Custom duty

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Introduction
‡ Kautilya·s Arthashastra refers to sulka (customs duty) consisting of import and export duty to be collected at the city gates on both goods coming in and going out. ‡ The levy of tax on goods imported into the country was organized through legislation during the British period. ‡ The law was governed by sea customs act, land customs act and air customs act. ‡ All these were consolidated and the customs act, 1962 was enacted.

Objective of customs duty ‡ The objective of customs duty are to protect the Indian social and cultural environment, to prevent smuggling activities, to prevent dumping of foreign goods, to encourage growth of local industries etc.

Customs glossary
‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Airway bill Appraiser Assessment Bill of Entry Bill of Export Bill of Lading CHAs /C&F Agents Clearance Custodians DEEC (Advance License) DEPB

Exporter Code Letter of Credit LIBOR Mates· Receipt Shipping Bill Warehouse .Customs glossary ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Entry Inward Entry Outward EPCG Scheme GATT Declaration High Sea Sales IGM Importer.

Filing of Import General Manifest ‡ Import general manifest is an import report to be filed by the master/ agent of the vessel or a aircraft within 24 hours after arrival in case of a vessel and 12 hours after arrival in the case of an aircraft or a vehicle in the prescribed form. ‡ It is also be filed even before the arrival of the vessel or aircraft is known as ¶Prior Entry Manifestµ ‡ Such advance manifest are accepted for any day 14 days before the expected arrival of the vessel. ‡ It can be filed in electronic mode also. .

‡ When the IGM is filed with all the enclosures. it will be treated as a fresh entry and a fresh manifest is filed. The date of entry inwards is the relevant date for determining the rate of duty. the officer will grant entry inwards for unloading the imported goods. ‡ If the vessel arrives after the cancellation. .Points to remember regarding IGM ‡ If the vessel does not arrive within the stipulated time of 14 days or such extended time granted. the manifest accepted is cancelled. hence bill of entry filed against the cancelled manifest becomes void.

. ‡ Territorial waters theory propagate the view that import is complete the moment a vessel enters the territorial waters of India.Taxable Event ‡ The taxable event for the purpose of levy of import duty is import. ‡ In the case of exports the supreme court in the case of Sun exports(1989) 35 ELT 241 has held that export is complete once goods leave Indian water and the property passes to the purchaser.

.LAN Mass Theory ‡ According to this theory territorial waters theory is impractical for the following reasons: ‡ A vessel may enter the territorial waters even though it does not have any Indian port as its destination. ‡ A vessel may enter Indian territorial waters due to poor weather conditions.

‡ Computation of Assessable value : Particulars Rs Rs xxx xxx xxx xxx xxx Transaction Value (FOB Value) Add: cost of transportation (20% of FOB value) xxx cost of insurance (1.125% of FOB value) xxx Cost Insurance freight value Add: Handling charges (1% of CIF) .valuation ‡ The value of imported goods is determined as per the rules framed under Determination of Price of Imported Goods (Valuation) Rules 1988.

Preferential rate is applicable where goods are originated from preferential area. subheading. description. The columns in the tariff act are heading. Seychelles and Tonga as preferential areas. The tariff act provides for import duty as well as export duty.Types of customs duty ‡ Basic customs duty: The duty is prescribed under the Customs Tariff Act 1975. standard rate and preferential rate. . Standard rate will apply where there is no provision for preferential rates. Government has notified Mauritius.

‡ This duty is calculated by taking into account the excisable duty applicable for the articles if produced or manufactured in India. . basic customs duty and surcharge. ‡ Countervailing duty is calculated on the aggregate of assessable value.Countervailing duty or Additional duty of customs: ‡ Section 3 of the Customs Tariff Act 1975 provides that an article that is imported into India shall in addition to customs duty be liable to a duty called as countervailing duty .

‡ For example. if a person imports goods having value of Rs 100 on which basic custom duty is 15%. excise duty on like goods manufactured in India is 14% and additional duty of customs is 4%. ‡ This duty will not be charged on information technology software.Imposition of additional duty of customs ‡ The duty shall be levied to counter balance various internal taxes like sales tax and VAT. then the duty shall be computed as follows .

00 115.40 5.00 16.10 133.00 15.34 138.74 .Example Particulars Assessable value of imported goods Add: Basic Customs duty @ 15% Total Add: Countervailing duty @ 14% Total Add: Additional duty of Customs @ 4% Total Amount 100.

. may also reduce the duty in which case th excess collected is refundable. ‡ Duty can be imposed on a provisional basis pending determination of margin of dumping. ‡ Margin of dumping means the difference between the export price and its normal value.Anti-Dumping Duty ‡ Where any article is exported from any country to India less than its normal value. then on its import the central Government may by notification in the official gazette impose on Anti-Dumping Duty not more than the margin of dumping in relation to such article. The Government on completion of enquiry.

‡ The notification should be introduced by way of a bill by the parliament.Protective duty ‡ The tariff commission may recommend immediate action if it is necessary in the interest of Indian Industry. ‡ If the bill is not passed within 6 months from the date of introduction. . it shall lapse.

the limit is 9%. the power is available to extend up to a period of 10 years from the date of imposition. ‡ Duty shall not be imposed on an article originating form a developing country so long as the share of import from that country does not exceed 3%. However.Safeguard duty ‡ Sec 8B of the Customs Tariff Act empowers the Central Government to impose the Safeguard duty on any article after enquiry where such articles are imported into India in such increased quantities so as to threaten to cause serious injury to the domestic industry. . ‡ The duty shall cease to have effect on the expiry of 4 years from the date of imposition unless revoked earlier. Where the imports are from more than one developing country.

Countervailing duty on subsidized Articles. . then Countervailing duty on such subsidized articles can be imposed by the Central Government. ‡ Where the country which exports goods to India providing any subsidy to exporters exporting goods to India.

motor cars. two wheelers are at the rate of 50 paisa per metric ton on domestic crude oil.National Calamity Contingent Duty ‡ The levy of National Calamity Contingent duty at the rate of 1% on polyester filament yarn. . multiutility vehicles.

Education cess ‡ While computing he assessable value for levy of education cess on the goods liable to additional duty of customs under sec 3(5) of the Customs Tariff Act. following duties shall be excluded: ‡ Additional duty of Customs ‡ Safeguard duty ‡ Anti dumping duty ‡ Education cess .

Procedure for clearance of Imported Goods IGM FILE Entry Inward Unloading of Goods Bill of Entry filing Assessment Payment of Duty Goods for Home Consumption .

‡ Bill of entry can be filed under both manual and electronic mode. . ‡ The importer has two options in filing of Bill of Entry: ‡ Bill of entry for home consumption can be filed and duty assessed can be paid and goods can be cleared (or) ‡ Bill of entry for warehousing can be filed and goods can be taken to the public warehouse and can be cleared on payment of duty in the future.Option available to the importer on arrival of Goods ‡ The importer has an option to file Bill of entry either before arrival of goods or on arrival of goods.

‡ After the assessment is over the duty has to be deposited by the importer with the treasury or the nominated banks.Assessment ‡ The assessing officers determine the duty liability taking note of exemptions or benefits claimed under different export promotions. ‡ After the payment of duty. the importer can go and seek delivery of the goods from the custodians. ‡ The AO assesses the bill of entry on receipt of the examination report final clarification and valuation is done and duty is calculated in the bill of entry and thereafter the B/E goes to A/C or D/C for confirmation depending upon certain value limits. .

Green channel facility ‡ Means clearance of goods done without examination of the goods. ‡ Payment of duty: ‡ Customs duty to be paid in authorized banks through GAR 7 challan. ‡ No physical examination of goods and everything else is similar. ‡ Declaration given at the time of filing B/E. . the AO requests for examination of goods. ‡ Some major importers come under this green channel facility. ‡ If any query arises.

then he can file B/E for warehousing. ‡ The rate of duty applicable to imported goods cleared from a warehouse is the rate at force on the date on which the goods are actually removed from the warehouse. ‡ The B/E is assessed and duty is determined.Bill of Entry for warehousing ‡ When the importer is not ready for the payment of customs duty. . ‡ All the required documents as like in B/E for home consumption to be filed with B/E for warehousing. ‡ Goods deposited in a warehouse connected to the customs house.

‡ The exporters have to obtain PAN based business identification number from the DGFT.  shipping bill for dutiable goods.  shipping bill for export under drawback. ‡ The exporters are also required to register authorized foreign exchange dealer code and open current account in the designated bank for credit of any drawback incentive.Procedure for clearance of exported goods. ‡ Shipping bill or Bill of export is to be filed by the exporter. . It is of three different types:  shipping bill for duty-free goods.

. ‡ The shipping lines may even receive an acknowledgement indicating the date and time at which the EGMs were received by the export department. Under manual filing. ‡ Both manual and electronic filing of EGM is allowed.Export General Manifest ‡ Shipping agents need to furnish the Export General Manifest to the customs within 7 days from the date of sailing of the vessel. EGM to be filed along with the exporters copy of the shipping bill.

Export documentation ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Export order Order acceptance Letter of credit Mate·s Receipt Bill of Lading Airway bill / Air Consignment Note Post Parcel Receipt Bill of Exchange Insurance policy / certificate .

Export documentation ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Certificate of Origin Manufacturers Certificate Packing List / Note Export Declaration Forms Certificate of Inspection Antiquity Certificate Certificate of Measurement Transhipment Bill Shipping order Cart/ Lorry Ticket .

Export documentation ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Dock challan / Export Application Shipper·s Declaration Form Commercial Invoice Consular Invoice Legalized Invoice Customs Invoice Shipping Bill Freight Declaration Health Certificate Certificate of Exports and Realization .

. ´Authorized couriersµ ‡ The regulations gives option to the courier company to get the goods imported through an onboard courier or the Person-in charge of the aircraft. ‡ Both are allowed to file the Courier Import Manifest. ‡ The weight limit of courier material is fixed at 70 kgs. ‡ Here the courier companies are called.Import and Export through Courier ‡ The duty is paid by the courier company on behalf of importers or exporters before taking delivery of the parcels.

Import of Goods by couriers not allowed ‡ ‡ ‡ ‡ ‡ Animals and plants Perishables Publications Precious and semi precious stones Chemicals .

Export of goods by courier not allowed ‡ Goods which attract any duty on exports or ‡ Goods those exported under export promotion schemes. . ‡ Transaction in foreign exchange. ‡ Goods where the value of the consignment is above Rs 25000.

.Warehousing ‡ Warehouses are classified as public warehouses and private warehouses. he have to execute the bonds. ‡ When the importer has entered the goods for warehousing. ‡ Public warehouses are warehouses which are appointed as such by the Assistant Commissioner of customs wherein dutiable goods may be deposited.

 Any other case.one year from the date the proper officer passes an order permitting deposit. . the period of 1 year may be reduced if the goods are likely to deteriorate. ‡ Where the license of the private warehouse is cancelled the owner shall remove the goods from such warehouse to another warehouse or for home consumption or export within 7 days from the date of cancellation.Warehousing period ‡ Goods which are deposited in a warehouse can remain only up to a prescribed such as  Capital goods intended for use in a 100% EOU ² 5 years from the date the Proper Officer passes on order permitting deposit. In respect of goods other than capital goods. ‡ The time limit can be increased by a further period of 6 months.

penalty. interest and other charges payable in respect of the goods have been paid. ‡ An order for clearance for home consumption has been made by the proper officer. rent. . ‡ The import duty leviable on such goods.Clearance of Home Consumption ‡ The importer may clear warehoused goods for home consumption if ‡ A Bill of Entry is presented in the prescribed form for home consumption.

.Letter of Credit ‡ Letter of credit is a document issued by the Importer·s Bank in favour of the Exporter giving him the authority to draw bills up to a particular amount (as per the contract price) covering a specified shipment of goods and assuring him of payment against the delivery of shipping documents.

Parties to a Letter of Credit ‡ ‡ ‡ ‡ Applicant/Importer Exporter Intermediary Bank/Confirming Bank Paying Bank/Negotiating Bank .

Documents required under Letters of Credit ‡ ‡ ‡ ‡ ‡ Bills of Exchange Invoice Certificate of Origin Transport Documents Insurance Policy .

‡ If it comes separately in a different conveyance it is called unaccompanied baggage. 1998. ‡ If baggage comes with the passenger in the same conveyance. ‡ The passenger files baggage declaration under sec 77 for clearing his baggage under Baggage rules. .Baggage Rules ‡ The term baggage covers personal effects of passengers and crew. it is called accompanied baggage.

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