Customs Procedures

Power to Levy

As per Entry 83 -list I of Indian Constitution

Customs duty is an indirect tax and levied on import into India and export out of India

Customs is Governed by

•Customs Act•Customs tariff Act•Customs Rules•Notification & Circulars•Customs manual

Customs Act, 1962• to regulate imports and exports• To protect Indian Industry from

dumping• To collect revenue

Customs Tariff Act, 1975Consists of Two SchedulesSch I for import & Sch II for Export

Some Important Definition

• Goods :- includes▫Vessels, aircrafts & vehicles▫Stores , baggage , currency and negotiable

instruments and other kinds of movable properties

• Dutiable Goods:- goods on which duty payable before custom clearance. Following is not dutiable goods▫ If any goods assessed at “Nil”▫ If duty rate is “free”

Some Important Definition

• Imported Goods:- goods brought in India from a place outside India.

• Export Goods:-▫Any goods which are to be taken out of

India to a place outside India▫Goods at port for export purpose “export

goods”▫Crossing of territorial water by goods

result in to loss of control by India law so Indian provisions cannot confiscate the same

Duty Levied

•Basic customs duty – u/s 12•Additional customs duty – Counter

balance the excise duty•Special Additional Duty –Counter balance

the VAT•Productive duty•Safeguard duty•Anti Dumping duty•Cess

Example

Goods Value = 200000, Basic Customs Duty= 10%, Additional Duty = 8%, CVD = 4%, Educational Cess Payable, Calculate the duty

Answer:

A Value 200000

B Basic duty 10% 20000

C Additional duty 8% on (A+B) 17600

D Cess for AD (2+1) 3% on C 528 18128

E Cess (2+1) 3% on (B+C+D) 1144

F CVD 4% on (A+B+C+D+E) 9571

Total duty payable 48843

The Customs Tariff Act, 1975

First Schedule

Liable to import duty

Second Schedule

Liable to export duty

Classification

Assessable Value

Tariff value not fixed by board

14(1) Transaction Value read with Valuation rules

Tariff value fixed by board

14 (2) Tariff value Fixed by Board

Ad valorem

Specific duty

Valuation

Value of Imported good

Rule 3(1)- Value shall be the transaction Value of

Imported goods adjusted with rule 10 (sub to Rule 12)

Rule 3(3) Even where the buyer & seller are related the

transaction value is accepted if the relationship did not

influence the price

Rule 3(4)Transaction Value is not Accepted

Rule 3(2) Transaction Value is acceptable if

1.There are no restriction to use2.No condition on Sale or price 3. No benefit to seller after sale4.Buyer & Seller Not Related

-Goods Same in all respect including physical Characteristics, quality and reputation (except minor difference that do not affect the Value)

-Should be produced the country in which the goods being imported-should be produced by the same manufacturer-Difference in Quantity/ Commercial factors to be adjusted

Rule 6 Value not determined in

Rule3,4 & 5 Go rule 7 or 8

Rule 5 Transaction Value Of Similar

goods

Rule 4 Transaction Value Of Identical

goods

Value of Imported good

Re-Sale price in India, Deductions for commission, transport, insurance and associated costs in India, duties and taxes on import / sale. Where there is manufacture and sale, deduction for value addition shall be given. Sale must happen within 90 days

Rule 7 Deductive value

Rule 8 Computed Value

Value shall consist of the sum of(a)cost or value of materials and

fabrication or other processing employed in producing the imported goods.

(b) profit and general expenses in respect of goods of same class.

(c) transportation, loading and insurance

Value of Imported good

Value of Imported good

RULE 9 – RESIDUAL METHOD Where value cannot be determined under the preceding rules, it shall be determined using reasonable means consistently the principles and general provisions of these rules and on the basis of data available.

RULE 10 – COST AND SERVICESShall be added to price paid or payable-Commissions and brokerage other than buying commission- Cost of packing- Cost of containers Goods and services supplied free of costs by the buyer or at a concessional rate.-Royalties & License fees-Cost of transport, Loading, unloading and handling charges & Insurance

Value of Exported good

Format similar to that of import valuation rules

Rule 2 provides definition for ‘Goods of like kind and quality’ ‘Transaction Value’ and ‘ Related Persons.

Rule 3 – Transaction Value Method subject to Rule 8 (Rejection of Declared Value)

Rule 4, 5 & 6 are alternative methods of valuation.

Rule 4 - Comparison Method - Main Elements.Comparison with ‘Transaction Value’ of goods of like kind and quality.Exported at or about the same time.To other buyer in same destination country.To other buyer in another destination subject to certain adjustments

Value of Exported good Rule 5 - Computed Value Method

Cost of Production / processing.Charge for the Design or Brand & Profit

Rule 6 - Residual Method using reasonable means

Rule 7 - Format of Declaration.

Rule 8 - Rejection of Declared Value.Counterpart of Rule 10A.

Relevant Date for Rate & Valuation

• On the Date on which the Bill of entry for home consumption is presented

Goods Entered for Home Consumption under 46

• On the Date on which the Bill of entry for home consumption is presented

Goods cleared for warehouse under Section 68

• On the date of payment of Duty

Other Cases

Relevant Date for Rate & Valuation

• Date on permitting the clearance & Loading of Goods

Goods Entered for Export Section 50

• Date on which the declaration is made in respect of such baggage u/s 77

Clearance of baggage Section 78

• Date on which the postal authorities present to the customs

Import Through Post Section 83

Relevant Date for Rate & Valuation

• Rate of Exchange notified by CBEC

Foreign Exchange Rate

Export Procedures

An export of a good occurs when there is a change of ownership

exporter has to submit ‘shipping bill’ for export by sea or air and ‘bill of export’ for export by road.

Relevant documents i.e. copies of packing list, invoices, export contract, letter of credit etc. are also to be submitted.

Export Procedures

DECLARATIONDeclaration in case of export of goods under

claim for drawback.

Declaration in case of export of goods under scheme.

Declaration in case of export of goods in anticipation of issue of advance license.

Export Procedures

DOCUMENTS- Four copies of commercial invoice.- Four copies of packing list.- Certificate of origin.- Insurance policy- Letter of credit.- Declaration of value.- GR/SDF form prescribed by RBI in

duplicate

Export Procedures

BILL OF LADING- As a document of title, it is a

certificate of ownership that allows a holder or consignee to claim the merchandise described.

- As a receipt of goods, it is issued by the carrier to the shipper for goods entrusted to the carrier’s care for transportation.

Import Procedures

• Goods are imported in India through sea, air or land.

• Goods can come through post parcel or as baggage with passengers.

Import Procedures

 IMPORT PROCEDURE :• Introduction• Bill of Entry• Amendment of Bill of Entry• Payment of Duty• Prior Entry for Shipping Bill or Bill of

Entry• Specialized Schemes• Bill of Entry for Bond/Warehousing

Import Procedures

Introduction : All goods imported into India have to

pass through the procedure of customs for proper examination, appraisal, assessment and evaluation.

This helps the custom authorities to charge the proper tax and also check the goods against the illegal import. Also it is important to note that no import is allowed in India if the importer doesn’t have the IEC number issued by the DFGT.

Import Procedures

 Bill of Entry : A Bill of Entry also known as Shipment Bill,

is a statement of the nature and value of goods to be imported or exported, prepared by the shipper and presented to a custom house.

Amendment of Bill of Entry : Whenever mistakes are noticed after

submission of documents, amendments to the bill of entry is carried out with the approval of Deputy/Assistant Commissioner.

Import Procedures Required Documents :- Signed invoice - Packing list- Bill of Lading or Delivery Order/Airway Bill- Letter of Credit/Bank Draft/wherever necessary- Insurance document- Import license, Industrial License, if required- Test report in case of chemicals- Adhoc exemption order- Catalogue, Technical write up, Literature in case

of machineries, spares or chemicals as may be applicable

- Separately split up value of spares, components machineries

- Certificate of Origin, if preferential rate of duty is claimed

Import Procedures

Payment of Customs Duty : The duty can be debited to such current

account, or it can be paid in cash/DD through TR-6 challan in designated banks.

Prior Entry for Shipping Bill or Bill of Entry :

For faster clearance of the goods, provision has been made in section 46 of the Act, to allow filing of bill of entry prior to arrival of goods. This bill of entry is valid if vessel /aircraft carrying the goods arrive within 30 days from the date of presentation of bill of entry.

Import Procedures

•  Specialized Schemes : Import of goods under specialized

scheme, DEEC, EOU etc , required to execute bonds with the custom authorities.

• Bill of Entry for Bond/Warehousing: A separate form of bill of entry is used

for clearance of goods for warehousing.

Import Procedures

 ASSESSMENT OF IMPORT DUTY AND CLEARANCE :

Noting of Bill of Entry :- Bill of Entry submitted by importer or Customs

House Agent is cross-checked with ‘Import Manifest’ submitted by person in charge of vessel / carrier.

Appraising The Goods :- Appraiser has to (a) correctly classify the

goods (b) decide the Value for purpose of Customs duty (c) find out rate of duty applicable as per any exemption notification and, (d)verify that goods are not imported in violation of any law.

Import Procedures

 VALUATION OF GOODS :- As per rule 10 of Customs Valuation

Rules, the importer has to file declaration about full value of goods.

APPROVAL OF ASSESSMENT :- The assessment has to be approved

by Assistant Commissioner,

Import Procedures

 EXAMINATION OF GOODS :- Examiners carry out physical

examination and quantitative checking like weighing, measuring etc. Selected packages are opened and examined on sample basis in ‘Customs Examination Yard’.

Out of Customs Charge Order :- After goods are examined, it is verified

that import is not prohibited and after customs duty is paid, Customs Officer will clear the goods for home consumption.

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