Indirect Tax - Customs Duty

7/30/2019 Indirect Tax - Customs Duty

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Customs Duty

Export Goods:

Export goods means any goods, which are to be

taken out of India, to a place outside India.

Import Goods:

Imported goods means any goods brought into

India from a place outside India

It excludes goods, which have been cleared forHome Consumption


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Components of Customs Law

Customs Act, 1962

Customs Tariff Act, 1975

a) This Act contains two Schedules

i . Schedule I gives classification and rate of duties for

import of all goods

i i. Schedule I Igives classification and rate of duties

for export of some specified goods.

b) It also provides for Additional Duty, Preferential Duty,

Anti Dumping Duty, Protective Duty, etc.


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Types of Duties

1. Basic Customs Duty u/s 12

2. Additional Customs Duty U/S 3

3. Protective Duty u/s 6

4. Anti-Dumping Duty u/s 9A

5. Safeguard Duty u/s 8B/8C


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1) Basic Customs Duty u/s 12

Basic customs duty is levied u/s 12 of customs

Act. Normally, it is levied as a percentage of

Value as determined u/s 14.


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2) Additional Customs Duty U/S 3( Counter

Vailing Duty - CVD)

Additional Customs Duty is often called Countervailing

Duty(CVD).

This duty is addition to Basic Customs Duty

Rate - Duty is equal to excise duty levied on a like product

manufactured or produced in India.

The duty is leviable on value of goods plus customs dutypayable (Assessable value + Basic Custom Duty)

While calculating CVD Education Cess is not considered.


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2) Additional Customs Duty U/S 3( Counter

Vailing Duty - CVD)

Where there is a concession or exemption under

excise law, the same can be taken into account while

calculating additional duty of customs.

Where a product is exempt from basic customs duty,it does not mean that there is no CVD unless there is

a corresponding exemption under the excise law.

CVD payable even if similar goods not produced in

IndiaAdditional duty is leviable even if like goods

are not produced in India.


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Rate of CVD

Sl. NO. Situation CVD rate is equal to -

1 Like articles produced or

manufactured in India

ED leviable on like article

2 Like articles not produced or

manufactured in India

ED leviable on the class or

description of articles to

which the imported article

belongs.

3 Alcoholic Liquor for human

consumption

Rate notified by the Central

Government


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Board Circular on Calculation of CVD

Example: When CVD u/s 3(1) is leviable (assuming ED Rate @ 10%)

Sl No. Particulars Duty Amount Total Duty

A Assessable Value 10000

B Basic Customs Duty 10 1000 1000

C Sub-Total for calculating CVD (A+B) 11000

D CVD 10 1100 1100

E Education cess of excise2% of D 2 22 22

F SAH Education cess of excise1% of D 1 11 11

G Sub-total for education cess on customs

B+D+E+F

2133

H Edu Cess of Customs2% of G 2 42.66 42.66

I SAH Edu Cess of Customs1% of G 1 21.33 21.33

J Sub-total for Spl CVD C+D+E+F+H+I 12196.99

K Total Duty 2196.99


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Valuation of Imported Goods

Customs duty is payable as a percentage of Value

often called AssessableValue orCustomsValue.

The value ma be either

1. Value (transaction value) as defined in Sec 14(1) of CustomsAct or

2. Tariff value prescribed u/s 14(2) of Customs Act.


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Customs Valuation (Transaction Value) on

basis of transaction value

Section 14(1) of Customs Act states that value ofimported and export goods will be transaction Value

of such goods i.e., price actually paid or payable for

the goods when sold for export to India for delivery at

the time and place of importation, or for export fromIndia for delivery at the time and place of exportation.

Where the buyer and seller of the goods are not

related and price is the sold consideration for the sale,subject to such other conditions as may be specified

in the rules made in this behalf.

Note: Transaction value is not acceptable if buyer and seller

arerelated

.


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Inclusions in Transaction Value (if these are not

already included in the invoice price)

For Imported Goods, Transaction Value includes the

following amounts that the Buyer is liable to pay

1. Price actually paid or payable for the goods when sold for

export to India

2. Amount towards Cost and Services including1. Commissions and Brokerage (except Buying Commission)

2. Assists, Engineering, Design Work,

3. Royalties and License Fees,

3. Cost of Transportation to the place of importation,

4. Packing Cost ( Except durable and re-usable container )

5. Insurance, and

6. Loading, Unloading and Handling Charges.


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Packing cost is includible

Cost of containers which are treated as being part of

goods for customs purposes are addible for valuation

purposes (e.g. cases for camera, necklaces etc.

especially shaped for the article suitable for longterm)

Similarly, cost of packing both labour and material

is to be included

Cost of durable and re-usable containers not to be

added


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Cost of Transport and Insurance

For the purpose of Sec 14(1) of the Customs Act,

1962 and these rules the value of the imported goods

shall be the value of such goods for delivery at the

time and place of importation and shall includeA. The cost of transport of the imported goods to the

place of importation

B. Cost of Insurance

C. Loading, unloading and handling charges associated

with the delivery of the imported goods at the place

of importation provided

Continued


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.. Cost of Transport and Insurance

Where the cost of transport referred to in (A) above is

not ascertainable, such cost shall be 20% of the Free

On Board Value (FOB) of the goods.

Where the cost of insurance referred to in (B) aboveis not ascertainable, such cost shall be 1.125% of the

Free On Board Value

Loading, unloading and handling charges shall be 1%

of [FOB value + cost of transport + Cost of

insurance]


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Cost and Services

Rule 10 of Customs Valuation Rules, 2007 provide that

following cost and services are to be added, if these arenot already included in the invoice price

Commission and brokerage, except buying commission

Buying Commission: Fee paid by an importer to his agent for

the service of representing him abroad in the purchase of thegoods being valued.

Commission to Local Agent: Exporters from abroad often

appoint local agents in India to promote their sales in India.

These agents get commission in Indian Rupees which is paiddirectly by Indian Importer. This commission is includible

for purpose of valuation.

Royalties and license fees related to the imported goods

that the buyer is required to pay, directly or indirectly.


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Exclusions from Transaction Value (if these

are included in the Invoice Price)

1. Charges for construction, erection, assembly,maintenance or technical assistance, undertaken

after importation on imported goods, e.g., industrial

plant, machinery or equipment.

2. Cost of transport after importation,

3. Duties and Taxes in India

4. Dividends or other payments from the Buyer to the

Seller that do not relate to the imported goods.

5. Payment made for activities undertaken by the

Buyer on his own account, other than those for

which an adjustment is provided in Rule 10


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CIF

CIF (cost, insurance, and freight): used by a seller to

indicate that the price quoted includes the cost of the

merchandise, packing, and freight to a specified

destination plus insurance charges. CIF = FOB + Cost + Insurance + Freight


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FOB

Free On Board value is the value excluding cost,

insurance and freight. Or It is cost of equipment

excluding transport and other charges.


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Cenvat Credit of CVD

Cenvat credit is available of CVD paid on imported

goods, if the imported goods are used in

manufacture of final products or for provision of

output service. Cenvat of CVD paid on capital goodsimported is also available I terms of Cenvat Credit

Rules.


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Problem 1

From the following particulars determine the A V of

the imported equipment. FOB cost of equipment 2,00,000yen

Freight Charges 20,000 yen

Insurance paid in India for transportation from JapanRs. 15,000

Charges for development connected to equipment

paid in India Rs. 60000

Commission payable to agent in India Rs. 15000

Exchange rate as per RBI is 1 yen = Rs. 0.45

Exchange rate as per CBEC is 1 yen = Rs. 0.50

Landing charges 1% of CIF cost.


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Indirect Tax - Customs Duty

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