Customs Duties

AMITY BUSINESS SCHOOL

Foreign Trade Procedures Assignmnet

On

INDIA ” “STRUCTURE OF IMPORT TARRIFS/DUTIES IN INDIA”

Submitted To:-

Submitted By-

Prof.Bandana Chadha

Supreet Kaur Sandhu MBA-G C-56

STRUCTURE OF IMPORT TARRIFS/DUTIES IN INDIA

Customs Duties (Import Duty and Export Tax)

Export duties are levied occasionally to mop up excess profitability in international prices of  goods in respect of which domestic prices may be low at the given time. But the sweep of import duties is quite wide. Import duties are generally of the following types:Basic Duty :- it may be at the standard rate or, in the case of import from some other countries, at the preferential rate. Additional customs duty :- equal to central excise duty leviable on like goods produced or  manufactured in India. Additional duty is commonly referred to as Countervailing duty or  C.V.D. It is payable only if the imported article is such as, if produced in India, its process of   production would amount to 'manufacture' as per the definition in Central Excise Act,1944. Exemption from excise duty has the effect of exempting additional duty of customs.

Additional duty is calculated on a value base of aggregate of value of the goods including landing charges and basic customs duty. Other duties like anti-dumping duty, safeguard duty etc are not taken into account. In case of goods covered by provisions of the Standards of Weights and Measures Act,1976, the value base would be the retail sale price declared on the package of  the goods less the rebate as notified under the Central Excise Act,1944 for such goods True Countervailing duty or additional duty of customs :- is levied to offset the disadvantage to like Indian goods due to high excise duty on their inputs. It is levied to provide a level playing field to indigenous goods which have to bear various internal taxes. Value base for this additional duty would be as in the case of C.V.D, under Customs Tariff Act,1975 minus the retail sale price provision. This additional duty will not be included in the assessable value for levy of  education cess on imported goods. Manufacturers will be able to take credit of this additional duty for payment of excise duty on their finished products. Anti-dumping Duty/ Safeguard Duty :- for import of specified goods with a view to protecting domestic industry from unfair injury. It would not apply to goods imported by a 100% EOU (Export Oriented Units) and units in FTZ (Free Trade Zones) and SEZ (Special Economic Zones). On export of goods, anti-dumping duty is rebatable only by way of a special brand rate of drawback. Safeguard duties do not require the finding of unfair trade practice such as dumping or subsidy on the part of exporting countries but they must not discriminate between imports from different countries. Safeguard action is resorted to only if it has been established that a sudden increase in imports has caused or threatens to cause serious injury to the domestic industry. Education cess :- at the prescribed rate is levied as a percentage of aggregate duties of customs. If goods are fully exempted from duty or are chargeable to nill duty or are cleared without

 payment of duty under prescribed procedure such as clearance under bond, no cess would be levied.

Classification of Goods and the Rates of Customs Duty

All goods must be classified into groups and sub-groups in order to levy the customs duty. The Customs Tariff Act 1975, gives the classification of goods and accordingly specifies the rate of duty. The act contains two schedules:

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Schedule 1 classifies the goods for import and prescribes the rate of import duties. It specifies the various categories of import items in a systematic and in accordance with an international scheme of classification of internationally traded goods  –  termed as „harmonized system of commodity classification'. Schedule 2 classifies the goods for export and prescribes the rate of export duties.

In addition, the Customs Tariff Act makes provisions for duties like additional duty(CVD),  preferential duty, anti-dumping duty, protective duties,etc. The duties are levied both on specific and ad-valorem basis, while there are few cases where at times specific-cum-ad valorem duties are also collected on imported items. Where ad-valorem duties (i.e. duties with reference to value) are collected, which are the predominant mode of levy, the value of the goods has to be determined for customs duty purposes as per provisions laid down under the Customs Act and the Customs Valuation (determination of prices of imports goods) Rules, 1988 issued thereunder. These provisions are essentially adoption of GATT based valuation system and followed internationally (now termed WTO Valuation Agreement). The importer as well as the assessing officer has to carefully study and apply these provisions so that the duties as due after proper valuation as per law get discharged before the goods get out of  customs control.

IMPORT DUTY STRUCTURE

The imported goods are levied with a Basic Customs Duty (BCD) on the assessable value. On the value thus arrived (after adding the BCD) an additional duty or Countervailing Duty (CVD), equivalent to the excise duty on like products (to countervail the same) is levied. Further an Additional CVD of 4% is charged to countervail the sales tax in India. A cess of 3% is charged on all the duties. In addition other duties like anti dumping, safe guard duties are applicable in specific cases. The duties normally are ad-valorem, but in some cases even specific duties are livable.

Goods / Raw Materials

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 Normally a BCD of 10% is charged along with a CVD of 10.3% and ACVD of 4%. This works out to a total of 26.849% The duties (BCD) on the agricultural goods are 30%. In some cases however they may be up-to 85%. For alcohols and spirits duties up to Rs. 150 per liter are levied. For minerals normal duty are 10%, 5%, 2%, NIL The duty on the textile fabrics is with floor value on per sq. m basis depending upon the kind of and weight of the fabric.

Capital Goods

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Capital Goods, machinery, equipments mostly covered under chapter 84 and 85 normally attract duty of 7.5% + CVD and ACVD. This works out to a total of 23.895%. Duties are lesser for computers & and computer parts and telecom related products under IT agreement. The duties are further reduced by exemption notifications based on the usage of goods for specified purposes and for specified industries.

Project Imports:

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Project Imports enjoy duties of 5% plus CVD, ACVD

Import Procedures

For clearance of import goods, the importer or his agents have to undertake the following formalities:Bill of Entry

It is a document certifying that the goods of specified description and value are entering into the country from abroad. If the goods are cleared through the (Electronic Data Interchange) EDI system no formal Bill of  Entry is filed as it is generated in the computer system, but the importer is required to file a cargo declaration having prescribed particulars required for processing of the entry for customs clearance. The Bill of entry, where filed, is to be submitted in a set, different copies meant for d ifferent

 purposes and also given different colour schemes. Bill of Entry are of three types :

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Bill of Entry for home consumption: is to be submitted when the imported goods are to  be cleared on payment of full duty for consumption of the goods in India. It is white colored. Bill of Entry for Warehouses : is to be submitted when the imported goods are not required immediately by the importer but here they a re to be stored in a warehouse without payment of duty under a bond and cleared later when required on payment of  duty. Bill of Entry for Ex-Bond Clearance : is used for clearing goods from the warehouse on  payment of duty. The goods are classified and valued at the time of clearance from the Customs Port. Value and classification are not determined on such Bill of Entry. In the non-EDI system along with the bill of entry filed b y the importer or his representative the following documents are also generally required:      

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Signed invoice Packing list Bill of Lading or Delivery Order/Airway Bill GATT declaration form duly filled in Importers declaration License wherever necessary Letter of Credit/Bank Draft/wherever necessary

Industrial License, if required Import license Test report in case of chemicals Adhoc exemption order  DEEC Book/DEPB in original Insurance document Catalogue, technical write up, literature in case of machineries, spares or chemicals as may be applicable Separately split up value of spares, compone nts machineries Certificate of Origin, if preferential rate of duty is claimed  No Commission declaration

Green Channel facility

Some major importers have been given the green channel clearance facility. It means clearance of goods is done without routine examination of the goods. They have to make a declaration in the declaration form at the time of filing of bill of entry. The appraisement is done as per normal  procedure except that there would be no physical examination of the goods. Only marks and number are to be checked in such cases. However, in rare cases, if there are specific doubts regarding description or quantity of the goods, ph ysical examination may be ordered.

Valuation

When customs duties are levied at ad-valorem rates, i.e depending upon its value, it becomes essential to lay down the broad guidelines for such valuation to avoid arbitrariness and to ensure that there is uniformity in approach at different customs formations. The Customs Act,1962 lays down the basis for valuation of import & export goods in the country. Provisions for Customs Valuation:

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Tariff value :The Central Government has been empowered to fix values for any product which are called Tariff Values. If tariff values are fixed for any goods, ad valorem duties are to be calculated with reference to such tariff values. The tariff values may be fixed for  any class of imported or export goods having regard to the trend of value of such or like goods and the same has to be notified in the official gazette.

When no tariff values are fixed:

In case of exported goods, provisions of sub-section (1) of Section 14 provide a complete code of valuation. For valuation of Export goods the criteria specified in the section is fully applicable and normally "FOB" i.e. Free on Board value is considered after excluding cost of international insurance and freight. According to the section, the value of the good shall be deemed to be:-

Price at which such or like goods are ordinarily sold or offered for sale. Price for delivery at the time of importation and exportation. The price at o the time and place of importation must be considered for determining the customs value. All expenses upto the destination of goods including freight, transit insurance, unloading and handling charges are to be considered. Price should be in the course of international trade. o Seller and buyer should have no interest in the business of each other. o Price should be the sole consideration for sale o r offer for sale. o Rate of exchange as on the date of presentation of bill of entry as fixed by o the Central Government must be considered. Foreign Exchange rate as applicable at the time of presentation of the bill of entry as prescribed by the central government must be considered. This rate may or may not be the market rate prevailing on that date. The relevant date for determining foreign exchange rate is the date of presentation bill of entry. In case of imported goods , the valuation is done according to the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. The Customs Valuation rules, follow the WTO Customs Valuation Agreement. According to the rules, the value o imported goods shall be the "transaction value" i.e. the price actually paid or payable for  the goods when they are sold for export to India, after adjustment by valuation factors o

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and subjected to:

Compliance with valuation conditions

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Customs authorities being satisfied with the truth and accuracy of the decla red value