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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