INDIAN TAXATION 2.

INDIAN CUSTOMS DUTY CALCULATION

I. CUSTOM DUTY CALCULATION Custom Duty is on Import to India and Export out of India. Illustration of calculation of Customs Duty (Currency `) Sn A B C D E F G H I J K Duty Description Assessable Value Basic Customs Duty Sub-Total for Calculating CVD (A+B) CVD C x Excise Duty Rate Sub Total for Edu Cess (B + D) Edu Cess of Customs E x 2% SAH Edu Cess of Customs E x 1% Subtotal for calculating Spl CVD C+D+E+F+G Spl CVD u/s 3 (3) H x 4% Total Payable Total Duty Duty (%) 10 12 02 01 Amount 1,000.00 100.00 1,100.00 132.00 232.00 4.64 2.32 1238.96 46.56 1285.52 Total Duty 100.00 132.00 4.64 2.32

04

49.56

288.52

Notes: CENVAT credits on Custom Duties 1. Manufacturer can avail CENVAT credits on CVD and Spl. CVD i.e. D & I 2. Service Provider can avail CENVAT credits on CVD i.e D 3. Trader who sell imported goods in India can avail credits on Spl. CVD i.e I after charging VAT/ Sales Tax. II. SCOPE AND COVERAGE OF CUSTOM LAW The rate of duty is as prescribed in Customs Tariff Act (CTA) 1975, read with relevant exemption notifications. Import Duty is levied on almost all items, while export duty is levied only on few limited items. Custom Tariff Act (CTA) 1975 The Act contains two Schedules as mentioned hereunder: Schedule 1 gives classification and rates of duties for imports. Schedule 2 gives classification and rates of duties for exports. In addition, the CTA makes provision for duties like Additional Duty (CVD), Preferential Duty, Anti-Dumping Duty, Protective Duty etc. III. TYPES OF CUSTOM DUTIES 1. Basic Customs Duty 2. Education Cess on Customs Duty 3. Secondary and Higher Education Cess on Customs Duty 4. Additional Customs Duty (CVD- Countervailing Duty) 5. Additional Duty u/s 3(3) 6. Protective Duties 7. CVD on subsidized goods 8. Antidumping Duty 9. Safeguard Duty u/s 8B 10. Product specific Safeguard Duty on Imports from China u/s 8C in addition to the general provision of Safeguard Duty u/s 8B. It is not applicable for EOU ( Export Oriented Unit) and SEZ (Special Economic Zone) with exceptions u/s 8C(3) 11. National Calamity Contingent Duty (NCCD) 12. Export Duty

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IV. CLASSIFICATION FOR CUSTOMS AND RATE OF DUTY Classification is as per CTA and based on Harmonized System of Nomenclature (HSN) Sections and Chapters in Custom Tariffs Customs Tariff is up to Chapter 99 Principles of Classification in Heading and Sub-Heading and Rule for Interpretation of Tariffs Classification of Parts Classification of Containers/ Packing Cases: Packaging materials and containers are to be classified with the goods, except when the Packaging is for repetitive use. Export Tariff under Customs Act: The Schedule 2 in CTA is Export Tariff showing Export Duty leviable. Since most of the exports are exempted from export duty, the Schedule contains only 26 items, out of which 24 items are exempt by the way of a notification.

Values for Custom Act Custom Duty is payable as percentage of Value often called Assessable Value or Customs Value. The Value may either be 1. Value as defined in section 14(1) 2. Tariff Value as prescribed in section 14 (2) Custom Value u/s 14(1) Criteria for deciding Customs Value or Assessable Value 1. Price at which such goods or like goods are ordinarily sold or offered for sale. 2. Price for Delivery at the time and place of importation or exportation. 3. Price should be in course of International Trade. 4. Rate of exchange as on date of presentation of Bill of Entry. These criteria are fully applicable in valuing export goods also. Major Requirements of Customs Value or Assessable Value Prices at which goods are being sold under an invoice is not the sole criteria for deciding Value for Customs Duty purpose (Though it is a major criterion). Price of such or like goods. Such means identical in all respect. Rule 9 of the valuation says that if the buyer has supplied some materials, components, parts, tools, dies etc. or has spent on engineering, development or art work etc.; cost of such expenditure will be added to the price actually paid. Like means if prices of the goods are not available, prices of identical goods or similar goods can be considered with applied conditions. Goods should be ordinarily sold at that price. Dual price in case of service parts and Original Equipment (OE). Price offered for sale. Price should be for delivery at the place of importation. All expenses up to the destination port, including freight, transit insurance, unloading and handling charges are to be included. Price should be for the delivery at the time of importation. Price should be in international trade. Buyer or Seller should not have interest in business of each other. Price must be the sole consideration. Price in case of High Sea Sale. Incase of High Sea Sale, price charged by the importer to the assessee would form the assessable value and not the invoice issued to the importer by foreign supplier. If the purchase is on High Sea Sale it will include importers service charges, demurrage, bank charges etc. Customs Duty will be payable on assessable value derived after adding these charges. Rate of Exchange for customs evaluation. Exchange rate as applicable on date of presentation of Bill of Entry as prescribed by CBE&C (Board) (Central Board of Excise and Customs) should be considered. This rate is not same as Inter Bank Closing Rates fixed by Foreign Exchange Dealers Association or by Reserve Bank of India. The applicable exchange rate for valuation is prescribed periodically by CBE&C (Board)
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Customs Valuation Inclusions Commission and brokerage. Packing cost. Value of goods supplied by the buyer. Services/ documents/ know-how supplied by the buyer. Royalty and License Fee. Value of subsequent resale if payable to foreign supplier. Other payments made to seller directly or indirectly. Cost of transport upto port: If the cost of transport is not ascertainable, it will be taken @ 20% of FOB (Free Onboard) value of goods. However, cost of transport within India is not to be considered. Landing charges: Cost of unloading and handling associated with delivery of imported goods in port (called landing charges) shall be added. These will be calculated @ 1% of CIF (Cost Insurance Freight) value i.e. FOB price + Freight + Insurance. Rule 9(2)(b). Insurance cost: Insurance charges on goods are to be added. Rule 9 (2)(c). If these are not ascertainable, these will be calculated @ 1.125% of FOB value of goods. For more detailed explanation read the Customs Tariff Act 1975 or visit the website. http://www.cbec.gov.in/ (Central Board of Excise and Customs) Chapters in Customs Duty (http://www.cbec.gov.in/customs/cst2012-13/cst1213-idx.htm) Schedule-1
Chapters Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Chapter 11 Chapter 12 Chapter 13 Chapter 14 Chapter 15 Chapter 16 Chapter 17 Chapter 18 Chapter 19 Commodities Live animals Meat and edible meat offal Fish and crustaceans, molluscs and other aquatic invertebrates Dairy produce; birds' eggs; natural honey; edible products of animal origin, not elsewhere specified or included Products of animal origin, not elsewhere specified or included. Live trees and other plants; bulbs, roots and the like; cut flowers and ornamental foliage Edible vegetables and certain roots and tubers Edible fruit and nuts; peel of citrus fruits or melons Coffee, tea, mate and spices Cereals Products of the milling industry; malt; starches; inulin; wheat gluten. Oil seeds and oleaginous fruits; miscellaneous grains, seeds and fruit; industrial or medicinal plants; straw and fodder. Lac; gums, resins and other vegetable saps and extracts. Vegetable plaiting materials; vegetable products not elsewhere specified or included. Animal or vegetable fats and oil and their cleavage products; prepared edible fats; animal or vegetable waxes Preparation of meat, of fish or of crustaceans, molluscs or other aquatic invertebrates Sugars and sugar confectionery Cocoa and cocoa preparations Preparations of cereals, flour, starch or milk; pastrycooks' products

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Chapter 20 Chapter 21 Chapter 22 Chapter 23 Chapter 24 Chapter 25 Chapter 26 Chapter 27 Chapter 28

Preparations of vegetables, fruit, nuts or other parts of plants Miscellaneous edible preparations Beverages, spirits and vinegar Residues and waste from the food industries; prepared animal fodder Tobacco and manufactured tobacco substitutes Salt; sulphur, earths and stones; plastering materials, lime and cement Ores, slag and ash Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes Inorganic chemicals; organic or inorganic compounds of precious metals, of rare-earth metals, of radioactive elements or of; isotopes Organic chemicals Pharmaceutical products Fertilisers Tanning or dyeing extracts; tannins and their derivatives; dyes, pigments and other colouring matter, paints and varnishes; putty and other mastics; inks. Essential oils and resinoids; perfumery, cosmetic or toilet preparations Soap, organic surface-active agents, washing preparations, lubricating preparations, artificial waxes, prepared waxes, polishing or scouring preparations, candles and similar articles, modelling pastes, "dental waxes" and dental preparations with a basis of plaster Albuminoidal substances; modified starches; glues; enzymes Explosives; pyrotechnic products; matches; pyrophoric alloys; certain combustible preparations. Photographic or cinematographic goods Miscellaneous chemical products Plastics and articles thereof Rubber and articles thereof Raw hides and skins (other than furskins) and leather Articles of leather; saddlery and harness; travel goods, handbags and similar containers; articles of animal gut (other than silk-worm gut) Furskins and artificial fur, manufactures thereof Wood and Articles of wood; wood charcoal Cork and articles of cork Manufactures of straw, of esparto or of other plaiting materials; basketware and wickerwork. Pulp of wood or of other fibrous cellulosic material; recovered (waste and scrap) paper or paperboard.

Chapter 29 Chapter 30 Chapter 31 Chapter 32

Chapter 33 Chapter 34

Chapter 35 Chapter 36 Chapter 37 Chapter 38 Chapter 39 Chapter 40 Chapter 41 Chapter 42

Chapter 43 Chapter 44 Chapter 45 Chapter 46 Chapter 47

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Chapter 48 Chapter 49 Chapter 50 Chapter 51 Chapter 52 Chapter 53 Chapter 54 Chapter 55 Chapter 56 Chapter 57 Chapter 58 Chapter 59 Chapter 60 Chapter 61 Chapter 62 Chapter 63 Chapter 64 Chapter 65 Chapter 66 Chapter 67 Chapter 68 Chapter 69 Chapter 70 Chapter 71

Paper and paperboard; articles of paper pulp, of paper or of paperboard. Printed books, newspapers, pictures and other products of the printing industry; manuscripts, typescripts and plans. Silk Wool, fine or coarse animal hair; horse hair yarn and woven fabric Cotton Other vegetable textile fibres; paper yarn and woven fabrics of paper yarn Man-made filaments Man-made staple fibres Wadding, felt and nonwovens; special yarns; twine, cordage, ropes and cables and articles thereof Carpets and other textile floor coverings Special woven fabrics; tufted textile fabrics; lace; tapestries; trimmings; embroidery Impregnated, coated, covered or laminated textile fabrics; textile articles of a kind suitable for industrial use. Knitted or crocheted fabrics Articles of apparel and clothing accessories knitted or crocheted Articles of apparel and clothing accessories, not knitted or crocheted Other made up textile articles; sets; worn clothing and worn textile articles; rags Footwear, gaiters and the like; parts of such articles Headgear and parts thereof Umbrellas, sun umbrellas, walking-sticks, seat-sticks, whips, riding-crops and parts thereof. Prepared feathers and down and articles made of feathers or of down; artificial flowers; articles of human hair Articles of stone, plaster, cement, asbestos, mica or similar materials Ceramic products Glass and glassware Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad with precious metal and articles thereof; imitation jewellery; coin Iron and steel Articles of iron or steel Copper and articles thereof Nickel and articles thereof Aluminium and articles thereof

Chapter 72 Chapter 73 Chapter 74 Chapter 75 Chapter 76

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Chapter 77 Chapter 78 Chapter 79 Chapter 80 Chapter 81 Chapter 82 Chapter 83 Chapter 84 Chapter 85

(Reserved for possible future use) Lead and articles thereof Zinc and articles thereof Tin and articles thereof Other base metals; cermets; articles thereof Tools, implements, cutlery, spoons and forks, of base metal; parts thereof of base metal Miscellaneous articles of base metal Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles Railway or tramway locomotives, rolling-stock and parts thereof; railway or tramway track fixtures and fittings and parts thereof; mechanical (including electro-mechanical) traffic signaling equipment of all kinds Vehicles other than railway or tramway rolling-stock, and parts and accessories thereof Aircraft, spacecraft, and parts thereof Ships, boats and floating structures Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; parts and accessories thereof Clocks and watches and parts thereof Musical instruments; parts and accessories of such articles Arms and ammunition; parts and accessories thereof Furniture; bedding, mattresses, mattress supports, cushions and similar stuffed furnishings; lamps and lighting fittings, not elsewhere specified or included; illuminated signs, illuminated name-plates and the like; prefabricated buildings Toys, games and sports requisites; parts and accessories thereof Miscellaneous manufactured articles Works of art, collectors' pieces and antiques Project imports, Laboratory chemicals, passenger's baggage, personal importation by air or post; ship stores

Chapter 86

Chapter 87 Chapter 88 Chapter 89 Chapter 90

Chapter 91 Chapter 92 Chapter 93 Chapter 94

Chapter 95 Chapter 96 Chapter 97 Chapter 98

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Demonstration of Customs Duties on Industrial Commodities.

Rate of Duty Tariff Item Description of Goods Unit Standard Chapter 26: Ores, slag and ash 2601 Iron ores and concentrates including roasted pyrites Iron ores and concentrates other than roasted pyrites 2601 2601 2601 2601 2601 2602 2602 11 11 11 00 00 11 12 19 11 Non agglomerated: Iron ores lumps (60% Fe or more) 60% Fe or more but less than 62% Fe 62% Fe or more but less than 65% Fe 65% Fe and above Manganese ores and concentrates, including ferroginous manganese ore and concentrates with a manganese content of 20% or more, calculated on dry weight: Manganese ores and Concentrates, including ferroginous manganese ore and concentrates with a manganese content of 20% or more, calculated on dry weight: Kg Kg Kg 10% 10% 10% Preferential Areas

2602 2602 2603 2604

00 00 00 00

10 10 00 00

Manganese ores ( 46% or more) Manganese ores (44% or more but below 46%) Copper ores and concentrates Nickel ores and concentrates

Kg Kg Kg Kg

5% 5% 5% 5%

Chapter 84: Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof 8406 8406 10 00 Steam turbines and other vapour turbines Turbines for marine propulsion Other turbines: 8406 8406 8406 8407 8407 10 00 81 82 90 00 00 00 Of an output exceeding 40 MW Of an output not exceeding 40 MW Parts Spark-ignition reciprocating or rotary internal Combustion piston engines Aircraft engines u 7.5% u u Kg 7.5% 7.5% 7.5% u 7.5% -

Chapter 27: Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes 2701 Coal; briquettes, ovoids and similar Solid fuels manufactured from coal Coal, whether or not pulverised, but not agglomerated : 2701 2701 2701 2701 2701 11 12 19 19 19 10 20 00 00 Anthracite Bituminous Coal Other Coal Coking Coal Steam Coal Kg Kg 10% 10% Kg Kg 10% 55%

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Schedule 2 Export Tariff and Appendix I Export tariff and corresponding exemption notifications and Appendix I (Cess leviable on certain articles on export under various enactments of the Government and exemption Notifications thereto.) http://www.cbec.gov.in/customs/cst2012-13/sch2-exptariff.pdf

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