MATHUR SIR CLASSES - HOWRAH | GIRISH PARK

☛ Difference between Direct Tax and Indirect Tax

Basis difference Direct tax Indirect tax
1. Meaning It is levied on a person’s It is levied on transactions of
income purchase / sale / supply on
and wealth and is paid consumers and is paid
directly indirectly to the
to Government. Government.
2. Incidence and impact Falls on the same person. Falls on different persons
( Burden of tax ).
3. Progressiveness It is usually progressive. Indirect taxes are flat.
4. Types Wealth Tax, Income Tax, GST, Customs Duty etc.
Corporate Tax etc.
5. Tax base The basis of the tax here is Indirect tax is imposed on
income, profit, property etc. production, distribution and
consumption of goods and
services.

☛ Objectives of GST
1. GST aims to replace most of the indirect taxes levied on Goods and Services by the Central
and State Government.
2. It intends to ensure input tax credit across value chain.
3. It intends to make a unified tax law to ensure deal of “One nation, One tax”.
4. To subsume a myriad of indirect taxes into a single tax.
5. Avoiding unhealthy competition among the states through un-uniform tax rates.
6. Reduction of administration expenses.

☛ Features of GST
The first country to introduce GST was France in 1954. India is the 161st country in the world
to introduce GST w.e.f. 1st July, 2017 (IGST of India is unique)
Following are the features:
1. Taxable event is supply.
2. It is destination-based consumption tax.
3. Single tax policy – One nation, One tax.
4. This model allows for availing the benefits of Input Tax Credit (ITC)
5. Outward supplies refers to sale of goods / rendering of services.
6. Inward supplies refers to purchase of goods/ capital goods/ availing of services.
7. Ease in compliance as it has a single window.
8. IGST is the most unique feature of the Indian GST model, which makes it different from all
the other 160 countries, which have already implemented GST.

☛ Taxes not likely to be subsumed even after GST

1. State Taxes: a) Road and Passenger Tax
b) Toll Tax
c) Property Tax (Municipal Tax)
d) Stamp Duty
e) Electricity Duty

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2. Central taxes: a) Basic Customs Duty (BCD)

b) Anti-dumping and Safeguard and Duty
c) Export Duty (Some specified goods)

☛ Non–applicability of GST
There are some goods and services that are still outside GST,
1. Alcoholic liquor for human consumption.
2. Petroleum products.( Petrol, Diesel, Petroleum crude, aviation fuel, Natural gas )
3. Tobacco products. ( Excise Duty by central Government )
4. Taxes on newspapers (No GST) and advertisement therein (Space – 5% or 18%)
(w.e.f 23.08.17)

☛ Basic Definitions of GST

1. Aggregate turnover / Net turnover
Under Section 2(6) of CGST Act, aggregate turnover means the aggregate value of all taxable
supplies excluding the value of inward supplies, exempt supplies, exports of goods or
services, inter-state supplies of persons having the same PAN but includes central tax, state
tax, integrated tax and cess.
2. Business [Section 2(17)]
a) Any trade, commerce, manufacture, professions, vocation, adventure, wages or any other
similar activity, whether or not it is for a pecuniary benefit.
b) Any activity or transaction in connection with or incidental or ancillary sub-clause (a)
c) Any activity or transaction in the nature of sub-clause (a), whether or not there is volume,
frequency, continuity or regularity of such transactions.
d) Supply or acquisition of goods including capital goods and services with commencement
or closure of business.
e) Admission for a consideration of persons to any premises.
3. Capital Goods [Section 2(19)]
Under Section 2(19) of the CGST / SGST Act, “Capital Goods” means goods, the value of
which is capitalized in the books of account of the person claiming the Input Tax Credit (ITC)
and which are used or intended to be used in the course of furtherance of Business.
Example:
Machine A/c Dr 10,00,000
CGST A/c Dr 50,000
SGST A/c Dr 50,000
To Vender/ Bank A/c 11,00,000
Example:
Building A/c Dr 11,00,000
To Bank A/ c 11,00,000
4. Casual Taxable Person (CTP) [Section 2(20)]
Section 2 (20) of the CGST Act defines casual taxable person as a person who occasionally
undertakes transactions involving supply of goods or services or both in the course of
furtherance of business, whether as principal, agent or in any other capacity, in a state or
a Union Territory (UT) where he has no fixed place of business.
According to this definition, two important criteria of a casual taxable person are :
i) The transaction is occasional.
ii) The person has no fixed place of Business.

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Note:
a) Registration as a CTP as a casual person is given for a period of 90 days only.
b) By payment of GST in advance.
5. Goods [Section 2(52)]
Goods means every kind of movable property other than money and securities and include,
a) Every kind of movable property.
b) Actionable claims (i.e., Debenture)
c) Growing crops, grass and things attached to or forming part of the land which are agreed
to be severed before supply or under a contract of supply.
6. Input [Section 2(59)]
Input means any goods other than capital goods used or intended to be used by a supplier
in the course of furtherance of his business.
Example:
A businessman purchased goods for Rs. 20000 and pays a GST of Rs. 2000 and then later
sells these goods for Rs. 24000 collecting a GST of Rs. 2800. In this case, the goods purchased
for Rs. 20000 will be considered as input and GST paid of Rs. 2000 will be eligible ITC.
GST payable = 2800 – 2000 = 800
7. Input Tax Credit (ITC) [Section 2(63)]
It means that the amount of tax paid at the time of inward supplies shall be considered as
an eligible Input Tax Credit on the satisfaction of the following cases:
a) The credit of input tax is only available to a regular person and a Casual Taxable Person
(CTP)
b) The credit is not available to a non-resident.
c) Input tax shall be considered eligible as a credit only if it is used for the purpose of the
business.
8. Output tax [Section 2(82)]
Output tax in relation to a taxable person means the tax chargeable under this act on taxable
supply of goods or services or both made by him or his agent but excludes tax payable by
him on reverse charge basis.
Example:
The value of taxable supplies of a taxpayer is Rs. 100000 and GST is @ 18%. The taxpayer
also has an eligible ITC of Rs. 20000. In this case, total output tax (100000 × 18%) = 18000.
This amount is by adjusting ITC Rs. 20000. Thus, after adjustment the amount of liability, a
balance of ITC (20000 – 18000) = 2000 shall remain in the electronic credit ledger.
9. Person [Section 2(84)]
The term person includes:
a) An individual
b) HUF
c) A company
d) A Firm
e) An LLP
f) AOP and BOI
g) A local authority
h) Trust
i) Central Government and state Government
j) Society
k) A Body Corporate etc.

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10. Place of Business

As per Section 2(85) of the CGST Act, Place of Businesses include:
a) A place from where the business is ordinarily carried on and includes a warehouse, a
godown etc.
b) A place where taxable person maintains his books of account or,
c) A place where a taxable person is engaged in business through an agent by whatever
name called.
11. Services [Section 2(102)]
Services means anything other than goods, money and securities but includes activities
relating to the use of money or its conversion by cash or by any other mode, from one form,
currency or to another form, currency or denomination for which a separate consideration
is charged.

[Unit-4: Taxable Event, Supply- Concept, Time, Value & Place, Charge of GST]

☛ Taxable Event
The taxable event under GST is supply. In case of sale of goods or services provided it will be
termed as outward supplies. In the case of purchase of goods or availing of services, it will be
considered as inward supplies.

☛ Factors for GST Compliance

Factors for GST Compliance

Whom When(Time) Where(Place) On what(value)

Registration status Time of supply Place of supply Value of Supply

of the supplier

☛ Supply Section (sec 7)

1. Supply of goods and services for a consideration.
Supply here means sale, transfer, barter, exchange, license, rental, lease or disposal, if such
supplies are made in the course or furtherance of business
The following points to be noted:
a) Supply means supplying of goods or Services.
b) The supply should be made for consideration.
c) The supply should be made in the course of business or furtherance of business. [V.V.I.]
d) The supply should be made by the taxable person.
e) The supply should be made within a taxable territory.

2. Import of Service [Section 7(1) (b)]

3. Supply without consideration: schedule I [Section 7 (1) (c)]
4. Deemed Supply: Schedule II if fulfilment Section 7 (1) (a) it is treated as supply under
Section 7 (1A).

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☛ Inward Supply [Section 2 (67)]

The term inward supply in relation to a person shall mean receipt of goods or services or both
whether by purchase, acquisition or any other means with or without consideration.
[Note: I. Inward supplies must be utilized in the course or furtherance of business.
II. ITC paid on such inward supplies, shall be eligible for claiming ITC.]

☛ Outward Supply [Section 2 (83)]

Outward supply in relation to a taxable person means supply of goods or services or both.
Whether by sales, transfer, barter, exchange, license, rental, lease or disposal or any other
mode, made or agreed to be made by such persons in the course or furtherance of business.
I. Sales of goods or services rendered shall be considered as outward supplies. [V.V.I.]
II. Outward supplies may be taxable, non-taxable, exempted, nil rated or exports.

☛ Non – Taxable Supply [Section 2 (78)]

It means supply of goods or services which is not chargeable to tax under this act or IGST Act.
Non – taxable supply may be for inward supplies or outward supplies, but do not allow availing
the benefits of ITC, Hence, considered a loss to the supplier (taxpayers)

☛ Taxable Supply [Section 2 (108)]

It means a supply of goods and/or services which is chargeable to tax. A taxable supply is
either a standard rated or a zero-rated supply.

☛ Exempt Supply [Section 2 (47)]

Which attract ‘Nil’ rate of tax or which may be exempt from tax under Section II. An exempt
supplier cannot claim refund of GST.

☛ Composite Supply [Section 2 (30)]

Means a supply made by a taxable person to a recipient comprising two or more supplies of
goods or services. For example, where goods are packed and transported with insurance,
packing material, transport etc.
[Note: Where the expense of transit insurance, freight, loading and unloading charges,
packaging charges form an integral part of the supply of assets, have assets is the principal
supply. Hence, GST will be Levied on total.]

☛ Mixed Supply [Section 2 (74)]

If the supply is made in the nature of a combo pack, then the highest rate of tax amongst the
items present in the combo is applied on the transaction of supply.

☛ Intra – State and Inter – State Supply of Goods

Intra – state (within) Inter – state (outside):
I. CGST = 2.5 % IGST
II. SGST = 2.5 %

☛ Zero – Rated Supply (Section 16):

Means any of the following supplies of goods or services both:
a) Export of goods or services or both.

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b) Supply of goods or services or both to a Special Economic Zone (SEZ) developers or unit.

☛ Time of Supply
Goods (Section 12):
1. Forward charge: Earliest of the following;
a) Date of invoice.
b) Date of receipt of payment.
2. Reverse charge: Earliest of the following;
a) Date of receipt of goods.
b) Date of payment.
c) 30 days from the date of invoice issued by the supplier.
d) Date of entry on books of accounts.

Services (Section 13):

1. Forward charge: Earliest of the following;
a) Date of invoice.
b) Date of receipt of payment.
2. Reverse charge: Earliest of the following;
a) Date of invoice.
b) 60 days from the date of invoice issued by the supplier.
Date of entry in the books of accounts.

☛ Place of GST under CGST / Levy of GST under CGST:

Basis of Charge (Sec 9): Section 9 of the CGST Act is the charging Section that deals with levy
and collection of GST. Accordingly, there shall be levied a tax called Central Goods and
Services Tax on all intra-state supplies of goods and services or both. Such tax shall be on a
value determined under Section 15 and at such rates, not exceeding 20%, as may be notified
by the recommendation of the GST Council.

Forward and Reverse Charge: Sub-Sections (3) and (4) of Section 9 contemplate two types of
charges for GST, namely, forward charges and reverse charges.

Notified Goods
Nature of Supply
Reverse Charge
Unorganized Sectors Taxable Supply
by an unregistered
Charges under person to a registered
GST Forward Charge person
are normal charges where
the supplier of goods &
services is liable to Pay Tax

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Forward Charge: Forward charges are the normal charges under the GST mechanism where
the supplier of goods or services is liable to pay tax. For example, A makes a taxable goods to
B. Here, under the forward charge mechanism, GST will be payable by A. Section 9(1) lays
down the provisions in respect of forward charges.

Reverse Charge: A reverse charge is a charge where the GST is payable by the recipient of
goods or services or both. Since the unorganized sectors are prone to evading taxes, the
reverse charge mechanism is designed to rope in the unorganized sector to the tax net.
Under Section 9 of CGST Act (Section 5 of IGST Act), there are two types of reverse charges:
a) Those covered under Section 9(3) (or Section 5(3) of IGST Act), which is based on the nature
of supply or the nature of the supplier.
b) The second type of reverse charge is covered under Section 9(4) in respect of taxable
supplies by an unregistered person to a registered person. Under the provision of this Section,
the Government may, by notification, specify a registered person who shall, in respect of
specified categories of goods or services or both received from an unregistered supplier, pay
tax on reverse charge basis.

Who should make the payment?

The following dealers are required to make GST payment:
a) A registered dealer is required to make GST payment if GST liability exists.
b) A registered dealer is required to pay tax under Reverse Charge Mechanism (RCM).
c) E-commerce operator is required to collect and pay TCS.
d) Dealers who are required to deduct TDS.
How to make GST payment?
GST payment can be made in the following two ways.
a) Through electronic credit ledger: The credit of ITC can be taken by dealers for GST
payment. The credit can be taken only for payment of tax. Interest, penalty, and late fees
cannot be paid by utilizing ITC.
b) Through electronic cash ledger: GST payment can be made online or offline. The challan
has to be generated on GST portal for both online and offline payment. Where tax liability is
more than Rs. 10,000, it is mandatory to pay the tax online.
These ledgers are maintained electronically on the GST portal.

Penalty for non-payment or delayed payment

If GST is short paid, unpaid or paid late, interest at the rate of 18% is required to be paid by
the dealer. Also, a penalty is to be paid. The penalty is higher if Rs. 10,000 or 10% of the tax
short paid or unpaid.

Q1) Mr. X sold goods worth Rs.50,000 and is also charged an interest of Rs.750 for delay in
payment. Determine the taxable value of levy of GST.
Q2) Mr. X sold goods to Mr. B for Rs.20,000. Mr. A is allowing discount of Rs.2,000 at the time
of supply. Determine the value of supply for the purpose of levy of GST.
Q3) Mr. X of Kolkata supplies a television to Mr. Y in Bihar. The television’s price inclusive of
GST @18% is Rs.50,000. Mr. Ram wants to arrive at the value of tax. How will he calculate it?

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Q4) Mr. A of Karnataka supplies a television to Mr. B in Karnataka. The television’s inclusive
of GST @18% is Rs.20,000. Calculate the tax to be paid.

[Unit-5: Input & Output Tax Computation/ Input Tax Credit/

Composition Scheme/ Time of Payment of GST]

☛ Input Tax Credit (ITC)

GST paid by the purchaser at the time of making purchases of inputs, capital goods or availing
inward services, may be considered as input tax credit. ITC represents the tax paid on an asset
and not a cost. The amount of ITC (representing the full or part amount of tax paid earlier) as
eligible, can be adjusted by the supplier, at the time of discharging any GST liability arising
from outward supplies.

 Eligibility and Conditions for taking Input Tax Credit [Section 16, Rule 36]:
Section 16 of the CGST Act / SGST Act sets out the eligibility and conditions for taking input
tax credit. Accordingly, input tax credit is available on fulfilment of the following conditions:
a) Every registered person shall, subject to such conditions and restrictions as may be
prescribed and, in the manner, specified in Section 49, be entitled to take credit of input tax
charged on any supply of goods or services or both to him which are used or intended to be
used in the course or furtherance of his business and the said amount shall be credited to the
electronic credit ledger of such person [Section 16(1)].
b) A registered person shall not be eligible to claim input tax credit unless [Section 16(2)]:
i) he is in possession of a tax invoice or debit note issued by a supplier registered under
this Act, of such other tax paying documents as may be prescribed.
ii) he has received the goods or services or both.
iii) subject to the provisions of Section 41, the tax charged in respect of such supply has
been actually paid to the Government, either in cash or through utilization of input tax
credit admissible in respect of the said supply; and
iv) he has furnished the return under Section 39.
c) Where the registered person has claimed depreciation on the tax component of the cost of
capital goods and plant and machinery under the provisions of the Income-tax Act, 1961, the
input tax credit on the said tax component shall not be allowed [Section 16(3)].

 Time limit to avail Input Tax Credit

Subject to the fulfilment of Section 16(2), input tax credit is available as soon as the goods
and/or services are received, and the dealer is in possession of the documentary evidences.
However, a registered person shall not be entitled to take input tax credit in respect of any
invoice or debit note for supply or goods or services or both after:
i) the due date of furnishing of the return under Section 39 for the month of September
following the end of financial year to which such invoice; or
ii) invoice relating to such debit note pertains or furnishing of the relevant annual return,
whichever is earlier [Section 16(4)].

☛ Composition Scheme under GST

The provisions relating to the composition levy are contained in Section 10 of the CGST Act /
SGST Act. the provision is designed for the small taxpayers to provide them relief from the

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tedious formalities of GST mechanisms and accord them the facility of paying tax at a lower
rate on the turnover. However, composition scheme is applicable to only the eligible
taxpayers within a financial threshold limit. Suppliers or services were not covered within the
composition scheme, but effective from 1st April, 2019, suppliers of services shall also be
covered by the composition scheme.
 Financial Criteria [Section 10(1)]:
The benefits of the composition scheme are available to a registered person, whose aggregate
turnover in the preceding financial year did not exceed:
• For special category states [Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland,
Sikkim, Tripura and Uttarakhand]: Rs. 75 lakhs
• Suppliers of services: Rs. 50 lakhs [w.e.f. 1.4.19]
• For others: Rs. 1.50 crores
 Tax rates [Section 10(1)]:
The rates of tax are as follows:
Taxable person is CGST + SGST
Traders 1%
Manufacturers 1%
Restaurants 5%
Services [w.e.f. 1.4.19] 6%

 Eligibility [Section 10(2)]:

The registered person shall be eligible to opt for composition scheme, if:
a) he is not engaged in the supply of goods which are not leviable to tax under this Act.
b) he is not engaged in making any inter-state outward supplies of goods.
c) he is not engaged in making any supply through an electronic commerce operator who is
required to collect tax at source under Section 52
d) he is not a manufacturer of goods
e) more than one registered person is having the same Permanent Account Number; the
registered person shall not be eligible to opt for composition scheme unless all such
registered persons opt for composition scheme.

 Time of payment of GST:

It is important to note that the mergence of liability for GST and the time of payment of GST
do not take place on the same date.

 Time of liability for GST:

As per Section 12, the liability to pay tax on goods arises at the time of supply, while under
Section 13, the liability to pay tax on services arises on the date of issue of invoice by the
supplier or the date of provision of services, whichever is earlier.

7.7. Advantages of GST:

The chief advantages of GST are mentioned below

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a) As almost all indirect taxes are subsumed in one tax i.e. GST, it would be easier to
handle the single legislation both by the taxpayers and tax administrators.
b) It eliminates the cascading effect of several indirect taxes. As a result, cost of
goods and services is expected to reduce.
c) It eliminates the unhealthy competition among the States. Instead of charging
different rates of indirect taxes, uniform rates will be applied on goods and
services by all states.
d) Under GST regime registration is PAN based. Thus, taxpayer can be identified
easily through GSTIN.
e) GST is levied on a common base i.e. ‘supply’ of goods and services. Thus, separate
valuation rules are not required to be followed for charging different indirect
taxes.
f) ‘Place of supply’ and ‘time of supply’ are well defined under the GST Act.
Therefore, different provisions of different indirect taxes are not required to be
considered for determining the point of taxation and the authority to levy tax.
g) As input tax credit (ITC) is available under the GST Act subject to fulfilment of
certain conditions, payment of GST would not be considered at cost. As a result,
cost of goods and services will be reduced
h) Composition scheme is available to small taxpayers. In such a case, compliance
procedure would be comparatively less.
i) GST Acts of States and Union territories are identical with central GST Act. Thus,
tax structure, statutory provisions, filing of returns, etc. will be uniform all over
India. This will make tax compliance easy and smooth for those having multi-State
businesses.
As most of the compliance procedures are IT based, human intervention is minimized to a
large extent which, in its turn, will minimize corruption.

CUSTOM DUTY
Custom Duty is an indirect tax charged on import and export of goods. Custom Duty is
governed by entry no. 83 of the union list, hence, is levied and collected by the Central
Government. Customs Act, 1962, and Customs Tariff Act, 1975 are the predominant sources
of customs law in India.

• Objectives of Customs Duty

Following are the objectives of customs Duty.
1. If restricts import with a view to conserving foreign resources.
2. If serves as a policy tool to protect import and exports.
3. Custom Duty can prevent dumping of foreign goods.
4. It intends to protect the domestic industries against the foreign goods.

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5. If restricts smuggling activities.

• Features of Customs Act 1962.

1. Customs Duty is an indirect tax levied on import and export.
2. It is imposed only on goods and not on services.
3. It is subject to social welfare charge @ 10% of on the aggregate of duties.
• Taxability of import and export:
Situation Taxability
1. Import of goods Custom Duty + IGST (Imports of goods treated as inter – state
supply)
2. Import of services No custom Duty + IGST (Import of service treated as Inter –state
supply)
3. Export of goods No Custom Duty Zero rated supply of GST (As per Section 16
(1)(a) of IGST Act’ 17)
4. Export of service No custom Duty (Asper Section 16 (1)(a) of IGST Act’ 17 )

GOODS [Section 2 (22)]

Goods include,
▪ Vessels, aircrafts and vehicles.
▪ Stores.
▪ Baggage.
▪ Currency and Negotiable Instruments (NI).
▪ Any other kind of Movable property.

Types of Customs Duty:

1. Basic Customs Duty (BCD) (Section 12)
2. IGST [Section 3(7)]
3. GST Compensation Tax [Section 3 (9)]
4. Social Welfare Surcharge.
5. Additional Duty.
6. Protective Duty.
7. Safeguard Duty. (Section 8B)
8. Countervailing duty on subsidized goods (Section 9)
9. Anti- dumping duty. (Section 9A)
10. National Calamity Contingent duty.

1. Basic Customs Duty (BCD) (Section 12):

It is the duty which is charged on imports and some of the exports made. Different rates are
applied (varies 5% to 40%) product wise on imports and exports. It is two types:
a) Standard rate
b) Preferential rate: shall be allowed by the Central Government if some conditions are
fulfilled.

2. Social Welfare Surcharge (SWS)

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This duty was introduced in the 2018 budget. It is levied in place of education cess. The rate
of SWS is 10% of the value of BCD.

3. Integrated Goods and Services Tax (IGST) [Section 3 (7)]

After the introduction of GST, all imports are deemed to be treated as inter-state supply of
goods and services. Hence, IGST is levied on all imports under Section 3 (7) of the Customs
Tariff Act. IGST is to be calculated on the total value of assessable value plus the customs
duty and SWS ( upto 40 % )

4. GST Compensation Cess [Section 3 (9)]

After GST, some states may have less collection of revenue in terms of GST. To compensate
that loss, GST compensation cess is introduced by the Central Government on import of luxury
and sin goods (Pan masala, tobacco ). It is calculated on the total assessable value + BCD +
SWS.

☛ Important terms for the valuation of transaction value

i) Ex-factory price: It is the price at which the goods come out from the factory ( Cost of
production + profit )
ii) FAS: It means free alongside and refers to the cost at which the goods are available for
delivery alongside the ship for shipments.
i.e., FAS = Ex-factory Price + local freight + local tax.
iii) FOB: It means free on board.
FOB = FAS + loading charges + export duty and cess,
i.e. FOB is that stage at which the goods are placed on board the conveyance carrying the
vessel.
iii) CIF: It means Cost insurance and freight and refers to the cost at which the goods are
delivered at freight at the Indian port.

☛ Valuation of Goods as per Section 14

It deals with the valuation of imported and exported goods, for the purpose of computation
of customs duty payable. The amount of customs duty is based on the transaction value and
it includes:
1. Commission and Brokerage
2. Engineering and design work
3. Royalties and license fees
4. Cost of transportation to the place of importation
5. Insurance
6. Loading, unloading and handling charges

☛ Conversion for Import of Goods

Valuation shall be done with reference to the exchange rate on the date of filing the bill
under Section 46.

☛ Foreign Exchange Rate

Notified by three agencies i.e.,
☆ RBI
☆ CBIC
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☆ Foreign Exchange Dealer’s Association of India.

For valuation of customs, CBIC rate should be considered.
Example:
Date of entry inward - 15.07.2021
Date of bill of entry - 20.07.2021
Exchange rate notified by 15.07.2021 20.07.2021
CBIC ₹ 67 per dollar ₹ 66 per dollar
RBI ₹ 68 per dollar ₹ 67 per dollar
Association ₹ 69 per dollar ₹ 68 per dollar

Computation of Transaction value

Particulars Amount
Value of material (ex – factory price) *
Add: carriage/ freight/ insurance *
: Loading charges on the ship *
Free on Board (FOB) *
Add: Commission and Brokerage
(except buying commission) *
: Packing cost
(except durable and return) *
: Cost of Engineering / development *
: Royalties and license fee *
FOB value as per customs *
Add: Cost of freight @ 20% of FOB value * (By Air)
: Insurance (@ 1.125% of FOB) *
If not given, assessable value / CIF *
FOB = CIF value
( – ) Actual Freight
( – ) Actual Insurance

 Points to be noted from Format

1. Cost of transportation is 20% of FOB (Free on Board) in case of goods imported by air.
2. Insurance (if not given / mentioned) then 1.125% of FOB.
3. Development work after import/post import/in India is not allowed
4. Freight from port of factory not allowed (i.e. unloading & handling charges)
5. Take CBIC value and Bill Date. [V.V.I.]
6. If CIF value is given then 1st calculate (i.e., CIF = Cost Insurance & Freight)
FOB = CIF – Freight – Insurance, then apply in Format.

 Protective Duties: Protective duties are levied by the Central Government on the
recommendation of Tariff Commission to protect the domestic industry of India.
It may be imposed for a period which is specified in the notification.
The imposition of Protective duty is subject to the following conditions:
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i) A notification in the Official Gazette is required.

ii) The notification shall cease to have effect when such Bill becomes law.
iii) If, for any reason, a Bill as aforesaid does not become law within six months from the date
of its introduction in Parliament, the notification shall cease to have effect on the expiration
of the said period of six months.

 Safeguard Duty: Under Section 8B of the Customs Tariff Act, 1975, if the Central
Government, after conducting such enquiry as it deems fit, is satisfied that any article is
imported into India in such increased quantities and under such conditions so as to cause or
threatening to cause serious injury to domestic industry, then, it may, by notification in the
Official Gazette, impose a safeguard duty on that article.
Safeguard duty can be imposed if the Central Government on enquiry finds that the imports
in increased quantity (a) have caused serious injury to the domestic industry or (b) are
threatening to cause serious injury to the domestic industry. it can be imposed irrespective
of the origin of the imported goods.

Anti-dumping duty [Section 9A]: Anti-dumping duty is leviable under Section 9A of Customs
Tariff Act when a foreign exporter exports his goods at prices lower than the prices normally
prevalent in the exporting country. Dumping is an unfair trade practice and the anti-
dumping duty is levied to protect Indian manufacturers from unfair competition. Margin of
dumping is the difference between the normal value (i.e., the sale price in the exporter’s
country) and export price (i.e., the price at which the exporter is exporting the goods). Price
of similar products in India is not relevant to determine the margin of dumping. Injury
margin means the difference between the fair selling price of domestic industry and the
landed cost of imported products. Dumping duty will be the lower of dumping or injury
margin. Benefits accruing to the local industry due to the availability of cheap foreign inputs
are not considered, which is a drawback.

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