Study Note - 2 TYPES OF DUTIES XE This Study Note includes 2.1 Introduction 22 Types of Duties 2.3. Exempiton from Customs Duly cc 2 Import Duties as per 1* Schedule of Customs Tori Act, 1975 Export Duties as per 2°4 Schedule of Customs Tarif Act, 1975 + + {2} Protective duties Sec. (1) (1) B.C. (Sec. 12 Customs Act, Rate as per Toni) De-olled rice brand oll coke: Luggage leather = 25% 10% {3} Safeguard duty Sec. 88/1) Leather = 15% [4] Countervaling duty on subsidized articles Sec. 9 | | Snake skins and raw fur lami skins = 10% [5] Ani-cumping duty Sec. 9A Ferrous waste and scrap = 15% (6) IGSTSec. 317) (7) GST Compensation Cess 319) NOTE: Social Welfare Surcharge (SWS} ON imports [w.e.f 02-02-2018) 1. Social Welfare Surcharge - A social welfare surcharge has been imposed on imported goods @ 10% of total customs duties (excluding certain duties) w-e.f 02-02-2018. Hence, effective rate of BCD = 10% general rate of basic custom duty (BCD) + SWS @ 10% of BCD = 11%. 2. NOEC & SHEC W.EF 02-02-2018 - Education coss @ 2% & Secondary & Higher Education Coss @ 1% was leived at total 3% on total import duties {excluding certain duties). Now, no EC & SHEC is leviable on imports trom 02- 02.2018 & Section 94 of Finance Act, 2007 providing forlevy of EC/SHEC have been omitted, 3, Road & Infrastructure Cess on Imported goods (Section 11] of Finance Act, 2018 w.e.1 02-02-2018)- Road and Infrastructure cess i leived as duty of Customs @ ¥ 8 per litre on motor spiit (petrl) and high speed aiesel Imported into India for the purpose of financing infrastructure projects. 4, No Social Welfare Surcharge (SWS) is leived on Export Goods. Peto (1) Basic Customs Duty (As per Sec 12 of the Customs Act, 1962): Goods imported into India are chargeable to basic customs duly (BCD] under Customs Act, 1962, The rates of BCD are indicated in | Schedule (forimpors} of Customs Tariff Act, 1975. Generally, BCD is lovied at standard rate of duly but if certain conditions are satisfied (below), the importer can aval the benef! of preferential rate of duly on imported goods. Conditions for availing the benefit of preferential rate of duty: The Institute of Cost Accountants of India 371ct Taxation + Specific claim for preferential rate must be made by the Importer, + Import must be from preferential area as notified by the Central Government, +The goods should be produced/manutactu (2) Integrated Goods and Services Tax (IGT) IGST {Integrated Goods and Services Tax) so component under GST law, which is levied on goods being imported into India from other country. It has subsumed various customs duties including Countervailing Duty (CVD) and Special Additional Duty of Customs (SAD) sd in such preferential area. In the GST regime, IGST will be levied on imports by virlue of sub - section (7) of Section 3 of the Customs Tariff Act, 975. IGSI wherever applicable, would be levied on cargo that would arrive on or after Ist July, 2017. It may also be noted that IGST would also be levied on cargo which has artived prior to Ist July but a bill of entry is fled on or after 1st July 2017. Similarly ex-bond bill of entry fled on or atter 1st July 2017 would attract IGST, as applicable. In the case where cargo amivalis after Ist July and an advance bill of eniry was fled before Ist July along with the payment of duly, the bil of entry may be recalled and reassessed by the proper officer fer levy of IGST as applicable Example: ‘Suppose Assessable Value (A.V,) Including landing charges = % 100/- (1) BcD- 10% @) iGst- 12% (B) Social Welfare Surcharge ~ 10% In view of the above parameters, the calculation of duty would be as below: (@) BCD =8 10 [10% of AV. (©) Social Welfare Surcharge -€ 1 [10% of (0)] (@)_IGST-2 13.32 (AV. +(@) +( b)}x12% Note: The Inclusion of anti- dumping duties and safeguard duty in the value for levy of IGST and Compensation Ces is an important change. These were not hitherto included in the value for the levy of additional duty of customs (CVD) or Special Adaitional Duty (SAD). The IGST paid shall not be added to the value for the purpose of calculating Compensation Cess, Case Law: 1 CVD (now called as IGST) on an Imported product be exempted If the excise duty (new GST) on a lke article produced or manufactured (now called as supply) in India is exempt? Aidek Tourism Services Pvt. Lid. v. CCus, 2015 (318) ELT 3 (SC) Decision: Supreme Court held that rate of adcitional duly leviable under section 3(1} of the Customs Tarif Act, 1975 would be only that which is payable under the Central Excise Act, 1944 on a Ike article. Therefore, the importer would be entitled to payment of concessional/ reduced or nil rate of countervaling duly if any nofiication is issued providing exemption/ remission of excise duly with respect to a like arlicle if produced/ manufactured in Indio! (3) GST Compensation Cess: Under GST regime, Compensation Cess will be charged on luxury products tke high-end cars and demeril commodities Ike pan masala, tebacco and aerated drinks for the period of $ yearsin order to compensate states for loss of revenue. In the GST regime, IGST will be levied on imports by virlue of sub - section (9) of Section 3 of the Customs Tariff Act, 975; 372 The Institute of Cost Accountants of India.Types of Duties — GST Compensation cess, wherever applicable, would be levied on cargo that would antive on or after Ist July, 2017, Similarly excbond bill of enity fled on or after Ist July 2017 would attract GST Compensation cess, as ‘applicable. In the case where cargo arrival is after Ist July and an advance bil of entry was fled before Ist July long with the payment of duty, tne bill of entry may be recalled and reassessed by the proper oificer for levy of GST compensation Cess, as applicable The valve of the imported article for the purpose of levying GST Compensation cess shallbe, assessable value plus Basic Customs Duty levied under the Act, and any sum chargeable on the goods under any law for the time being inforce, as an addition to, and in the same manner as, a duty of customs. These would include education cess or higher education cess as well as anti - dumping and safeguard duties. Input tax credit be availed on GST Compensation Cess paid on inward supplies: Yes, input tax credit can be availed on GST Compensation Cess paid on inward supplies of the above mentioned notiied goods. However, the credit of GST Compensation Cess paid can be ulllzed only tawards payment of the GST Compensation Cess lability GST Compensation Cess applicable goods: GST Cess willbe levied on supply of certain notified goods — mostly belonging fo the luxury and demerit category. Sample of items on which GST Cess willbe applicable are as follows - Thoms GST Rate Applicable (GST Cess Range (GST Ces Calling Coal o% INR 400 / tonne INR 400 / tonne Pon Masala) 28% 50% 135% Tobacco 28% 1% 204% INR 4170 / thousand: ‘Aerated Drinks 28% 12% 15% Motor Vehicles 28% 120% 22% Example :2 Suppose Assessable Value (A.V.) including landing charges = 100/- (eco - 10% @ i6st- 12% () Social Welfare Surcharge - 10% (Compensation cess - 10% In view of the above parameters, the calculation of duty would be as belo\ (@) eco 10 [10% of AV.] (&) Social Welfare Surcharge = 1 [10% of (a)] (©) IGST-213.32 (AV. +(0)+(b )Px12% (c)_Compensation cess -€11.10 [A.V. +(a)+(b)Ix 107% The Institute of Cost Accountants of India 373Note: (1) In cases where imported goods ore liable to Anti - Dumping Duly or Safeguard Duty, calculation of Anti - Dumping Duty or Safeguard duty would be os per the respective notification issued for levy of such duty. Its {iso Clarified that value for calculation of IGST as well as Compensation Cess shall also include Anti- Dumping Duty amount and Safeguard duty amount. (2) The inclusion of anti- dumping duties and safeguard duly in the value fer levy of IGST and Compensation Ces is an important change. These were not hitherto included in the value for the levy of additional duty of customs (CVD) or Special Additional Duty {SAD}. The IGST paid shall net be added to the valve for the purpose. of calculating Compensation Cess, Example: 3 X Transport company imported Rolls Royce car for the purpose of providing output services by woy of transportation of passengers. Following are the cost & other details Particulars ‘Amount (INR) ‘Cost of vehicle (Assessable value) '300,00,000 ‘Custom duty 10% IGT 28% ‘Compensation cess 20% X Transport company Is eligible fo lake Input fax credif and have output IGST labilly of INR 120 Lakh, Calculate fax liabilly towards Custom duty & GST liability. Answer: Particulars ‘Calculation ‘Amount(INR) Cost of Vehicle-(A) '300,00,000 Custom duty-(@) 10%, 30,00,000 Social Welfare Surcharge -(C) 10% on (8) 3,00,000, Total custom duty payable- (0) (8+C) 33,00,000 Total Cost after Custom duty-(@) ) '333,00,000 167-9) 28% on (©) 93,24,000 Compensation cess-(6) 20% on (€) 66,60,000 Total cost-(H) (E+F+G) 492,84,000 + Input tax credit available fo set off against output IGST Is INR 93,24,000 + Compensation cess paid cannot be set off gainst output tax lability of IGST + Total tax payable by X Transport Company after adjusting IGST ITC is INR 26,76,000 (120,00,000-93,24,000) (4) Protective Duties: A duty imposed on imported goods for the protection of the interests of any industry established in India on the recommendation of Tariff Commission. It fs effective only and inclusive of the date, if any, specified in the Frst Schedule of the Tarif, (5) Safeguard Duty: Safeguard duty is product specific. the duly imposed under ths section shall be in force for a period the date of its imposition and can be extended with the otal period of levy not exceeding 10 years f 4 years from Safeguard duty shall not apply to articles imported by a 100% EOU undertaking or a unit in a FIZ or in a SEZ unless specifically made applicable. wef. 6-8-2014 itimported goods are cleared in DTA, then safeguard duty will be payable. 374 The Institute of Cost Accountants of IndiaTypes of Duties 1 Provisional Sateguard Duty: The Central Government may, pending the determination under sub-section (1) of Section 88, impose a provisional safeguard duty under this subsection on the basis of a preliminary determination that increased imports have caused or threatened fo cause serious injury lo a. domestic industry: Provided that where, on final determination, the Central Governmentis of the opinion that increased imports have not caused or threatened to cause serious injury to a domestic indusity, it shallrefund the duty so collected; Provided further that the provisional safeguard duty shall not remain in force for more than two hundred days trom Ihe date on which it was imposed, Question: When shall the safeguard duty under section 88 of the Customs Tariff Act, 1975 be not imposed? Discuss briefly. Answer: The safeguare types of articles Suty under section 88 of the Customs Tariff Act, 1975 is not imposed on the import of the following (i) Adictes originating from a developing country, so long as the share of imporis of that article from that country does not exceed 3% of the total imports of that article into Inaia: (i) Attictes originating from more than one developing county, so long as the aggregate of imports trom developing countries each with loss than 3% import share taken together does not exceed 9% of the total imports of that arfcle into India (il) Adticles imported by a 100% EOU or units in a Free Trade Zone or Special specifically made applicable on them. Note: "developing country” means a country notified by the Central Government in the Official Gazette for the purposes of this section, sonomic Zone unless the duty is Example :4 Determine the safeguard duty payable by X Ud., under section 8B of the Customs Tariff Act, 1975 trom the following: X Ltd imported Sodium Nitite from a developing country from 26th February, 2015 to 2sth February, 2016 (both days inclusive) € 50 crores. Total imports of Sodium Nitite (Incuding developing country) is € 2,500 crores. Note: Satteguard duty is @ 30%. Whether your answer is diferent in case of import of Sodium Nitite from a developing country € 80 crores? “Answer: Since, import from a developing country does not exceeds 3% (Le. 2% only) of total import of that article in to India, Safeguard duty is Nil Inthe given case safeguard duty will be payable by X Ltd. Safeguard duty 24 crores (Le. @ 80 crores x 307) Since, import rom a developing country exceeds 3% (ie. 3.2%) The Institute of Cost Accountants of India 375Ini Example: 5 Determine the safeguard duly payable by X Ud., ¥ Lid, Z Ud. and A Lid. under section 88 of the Customs Tariff Act, 1975 from the following: Import of Sodium Nitite from developing and developed counties from 26th February, 2015 to 25th Febrvary, 2016 (both days inclusive) are as follows: Importer ‘Country of import Zin Crores Xd. Developing Coury 70 Yuta. Developing Coury 72 Zita. Developing Coury 52 Alta, Developing Coury 50 ‘Others Developed Courly 2.256 Total 2,500 Note: Saffeguard duly 30%. Answer: Importer ‘Country of import Zin Crores % of imports Xd. Developing Courty 70 28% Ylid. Developing Courly 72 2.88% Zit. Developing Courty 2 2.08% Ald. Developing Courly 50 2% Others Developed Courty 2.256 Total 2,500 9.76% Safeguard duty is as follows: Importer Zin Crores % of imports Xa. 21 70% 30% Yud. 21.60 72% 30% Zit. 15.60 52% 30% Ald. 15 50* 30% Articles originating from more than one developing countries and imports from each developing country is less than 3%, safeguard duty can be imposed if imports rom all such developing countries taken together exceeds 9% of fotal imports of that article in India. 376 The Institute of Cost Accountants of Indiaypes of Duties Example :6 Determine the safeguard duly payable by X Lid. ¥ Ud., and Z Lid. and A Ud. under section 8B of the Customs Tati Act, 1975 trom the following: Import of Sodium Nitite from developing and developed counties from 26th February, 2015 to 25th Febrvary, 2016 (both days inclusive) are as follows: Importer County of mport Tin Crores Xd. Developing Coury 70 Yud. Developing Coury a2 Zuid. Developing Coury 52 Altd. Developing Coury 50 ‘Others Developed Courly 2.246 Total 2,500 Note: Safleguard duly 30%. Answer: Importer ‘Country of import Zin Crores % of imports Xt Developing Courly 70 28% Yuid, Developing Courly 2 3.28% Zit. Developing Courty 2 2.08% Altd. Developing Courly 50 2% ‘Others Developed Courty 2.256 Total 2,500 688% 3.28% Safeguard duty is as follows: Importer Tin Crores % of imports Xt NIL 70 * 30% Yutd. 724.60 82* 30% Zita. NIL 52% 30% Alta. NIL 50% 30% Articles originating from more than one developing countries (each with less than 3% import share), then the ‘aggregate of imports fom all such countrels taken together does not exceed 9% (Le., In the given case 6.88%) of the fotal imports of that article into India. Therefore, Safeguard duty is not applicable to X Lid. Z Lid. and A Lid. [Circular No. 23/2015 Cus dated 29.09.2015] Safeguard duties are rebatable as duty drawback (section 75 of the Customs Act). Since safeguard duties are not taken into consideration while fxing All Industry Retes of drawback, the drawback of the same can be claimed under an application for Brand Rale under rule 6 or tule 7 of the Customs, Central Excise Dutles and Service Tax Drawback Rules, 1995. Thisimplies thal drawback shallbe admissible only where the inputs which suffered sofeguard duties were ac! Used in the goods exported as confirmed by the verfication conducted for fixation of Brand Rate. ually Further, where imported goods subject to safeguard duties are exported out of the country as such, then the Growoack payable under section 74 of the Customs Act would also include the incidence of safeguard duties as part of total duties paid, subject fo fulllment of other conditions. The Institute of Cost Accountants of india 377Ini (6) Countervailing Duty on Subsidized alicles: Duty levied if the articles are imported into India by getting the subsidies from other country. The amount of countervailing duty shall not exceed the amount of subsidy paid. It shall be in force for @ period of 5 years from the date of is imposition and can be extended for a further period of S years. Ithas been subsumed under GST. (7) Anticdumping duty: Itis imposed on imports of « parliculor country. Where any orlicles exported by an exporter fo Indie al less than ils normal value, then, upon the Importation of such article into India, the Central Govt, may impose an anti-dumping duty. ‘Example: 7 A commodlty is imported info India from a country covered by a notification issued by the Central Government under section 9A of the Customs Tarif Act, 1975. Following particulars are made available: CIF valve of the consignment: US$25,000 Quantity imported: 500 kgs. Exchange rate applicable: € 60=US$1 Basic customs duty: 12% Social Welfare Surcharge applicable as per the Finance Act, 2018. ‘As per the nolifcation, the anti-dumping duly will be equal fo the diference between the cost of commedlly calculated @ US$70 per kg. and the landed valve of the commodity as imported. Appraise the labilily on account of normal duties, cess and the anti-dumping duty. ‘Assume that only ‘basic customs duty’ (@CD) and Social Welfare Surcharge are payable. IGST @12% is also be applicable. Answer: ‘Statement showing land value of imported goods and customs duties: Particulars uss Clk value 25,000 Value int ‘Assessable valve (.e. 25,000 x %60) 1¥5,00,000 ‘Add: Customs duty (including SWS) 13.2% on Assessable valve 1,98,000 Landed valve (or value of imported goods) 16,98,000 “Anti-dumping duty (21,00,000 - 16,98,000) “4,02,000 Market value of imported goods (500 kgs x €60 x US $70) = 21,00,000 ‘Open Market Value 21,00,000 ‘Add: IGST@12% on € 21,00,000 2,52,000 Total 23,52,000 Total customs duty payable is & 8,52,000 (Le. 1,98,000 + 4,02,000 + 2,52,000) 378 The Institute of Cost Accountants of IndiaTypes of Duties Note: In. cases whore imported goods are fable to Anti - Dumping Duty or Safeguard Duty, calculation of Anti - Dumping Duty of Safeguard duty would be as per the respective notification issued for levy of such duty. It fs also clarified that valve for calculation of IGST as well as Compensation Cess shall also include Anti - Dumping Duty amount ond Safeguard duty amount (8) Export Duties os per 2nd Schedule of Customs Tarif Act, 1975, Export duly @ 10% onde Oiled | _ Exporl duly @ 25% on Export duly 15% Ferrous Rice Bran (Grade 1) - used for luggage leather ‘waste and serap Poultry/Cattle/Fish teed manufacturing Export duly @ 15% on Leather ] Export duly 10% on Snake | Export duly 10% on raw fur skins lam skins esa Exemption from Customs Duties General Exemption ‘Special Exemption | ¥ ¥ By nofification in the official Gazette, exempt | |By special order in each case, exempt generally either absolutely or subject to such || from payment of duty, any goods on conditions as may be specified in the notification, | | which duty is leviable only under ‘goods of any specified description from the whole | | circumstances of an exceptional nature ‘oF any part of duty of customs leviable thereon, to be slated in such order, Note: No duty shalllbe collected if the amount of duly leviable is equal fo, or less than & 100. The Institute of Cost Accountants of India 379