Budget 2011- Brief Notes on all amendments in Custom Duty Act and Tariff Act

Major proposals about customs duties are the following:

A GENERAL

1.The First Schedule to the Customs Tariff Act, 1975 is being amended vide Clause 57 of the Bill to give effect to the tariff changes relating to the Union Customs Duties.

2. The basic customs duty rates of 2%, 2.5% and 3% are being unified at the median rate of 2.5%.

B. Proposals involving changes in rates of duty, whether by amendment of tariff rates or by notification

I. FOOD/AGRO PROCESSING/AGRICULTURE:

1)Basic customs duty is being reduced from 5% to 2.5% on specified agriculture machinery namely paddy transplanter, laser land leveler, cotton picker, reaper-cum-binder, straw or fodder balers, sugarcane harvesters and track used for manufacture of track-type combine harvester.

2) Basic customs duty is being reduced from 7.5% to 2.5% on parts and components required for the manufacture of equipment at (1) above.

3) Basic customs duty is being reduced from 7.5% to 5% on micro-irrigation equipment (tariff item 8424 8100).

4) Basic customs duty on raw pistachios is being reduced from 30% to 10%.

5) Basic customs duty on sun-dried dark seedless raisins is being reduced from 100% to 30%.

6) Basic customs duty on cranberry products is being reduced from 30% to 10%.

7)Full exemption from basic customs duty is being extended to de-oiled rice bran oil cake.

8) Export duty of 10% is being imposed on exports of de-oiled rice bran oil cake.

II. AUTOMOBILES:

1) Full exemption from basic customs duty and SAD and concessional CVD @5% (by way of a central excise duty exemption) is being extended to specified parts of the hybrid vehicles, namely, battery pack, battery chargers, AC/DC electric motors and motor controllers. The concession is subject to actual user condition and will be available till 31.03.2013.

2) The customs duty dispensation and concessional CVD @5% at (1) above is also being made available to import of spare battery packs for the electric vehicles by importers which are registered with the agencies notified for Central Financial Assistance (CFA) scheme of the Ministry of Non-conventional & Renewable Energy (MNRE).

3) A definition for “Completely Knocked Down (CKD) unit” of a vehicle including two wheelers, eligible for concessional import duty, is being inserted to exclude from its purview such units containing a pre-assembled engine or gearbox or transmission mechanism or a chassis where any of such parts or sub-assemblies is installed.

III. SPECIAL ECONOMIC ZONES:

1) All clearances from SEZ into DTA are being exempted from SAD provided they are not exempt from the levy of VAT/ Sales Tax.

2) The CVD exemption currently available to Plastic materials reprocessed in India out of the scrap or the waste of goods falling under specified chapters is being extended to domestic tariff area clearances of such plastic materials manufactured in SEZ units also.

IV.  SHIP REPAIRS:

The benefit of exemption currently available to ship repair units on imports of spares and consumables required for repair of ocean going vessels is being extended to such spares and consumables for repairs of ocean going vessels by owners of such vessels registered in India.

V. TEXTILES:

1) Basic customs duty is being reduced on raw silk (not thrown) of all grades from 30% to 5%.

2) Cotton waste is being fully exempted from basic customs duty.

3) Basic customs duty on Poly Tetra Methylene Ether Glycol (PTMEG) and Diphenylmethane 4, 4-diisocyanate (MDI) is being reduced from 7.5% to 5% subject to actual user condition.

4) Basic customs duty is being reduced from 5% to 2.5% on Acrylonitrile.

5) Basic customs duty is being reduced from 7.5% to 5% on Sodium Polyacrylate.

6) Basic customs duty is being reduced from 10% to 7.5% on Caprolactum.

7) Basic customs duty is being reduced from 10% to 7.5% on Nylon chips, fibre & yarn.

8) Basic customs duty is being reduced from 5% to 2.5% on rayon grade wood pulp.

VI. CAPITAL GOODS/INFRASTRUCTURE:

1) The scope of full customs duty exemption to water supply projects for agricultural and industrial use is being expanded to the water pumping station and water reservoir of such projects.

2) The benefit of full exemption from basic customs duty and CVD currently available to Tunnel Boring machine’ and parts thereof for hydro-electric power projects is being extended to such machines for highway development projects also.

3) Basic customs duty is being reduced from 7.5% to 5% for specified gems and jewellery machinery.

4) Full exemption from basic customs is being provided to cash dispensers. Parts required for the manufacturer of cash dispensers are also being exempted from basic customs duty on actual user basis.

5) The concessional import duty of 5% basic customs duty, 5% CVD & Nil SAD currently applicable to high-speed printing machinery is being extended to mailroom equipment compatible with such printing machinery imported by registered newspaper establishments.

6) A concessional rate of 5% basic customs duty , 5% CVD & Nil SAD is being extended to parts and components for manufacture of 23 specified high voltage transmission equipments.

7) Full exemption from basic customs duty is being extended on bio-based asphalt sealer and preservation agent, millings remover and crack filler, asphalt remover and corrosion protectant and sprayer system for bio-based asphalt applications.

VII. CONCESSIONS TO ENVIRONMENT-FRIENDLY HEMS:

1) Concessional CVD @5% (by way of a central excise exemption) and full exemption from SAD is being provided to LEDs used for manufacture of LED lights and light fixtures.

2) Basic customs duty is being reduced from 10% to 5% on solar lantern or lamps.

3) Full exemption from customs duty is being extended to toughened glass and silver paste imported for manufacture of solar cells or solar modules on actual user basis.

VIII. HEALTH SECTOR:

1) Endovascular stents are being fully exempted from basic customs duty of 5%.

2) A concessional import duty regime of 5% Basic customs duty, 5% CVD & Nil SAD is being prescribed on specified raw material for the manufacture of syringes, needles, catheters, cannulae on actual user basis.

3) Exemption from SAD is being provided to P&P medicines imported for retail sale.

4) Customs duty on four specified life saving drugs and their bulk drugs is being reduced from 10% to 5% with Nil CVD (by way of excise duty exemption).

5) Basic customs duty on lactose for use in the manufacture of homoeopathic medicines is being reduced from 25% to 10%.

IX. ELECTRONICS HARDWARE:

1) A concessional import duty structure of 5% CVD and Nil SAD is being prescribed on parts of inkjet and laser-jet printers imported for manufacture of such printers.

2) Full exemption from basic customs duty is being extended to parts/components required for the manufacture of PC connectivity cable and sub-parts of parts & components of battery charger, hands-free head phones and PC connectivity cable of mobile handsets including cellular phones.

3) Full exemption from SAD presently available upto 31.03.2011 on parts, components and accessories for manufacture of mobile handsets including cellular phones is being extended upto 31.03.2012.

4) Full exemption from customs duty is being extended to additional specified capital goods and raw materials for the manufacture of electronic hardware.

5) A concessional import duty structure of 5% CVD and Nil SAD is being prescribed on parts for manufacture of DVD writers, Combo drives and CD Drives subject to actual user condition.

X AIRCRAFTS:

1) A basic customs duty of 2.5% is being imposed on imports of aircrafts for non-scheduled operations. The exemption from additional duty of customs (CVD) and special additional duty of customs (SAD) would continue.

2) Exemption from education cess and secondary and higher education cess presently available to aircrafts is being withdrawn.

XI. EXPORT PROMOTION:

1) The list of specified goods, allowed to be imported duty free for use in the manufacture of leather goods, for export is being expanded.

2) The list of specified goods, allowed to be imported duty free for use in the manufacture of textile and leather garments, is being expanded by including anti-theft devices like labels, tags and sensors therein.

3) Description of some items is being changed in the list of items that are allowed to be imported duty free for manufacture of textile or leather garments and other leather goods for export.

4) Benefit of duty free import on trimmings, embellishments, components etc. for manufacture of leather goods, footwear and textile garments is being extended to merchant exporters subject to certain conditions.

5) Specified tools used in the handicrafts sector are being included in the list of specified goods, allowed to be imported duty free to Handicrafts exporters.

6) Full exemption from basic customs duty is being extended to fin fish feed.

7) Basic customs duty on vannamei broodstock is being reduced from 30% to 10%.

8) Basic customs duty on bamboo used for manufacture of agarbattis is being reduced from 30% to 10%.

XII. PAPER:

Basic customs duty on waste paper is being reduced from 5% to 2.5%.

XIII. METALS:

1) Full exemption from basic customs duty is being extended to stainless steel scrap.

2) Basic customs duty on ferro-nickel is being reduced from 5% to 2.5%

3) Statutory rate of export duty on iron ores is being increased from 20% to 30% while unifying the effective rate of export duty on iron ore fines and lumps at 20%.

4) Iron ore pellets are being fully exempted from the export duty.

5) Copper dross, copper residues, copper oxide mill scale, brass dross and zinc ash are being exempted from levy of SAD.

6) Basic customs duty on vanadium pentoxide and vanadium sludge is being reduced from 7.5% to 2.5%. 7) Exemption from basic customs duty is being provided on the value of gold and silver contained in the copper concentrate.

XIV. PRECIOUS METALS:

An import duty of Nil basic customs duty, CVD of Rs.140 per 10 gram and Nil SAD is being prescribed for gold dore bars of upto 80% gold purity imported for refining and manufacturing serially numbered gold bars in India.

XV. MISCELLANEOUS:

1) Basic customs duty is being reduced from 5% to 2.5% on carbon black feed stock.

2) Basic customs duty is being reduced from 5% to 2.5% on petroleum coke.

3) Basic customs duty is being reduced from 5% to 2.5% on mineral gypsum.

4) Crude palm stearin is being fully exempted from basic customs duty for use in the manufacture of laundry soap on actual user basis.

5) At present specified categories of works of art and antiquities are exempted from customs duty. The scope of the exemption is being expanded by including,

(a) works or arts or antiquities for exhibition or display in private art galleries or similar premises that are open to general public;

(b) works of art created by an Indian artist abroad, irrespective of the fact whether such works are imported along with the artist or the sculptor on their return to India.

6) Special provision is being made in the Finance Bill imposing definitive safeguard duty retrospectively on imports of caustic soda lye imported into India during the period 04.12.2009 to 03.03.2010

7) Special provision is being made in the Finance Bill to retrospectively provide a concessional basic customs duty of 30% to fresh garlic imported by National Consumer Cooperative Federation and Madhya Pradesh State Cooperative Marketing Federation under import licenses issued by the Central Government and cleared after 15.1.2003.

8) Certain notifications are being amended retrospectively to allow exports made under the EPCG scheme to simultaneously avail of benefits under Export Reward Schemes such as Served From India Scheme, Focus Market Scheme etc.

[The changes at S. No. 6, 7 and 8 will come into effect on enactment of the Finance Bill]

XVI. AMENDMENTS IN CUSTOMS ACT, 1962:

1) Section 2 is being amended to include ‘self-assessment’ within the definition of ‘assessment’.

2) Section 17 is being amended to replace the existing system of assesment with ‘self-assessment’ of duty on imported and export goods by the importer or exporter. The revised provisions empower customs officers to verify the self assessment and if required, reassess duty on the imported or export goods. It is being further provided that the officers may conduct audit in certain situations either in their own office or at the premises of the importer or exporter.

3) Section 18 is being amended to make the provisions relating to provisional assessment of duty applicable in case an importer or exporter is unable to make self-assessment with the proposed scheme of `self-assessment’.

4)Section 19 is being amended to align the provisions relating to determination of duty where goods consist of articles liable to different rates of duty with the proposed scheme of ‘self-assessment’ under section 17.

5) Sub-section (1) of section 27 is being substituted so as to enhance the time limit for claiming refund of duty and interest from six months to one year. This will bring uniformity for both demanding duty and claiming refund.

6) Section 28 is being substituted so as to make the provisions more coherent and clear as also to harmonize the demand period in normal cases to one year.

7) Section 28AA and 28AB are being substituted with a revised section 28AA so as to make the provisions relating to interest more coherent and clear.

8) Section 46 is being amended to provide that an entry of imported goods shall be presented electronically and to empower the Commissioner of Customs to allow filing of entry in any other manner when it is infeasible to present electronically.

9) Section 50 is being amended to provide that an entry of export goods shall be presented electronically and to empower the Commissioner of Customs to allow filing of entry in any other manner when it is infeasible to present electronically.

10) Section 75 is being amended to enable the Central Government to prescribe circumstances under which drawback would not be disallowed even though the export remittances are not received within the period specified in the Foreign Exchange Management Act.

11) Section 110A is being amended to empower the adjudicating authority to allow release of seized goods.

12)  Section 124 is being amended to provide for issuance of a show cause notice with prior approval of an officer not below the rank of an Assistant Commissioner of Customs.

13) Section 131D is being inserted retrospectively with effect from 20.10.2010 to empower the Board to issue instructions relating to non-filing of appeal in certain cases in line with National Litigation Policy.

14) A new section 142A is being inserted so as to create first charge on the property of the defaulter for recovery of the customs dues from such defaulter subject to provisions of section 529A of the Companies Act, the Recovery of Debt due to Bank and Financial Institution Act, 1993 and Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

15) Section 150 is being amended so as to provide that the balance of sale proceeds of unclaimed cargo sold in auction shall be paid to the Government when it cannot be paid to the owner within six months,

16) Section 151A is being amended so as to empower the Board to also issue instructions to customs authorities on any other matters under the Customs Act or any other Act for the time being in force so far as they relate to prohibition, restrictions or procedure relating to import or export of goods.

17) Section 157 is being amended to empower the Board to prescribe regulations for specifying the manner of conducting audit at the office of the proper officer of customs or at the premises of the importer.

[These legislative changes will come into effect on enactment of the Finance Bill]

XVII. AMENDMENTS IN CUSTOMS TARIFF ACT, 1975:

1) Section 3 is being amended to substitute the reference to Standards of Weight & Measures Act, 1976 with Legal Metrology Act, 2009 with effect from 1.3.2011.

2) Section 9AA is being amended so as to enable the Central Government to reduce the anti-dumping duty imposed under the provisions of sub-section (1) of section 9A on an article or an importer where such importer proves to the satisfaction of the Central Government that he has paid anti-dumping duty in excess of his actual margin of dumping.

3) Customs Tariff (Identification, Assessment and Collection of Anti Dumping duty on Dumped Articles and for Determination of Injury) Rules, 1995 is being amended so as to revise provisions of rule 23 so as to align the same with Article 11 of the WTO Agreement on anti dumping and also to insert Annexure-III containing principles to determine the non-injurious price.

[These legislative changes will come into effect on enactment of the Finance Bill]

XVIII. AMENDMENTS IN THE SCHEDULES TO THE CUSTOMS TARIFF ACT, 1975:

1) The First Schedule is being amended to include editorial changes in the Harmonized System of Nomenclature (HSN) in certain chapters, which would be effective from 01.01.2012.

2) Description of heading 9804 in the First Schedule is being amended to cover all dutiable items intended for personal use, imported by post or air and to prescribe a tariff rate of 35% for tariff items under the heading.

3) The Second Schedule is being amended so as to align the entries with the Harmonized System of Nomenclature (HSN) and introduce a new entry for de-oiled rice bran cake. The effective rates of export duty on all items other than iron ores lumps, fines and pellets; and de-oiled rice bran cake are being maintained.

[These legislative changes at (1) will come into effect on enactment of the Finance Bill]

Notes to above:-

(a) “Customs Duty” means the customs duty levied under the Customs Act, 1962.

(b) “CVD” means the Additional Duty of Customs levied under sub-section (1) of section 3 of the Customs Tariff Act, 1975.

(c) “SAD” means the Special Additional Duty of Customs levied under sub-section (5) of section 3 of the Customs Tariff Act, 1975.

(d) All the Changes  mentioned below come into effect immediately unless otherwise specified.