India New Budget 2010 - 2011 Changes in Customs Duty.

I. CUSTOMS

12     Rate structure:

12.1     There is no change in the overall rate structure of basic customs duty. The peak rate of 10% and the lower rate slabs are being maintained. However, there are changes in respect of certain commodities/ goods which are discussed in subsequent paragraphs.

13     Petroleum:
13.1     The following changes have been made in the duty structure applicable to crude petroleum and refined petroleum products:
(i) basic customs duty on crude petroleum is being increased from Nil to 5%.
(ii) basic customs duty on Motor Spirit (petrol) and HSD (diesel) is being increased from 2.5% to 7.5%.
(iii) basic customs duty on some other specified petroleum products is being increased from 5% to 10%.

14     Precious Metals:
14.1     The rates of duty on precious metals are being increased, whether these are imported as cargo or baggage (except platinum).

15     Relief Measures:
15.1     Additional Duty of Customs under section 3 (5) of the Customs Tariff Act
15.1.1     Outright exemption from additional duty of customs (of 4%) leviable under sub-section (5) of section 3 of the Customs Tariff Act, 1975 is being provided to goods imported in a pre-packaged form and intended for retail sale. The condition of the exemption is that the goods have to be such as requiring the declaration of the retail sale price either under the Standards of Weights and Measures Act or under any other law. Full exemption is also being provided to mobile phones, watches and ready made garments falling under specified headings of the Tariff. The exemption based on refunds contained in notification No. 102/2007-Customs dated 14.9.2007 is also being retained to enable other importers to claim exemption by way of refund, if VAT is paid on the goods. Full exemption from this duty is also being provided to Carbon Black Feedstock and Waste Paper.

15.2     Project Imports
15.2.1     The following projects are being notified under heading 98.01 (6):
(i) Cold storage, cold room (including farm pre-coolers) or industrial projects for preservation, storage or processing of agricultural, apiary, horticultural, dairy, poultry, aquatic & marine produce and meat- (5% basic duty)
(ii) Project for installation of Mechanized Handling Systems & Pallet Racking Systems, in mandis or warehouses for food grains and sugar (basic customs duty 5% +nil CVD + Nil Spl CVD)
(iii) Mono Rail Projects for urban public transport (5% basic customs duty)
(iv) Setting up of Digital Head End (5% basic customs duty + Nil Spl CVD)

15.3 Other relief measures
15.3.1     Important relief measures are as under:

Full exemption to –
o Truck Refrigeration units for the manufacture of refrigerated vans/trucks
o Bio-polymer/bio-plastics (HS Code 39139090) used for manufacture of biodegradable agro mulching films, nursery plantation & flower pots
o Tunnel Boring machine for hydro-electric power projects
o Ground source heat pump (geo-thermal energy) (with full exemption from special CVD of 4%)
o Specified capital goods and raw materials for the manufacture of electronic hardware.
o Specified parts namely, batteries including battery chargers, electric motors and AC or DC motor controllers imported for manufacture of all categories of electrical vehicles including cars, two wheelers and three wheelers (like Soleckshaw) with CVD of 4% and full exemption from special CVD till 31.03.2013.
o Parts for the manufacture of battery chargers and hands-free headphones (accessories of mobile phones) along with full CVD and special CVD (time-bound) exemption
o Specified components, raw materials and accessories for the manufacture of sports goods (Nil basic duty)
o Security thread, security fibres, M-features for use in the manufacture of security paper by Security paper Mill, Hoshangabad.

Concessional basic customs duty of 5% to-
o Specified agricultural machinery e.g. paddy transplanter, laser land leveler, cotton picker, reaper-cum-binder, straw or fodder balers, sugarcane harvesters, track used for manufacture of track-type combine harvester
o Specified machinery for tea, coffee and rubber plantation is being extended upto 31.03.2011 (along with full excise/ CVD exemption)
o Machinery items, instruments, appliances required for initial setting up of solar power generation projects or facilities with full exemption from excise duty/ CVD

Other concessions-
o Basic customs duty on long pepper from 70% to 30%.
o Basic customs duty on „asafoetida‟ (heeng) from 30% to 20%.
o Basic customs duty on magnetrons of upto 1,000 kw for the manufacture of domestic microwave ovens from 10% to 5%.
o Basic customs duty on Rhodium from 10% to 2%.

15.4     Specified road construction machinery items are presently fully exempt from customs duty subject to certain conditions in terms of S. No. 230 of notification No.21/2002-Customs dated 1.3.2002. One of the conditions of this exemption is that the equipment imported under it cannot be sold or disposed of for a period of five years from the date of import. The condition is now being relaxed to allow the sale or disposal of such machinery items on payment of customs duties on depreciated value at the rate of duty applicable at the time of import. In order to claim this benefit, the importer is to produce a certificate from the sponsoring authority that the equipment is no longer required for the project. Another condition of the exemption is that the importer is required to undertake that he shall use the goods exclusively for the construction of roads. It has been brought to the notice of the Ministry that this is being interpreted to mean that the imported machinery may be used only for the project for which it was initially imported. This is resulting in the idling of machinery/ equipment. It is clarified that it is permissible to relocate or re-deploy the machinery imported under the exemption to another road construction project for which the importer would have been otherwise eligible to claim the benefit of the exemption. Pending cases, if any, may be disposed of accordingly.

15.5     Gold ore and concentrate are being fully exempted from basic customs duty and special additional duty of customs. They will, however, be chargeable to CVD @ Rs.140 per 10 gram of gold content. This duty structure is subject to actual user condition.

15.6 The current limit of Rs. 1 lakh per annum for duty free import of samples in terms of notification no. 154/94-Customs dated 13.7.1994 is being enhanced to Rs. 3 lakh per annum.

16     Rationalisation Measures:

16.1     Medical Equipment
16.1.1     The rate structure applicable to medical, surgical, dental and veterinary equipment falling under heading nos. 90.18, 90.19, 90.20, 90.21 and 90.22 is being rationalized. At present, such equipments attract varying rates of customs duty and are spread over many lists. This multiplicity of rates is being done away with and now all medical equipments (with some exceptions) will attract 5% basic customs duty, 4% CVD/ excise duty and Nil special additional duty of customs [i.e. effective duty of 9.2%].

16.1.2     Parts required for the manufacture and accessories of medical equipment will also attract 5% concessional basic customs duty with Nil special CVD. This concession is not confined to parts classifiable in Chapter 90 but to parts falling under any chapter of the tariff.

16.1.3     Concessional customs duty available to spares for the maintenance of medical equipment is being withdrawn except in specified cases.

16.1.4     Full exemption from basic customs duty and CVD/excise duty is being retained for specified medical devices (exempt by description) as well as for assistive devices, rehabilitation aids and other goods for disabled (List 41).

16.1.5     Cobalt-chrome alloys, special grade stainless steel etc. for the manufacture of orthopaedic implants are being exempted from basic customs duty subject to actual user condition.

16.2     Motion pictures, music and gaming software recorded on medium

16.2.1     Movies imported on cinematographic film are exempt from so much of the customs duty as is in excess of the duty payable on the aggregate of the cost of the print and the freight and insurance charges in terms of notification no.33/2003-Customs dated 1.3.2003. This exemption is being rescinded. A fresh exemption is being provided whereby customs duty on movies/ motion pictures recorded on cinematographic film or digital medium (CD/DVD etc.) would be charged only on the cost of the medium and the freight and insurance. The exemption would also apply to music and gaming software (meant for use with gaming consoles) but not to such goods when they are imported in a pre-packaged form for retail sale.

16.2.2     Full exemption from customs duty is being provided to promotional material like trailors, making of films etc. imported free of cost in the form of electronic promotion kits (EPK)/Betacams.

16.3     Electrical energy
16.3.1     At present, Electrical energy is fully exempt from customs duty. Electrical energy supplied from a Special Economic Zone to the Domestic Tariff Area and non - processing areas of SEZ would now attract duty of 16% ad valorem + Nil Special CVD. This change is being made retrospectively w.e.f. 26th June, 2009. Exemption on supplies or imports of electrical energy, other than the above, would continue. (clause 60 of the Finance Bill)

16.4     IT software
16.4.1     Packaged software is exempt from so much of the CVD as is equivalent to the duty payable on the portion of the value which represents the consideration paid or payable for transfer of the right to use such goods provided that the said transfer is for commercial exploitation. The condition of commercial exploitation is being removed. Similar change is being effected on the excise side as well.

17     Other Legislative Proposals:
17.1     The provisions relating to Settlement Commission in Section 127 of the Customs Act, 1962 have also been amended on the lines of Central Excise discussed above to expand the scope of cases that may be taken up for settlement, to enable repeated applications for settlement except in specified cases and to empower the Commission to extend the period for disposal of cases by three months.(clauses 57-59 of the Finance Bill)

17.2     Section 3 of the Customs Tariff Act is being amended to provide that the value of the imported goods for the purpose of charging CVD in respect of goods chargeable to excise duty on the basis of Maximum Retail Sale Price under Medicinal and Toilet Preparations (Excise Duties) Act, 1955 shall be the retail sale price declared on such imported goods less the amount of abatement, if any. This change will come into effect on enactment of the Finance Bill. (clause 61 of the Finance Bill)

17.3     Consequent upon insertion of a new tariff item covering filter cigarettes of length not exceeding 60 mm and other changes in the schedule to the Central Excise Tariff Act, similar change is being carried out in heading 2402 with the new tariff item attracting customs duty of 30% ad valorem. (clause 62 of the Finance Bill)

17.4     Changes in Chapter 27 carried out in the First Schedule to the Central Excise Tariff Act have been replicated in the Customs Tariff Schedule so as to align the two. (clause 62 of the Finance Bill)

18.     In the interest of brevity and focus, it has been possible for me to highlight only the important changes in this communication. A detailed discussion of the changes is contained in the Explanatory Notes that have been prepared separately for Customs and Central Excise and circulated. I may caution, however, that it is only the Finance Bill and the relevant notifications that have legal force. It has been our sincere endeavor to avoid any inconsistencies or mistakes in preparing these documents and to reflect the policy and legislative intent clearly both in the legal text as also in explaining their scope in other budget papers. Yet errors cannot be ruled out. I would urge you and your colleagues to study the budgetary changes carefully and to promptly bring to our notice any mistakes or
ambiguities that you may notice. The Departmental Officers in the field formations may be suitably briefed about them.

19.     It may kindly be ensured that the changes are implemented in a smooth manner without causing any inconvenience to the taxpayers and other stakeholders. All possible efforts may be made to guide the taxpayers by holding interactive sessions/ seminars for their benefit. In case of any doubt or difficulty, I would request you to bring it immediately either to my notice or to the notice of Shri Yogendra Garg, Director TRU, (Tel No.011-23092236; e-mail: [email protected]) or Ms. Limatula Yaden, Deputy Secretary, TRU (Tel No. 011-23092753; e-mail: [email protected] ).

20.     In order to monitor some of the key changes announced in the Budget and to study their impact, Post Budget Reports (PBR I to VIII) have been prescribed.