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Import clearance and custom duty

Customs duties
Types of customs duties Import of goods into India attracts customs duty. Customs duty consists of :

Basic customs duty Additional duty/Counter Vailing Duty (CVD) levied under section 3 of Customs Tariff Act Special additional duty levied under section 3A of Customs Tariff Act

STEPS OF IMPORT CLEARANCE


PURCHASE ORDER CONDITION L. C. CONDITIONS MODE OF DESPATCH ARRANGEMENT OF CARRIER COLLECTION OF DELIVERY ORDER CUSTOM CLEARANCE STORAGE AND ONWARD DESPATCH TO PROJECT SITE ARRANGEMENT OF RE EXPORT SETTLEMENT OF CUSTOM DISPUTE

Customs clearance processes

Arrival of carrier - Cargo Arrival Notice Filing of Manifest - Cargo declaration Filing of Bill of Entry - Import declaration Assessment Appraisal Classification Valuation Payment of duty Examination Release of goods

Import processing - Steps involved


Cargo Arrival Notice by shipping/Air lines to

the importer
Along with IGM, an application for entry

inwards has to be filed by the shipping/Air line


Preparation of BOE ( BILL OF ENTRY ) Submission of import documents and relevant

supporting documents

Import processing - Steps involved


Submission of BOE for home consumption Appraisal and Assessment

Approval by the Assistant Commissioner

(Customs) (AC) of the assessment and

Payment of duty, examination and

Out of Charge by Customs

Customs duties
Types of customs duties

Import of goods into India attracts customs duty.

Customs duty consists of : Basic customs duty Additional duty/Counter Vailing Duty (CVD) levied under section 3 of Customs Tariff Act Add Cess (Education) on CVD, if any Special additional duty (SAD) levied under section 3A of Customs Tariff Act Add Cess (Education) on Total Custom Duty

Customs duty Calculation (I)


Value of goods (CIF) + 1% of CIF value as Landing charges

paid in India (A)


100.0

Basic customs duty @ 25 % (B) 25.0 Total = (A) + (B) =(C) 125.0 Additional duty/CVD @ 16 % of (C)=(D) 20.0 Total = (C) + (D) = (E) 145.0 Special additional duty @ 4 % of (E) = (F) 5.8 Total landed cost = (E) + (F) = (G) 150.8 Effective duty = (G) - (A) = 50.8 The table provides the method of calculating effective customs duty

(Cess to be added on CVD & Total Custom Duty)

Customs duty Calculation (II) For ITA Items


Value of goods (CIF) + 1% of CIF value as Landing charges paid

in India

100.0 MEGA ITA Basic customs duty @ 0 % (B) NIL NIL Total = (A) + (B) =(C) 100.0 100.000 Additional duty/CVD @ 0/16 % of (C)=(D) NIL 16.000 Total = (C) + (D) = (E) 100.0 116.000 Special additional duty @ 4 % of (E) = (F) 4.0 4.640 Total landed cost = (E) + (F) = (G) 104.0 120.640 Custom duty = (G) - (A) = 4.0 20.640 Education Cess @ 2% => 0.08 0.413 Effective Custom Duty => 4.08 21.053 (The table provides the method of calculating effective customs duty)

(A)

(Cess to be added after CVD & Total Custom Duty)

NEW TARIFF CALCULATION (III)


EFECTIVE FROM 1.3.2005
Value of goods (CIF) + 1% of CIF value as Landing charges paid in India

(A) Basic customs duty @ 15 % (B) Total = (A) + (B) = (C) Additional duty/CVD @ 16 % of (C) =>(D) Education Cess @ 2% (E) Total CVD (D) + (E) = (F) Total Custom Duty (B) + (F) Education Cess @ 2% (G) Effective duty (H) = (B) + (F) + (G) => Total landed cost = (A) + (H) => (I)

100.000 15.000 115.000 18.400 0.368 18.768 33.768 0.675 34.443 134.443

The table provides the method of calculating effective customs duty

NEW TARIFF CALCULATION (IV) EFECTIVE FROM 1.3.2006

Value of goods (CIF) + 1% of CIF value as Landing charges paid in India (A) 100.000 Basic customs duty @ 12.5 % (B) Total = (A) + (B) = (C) Additional duty/CVD @ 16 % of (C) =>(D) Education Cess @ 2% (E) Total CVD (D) + (E) = (F) Total Custom Duty (B) + (F) Education Cess @ 2% (G) Effective duty (H) = (B) + (F) + (G) => Special Add. Duty (J) @4% = Total landed cost = (A) + (H) => (I) 12.500 112.500

18.000 0.360 18.360 30.860 0.6172 31.4772 5.2591 136.7363

The table provides the method of calculating effective customs duty (For Mega Power Stations BCD/CVD/EC/SAD all are NIL.)

NEW TARIFF CALCULATION (IV) EFECTIVE FROM 1.3.2007


Value of goods (CIF) + 1% of CIF value as Landing charges paid in

India (A) Basic customs duty @ 10 % (B) Total = (A) + (B) =(C) Additional duty/CVD @ 16 % of (C) =>(D) Education Cess @ 2% (E1) H Education Cess @ 1% (E2) Total CVD (D) + (E) = (F) Total Custom Duty (B) + (F) Education Cess @ 2% (G1) Education Cess @ 1% (G2) Effective duty (H) = (B) + (F) + (G) => Special Add. Duty (J) @4% = Total landed cost = (A) + (H) => (I)

100.000 10.000 110.000 17.600 0.352/17.952 0.176/18.128 18.128 28.128 0.56256/28.69 0.28128/28.97 28.97184 5.15887/34.13071 134.13071

The table provides the method of calculating effective customs duty (For Mega Power Stations BCD/CVD/EC/SAD all are NIL.)

CALCULATION OF ASSESIBLE VALUE


INVOICE VALUE : (A) FREIGHT : (B) OTHER CHARGES : (C)

( P&F, IAC, Etc.)


INSURANCE @ % Of A + C : ( D ) HANDLING CHARGES @ 1% of A+B+C+D : (E) TOTAL ASSESSABLE VALUE : A+B+C+D+E CONVERSION RATE TO INR FORMULA FOR CALCULATING ITEM WISE ASSESSABLE VALUE : Value Of Items as per Invoice x Gross Assessable value Total Invoice value

EXAMPLE:
FREIGHT : INVOICE VALUE : OTHER CHARGES :

( P&F, IAC, Etc.)


1927.00 34008.10 3159.90 39095.00 14.866 391.100 32500.966 8347420.48 Rs.

INSURANCE @ 0.04 % Of (A+ C) 37168 : HANDLING CHARGES @ 1% of 39109.866 TOTAL ASSESSABLE VALUE : in DM CONVERSION RATE -- 1DM = 21.20 INR 123482.10 X 837420.48 = 304898.66 Rs 34008.10

Basic Duty @ 20% on Value 304898.66 CVD @ 16% on value 365878.39 Total Duty

= =

60979.73 58540.54 1,19,510.27 Rs

Classification

The rate of customs duty applicable is governed by the sub-heading in which classification of the goods is covered under the Customs Tariff Act, 1975 (Tariff Act)

The Schedule to the Tariff Act consist of 99

Chapters arranged under 21 Sections and 6 digit classification code in each Chapter
Each Chapter and Section has notes that

facilitate the classification of goods therein

CUSTOMS TARIFF -CHAPTERS eg. 84 - Machinery & Mechanical Appliances . 85 - Electrical / Electronic Machinery & Equipment 90 - Photographic, Medical, Measuring & etc. Instruments
(These Chapters are subjects to certain inclusions/exclusions in line with chapters notes )

CODES :
XX

XX XX XX First 2 digits indicates Chapter No. Next 2 digits indicates broad category of items Next 2 digits indicates sub heading of the broad category Next 2 digits indicates item covered . eg. Torch Code 8513 10 10 13 Portable electric lamps ; 10 Lamps ; 10 Torch Miners Safety Lamps 8513 10 30

Basic principles of classification

Dictionary meaning Technical literature Common parlance test The Harmonised System of Nomenclature (HSN) is an international system of classification and coding of goods Trade/commercial understanding/usage HSN explanatory notes have persuasive value

Valuation - Sec 14
As per the Rules, the value of goods shall be

the transaction value Transaction value is the price actually paid or payable for the imported goods when sold for export to India Such price would include the following: cost of transportation, Loading, unloading and handling charges, Cost of insurance

Relevant date for rate of duty-S.15 of Customs Act


In case of home consumption, date on which

BOE is presented In case of warehoused goods, date on which goods are actually removed from warehouse In case of any other goods, date of payment of duty If BOE presented before entry inwards of vessel, then it shall deemed to have been presented on the date of such entry inwards or the arrival, as the case may be

Warehousing
Section 49 of the Customs Act In case the goods entered for home

consumption are not cleared within a reasonable time may with the permission from the concerned officer, be permitted to be stored in a warehouse.

Drawback provisions
Section 74 of the Customs Act deals with

drawback of duty on re-export of duty paid goods


The availability of drawback is subject to the

following conditions:

at the time of import, customs duty must have been paid on the imported goods; the goods imported must be identifiable as the goods exported;

where the goods are used in India, such usage must be for the prescribed period

Where the goods are used in India

subsequent to their import, the drawback rate is determined on the basis of the duration of use of the goods in India (i.e., the length of period from the date of clearance for home consumption and the date goods are placed under customs control for export)

Drawback provisions (contd.)


Where imported goods are re-exported

without use, a refund of 98 percent of the customs duty paid on import of such goods is available. The rates of duty drawback where the goods are put to use in India are set out below:
Length of period between the date of

clearance for home consumption and the date when the goods are placed under customs control for export

Percentage of customs duty be paid as drawback

Not more than 6 months 85% More than 6 months but not more than 12 months 70% More than 12 months but not more than 18 months 60% More than 18 months but not more than 24 months 50% More than 24 months but not more than 30 months 40% More than 30 months but not more than 36 months 30%

Drawback provisions (contd.)


Section 75 of the Customs Act read with section

37 of the Central Excise Act and the Customs and Central Excise Duties Drawback Rules, 1995, deals with drawback on imported materials used in the manufacture of goods which are exported
The drawback is allowed for the duties of

customs and excise, subject to specified conditions and procedure


Drawback is of two types

all Industry rate

brand rate