Illustrative scenario · Garment exporter · Material, partners and deadlines
Our costing says 12% margin. Why does the year-end never match?
₹20 lakh for every point of fabric savedIllustrative
Not a client. A worked example of the method, with stated assumptions and public benchmarks. No result is claimed.
The business
A garment exporter in the National Capital Region. About ₹50 crore a year, buying ₹20 crore of fabric. Cut pieces go to a dozen job workers for embroidery, printing and washing.
The owner's question
“Our costing says 12% margin. Why does the year-end never match?”
What's already in the records
- Fabric GRNs
- The cutting register
- Packing lists
- Job-work challans out and in
- Costing sheets
What I'd join
- Job-work challans out against goods received back, by job worker and lot. This shows material still out, and the loss at each job worker.
- Fabric bought against costed requirement against what was cut and shipped. This gives actual consumption by style and buyer.
What it could show, worked through
The one-year clock. Under Section 143 of the CGST Act, inputs sent for job work that aren't back within a year are treated as supplied on the day they left. The join gives you the list before it becomes a tax question.
the list, before it becomes a tax question
Fabric. A study of eight Delhi-NCR factories found only 82% of fabric bought was used effectively, with buying 17% above the costed requirement. It dates from 2009 and is a small sample. On ₹20 crore of fabric, every percentage point saved is ₹20 lakh.
every percentage point saved is ₹20 lakh
Why it isn't obvious
The costing sheet assumes one consumption, the cutting floor runs another, and the job workers return a third.
The decisions it opens
- Which job workers to keep, and on what loss allowance.
- Buying allowances by buyer and style.
- Regularise old challans now.
What you'd get
- Diagnostic: actual against costed margin by style.
- Sprint: a monthly job-work ageing report.
Sources
- CGST Act, Section 143.
- Methods Apparel Consultancy study, reported by Apparel Resources (2009).
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