period, then to create the GST liability. Source code is also required if any subcontracting item is received after the job work Return period.

[!INCLUDE [open-search](../../includes/open-search.md)] Enter Source Code Setup, and then choose the related link.
On the General FastTab, select Source code in the GST Receipt – Job Work field.
Select Source code in the GST Liability – Job Work field.

Set up general ledger setup

Set up the interim account used when posting subcontracting GST liability.

[!INCLUDE [open-search](../../includes/open-search.md)] Enter General Ledger Setup, and then choose the related link.
On the Tax Information FastTab, specify Sub-Con Interim Account. Liability posting requires this account.

Set up work center

You need to set up the work center for the subcontracting vendor. On the work center, you can also set up the unit cost of job work.

[!INCLUDE [open-search](../../includes/open-search.md)] Enter Work Centers, and then choose the related link.
On the Posting tab, select subcontracting vendor in the Subcontractor No. field.

Set up routing

You need to create a Routing for finished item. Routing defines the sequence of the operations required to manufacture the finished item.

[!INCLUDE [open-search](../../includes/open-search.md)] Enter Routings, and then choose the related link.
On the Lines tab, select subcontracting work center no. in the Work Center No. field.
On the Lines tab, enter the job work charges in the Unit Cost Per field.

GST liability no series setup

No. series for GST liability invoice is set up on location master. You can define location wise number series for GST liability invoices.

[!INCLUDE [open-search](../../includes/open-search.md)] Enter Locations, and then choose the related link.
On the Tax Information FastTab, select the number series in GST Liability Invoice.

Subcontracting Transactions

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