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Changes in Custom Duty vide Budget 2022- Detailed Analysis

Memorandum Explaining the Provisions in Finance Bill, 2022 (Budget 2022-23) Relating To  Amendments in the Customs Act, 1962 Other Legislative Amendments Pertaining To Customs, Amendments in the First Schedule to the Customs Tariff Act, 1975, Pruning and Review of Customs Duty Concessions/ Exemptions, Proposals Involving Changes in Effective Basic Customs Duty Rates In Respect Of Phased Manufacturing Program [PMP] With Respect To Specific Electronic Goods, Other Proposals Involving Changes in Basic Customs Duty Rates/Health Cess in Respective Notifications [With Effect from 2.2.2022, Unless Specified Otherwise], Duty Concessions on Specified Items When Imported By Bonafide Exporters, Review Of Levy Of Social Welfare Surcharge [SWS] On Various Items By Amending Notification No. 11/2018- Customs Dated 02.02.2018, Other Miscellaneous Changes in Various Notifications Providing Concession on Imports, Other Changes (Including Certain Clarifications/ Technical Changes by Amending Notification No. 50/2017-Customs Dated 30.06.2017, Anti-Dumping Duty (ADD)/ Countervailing Duty (CVD)/ Safeguard Measures and Changes In Export Duty Rates in Notification No. 27/2011 – Customs [With Effect from 02.02.2022

Changes in Custom Duty vide Budget 2022- Detailed Analysis

EXPLANATORY MEMORANDUM TO THE FINANCE BILL, 2022

CUSTOMS

Note:

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

(b) “Agriculture Infrastructure and Development Cess” means a duty of customs that is levied under Section 124 of the Finance Act, 2021.

(c) “Road and Infrastructure Cess” means an additional duty of customs that is levied under Section 111 of the Finance Act, 2018 respectively.

(d) “Health Cess” means a duty of customs that is levied under Section 141 of the Finance Act, 2020.

(e) “Social Welfare Surcharge” means a duty of customs that is levied under Section 110 of the Finance Act, 2018.

(f) Clause Nos. in square brackets [ ] indicate the relevant clause of the Finance Bill, 2022.

(g) Amendments carried out through the Finance Bill, 2022, will come into effect on the date of its enactment, unless otherwise specified.

I. Amendments in the Customs Act, 1962

S. No. Amendment Clause of the Finance Bill, 2022
1. Clause (34) of section 2 contains definition of “proper officer”. This section is being modified to specifically state that assignment of functions to an officer of Customs by the Board or the Principal Commissioner of Customs or the Commissioner of Customs shall be done under the newly inserted sub-sections (1A) and (1B) of Section 5 in the Customs Act, 1962 (52 of 1962). [85]
2. Section 3 is being amended to specifically include the officers of DRI, Audit and Preventive formation in the class of Officers. This amendment has been made to remove any ambiguity as regards the class of officers of Customs. [86]
3. Sub-Section (1A) and 1(B) to Section 5: Sub-section (1A) and (1B) have been inserted in section 5 of the Act to explicitly provide power of assignment of function to officers of customs by the Board or as the case may be by the Principal Commissioner of Customs or Commissioner of Customs. This amendment has been necessitated to correct the infirmity observed by the Courts in recent judgments that the Act required explicit provision conferring powers for assignment of function to officers of Customs as “proper officers” for the purposes of the Act, besides the definition clause (34) in section 2 of the Customs Act [87]
4. Sub-section (4) to Section 5 is being inserted to delineate the criteria which the Board may adopt while imposing limitations or conditions under sub-section (1) or while assigning functions under sub-section (1A) to the officer of Customs. For instance, one of the limitations/ conditions that the Board currently imposes on “officers of Customs” is that they are required to operate within a specified territorial jurisdiction. However, with the launch of faceless assessments and other trade facilitation initiatives wherein, for instance, a need is felt for the development of industry-specific expertise in assessments the Board may need to confine jurisdiction to certain goods or class of goods. [87]
5. Sub-section (5) to Section 5 is being inserted to ensure that wherever necessary, for the proper management of work, two or more officers of customs, can concurrently exercise powers and functions (for example in the case of faceless assessment) [87]
6. Section 14 is being amended to include provisions for rules enabling the Board to specify the additional obligations of the importer in respect of a class of imported goods whose value is not being declared correctly, the criteria of selection of such goods, and the checks in respect of such goods.

This amendment is a measure to address the issue of
undervaluation in imports.

 [88]
7. Section 28E is being amended to omit the Explanation under clause (c) and omit clause (h). [89]
8. Section 28H is being amended to make provisions for prescribing appropriate fees by Board relating to application for advance Ruling and also give flexibility to the applicant to withdraw his application at any time before a ruling is pronounced from the current 30 days’ time period. Consequently, the sub-section (3) is being omitted. [90]
9. Sub-section (7) under section 28I is being substituted so as to remove the word “Members” and also make changes accordingly. [91]
10. Sub-section (2) under Section 28J is being substituted so that advance ruling under sub-section (1) of Section 28J is now valid for a period of three years or till there is a change in law or facts on the basis of which the advance ruling has been pronounced, whichever is earlier.

A proviso is also being inserted to provide that the advance rulings in force on the date on which the Finance Bill, 2022 receives assent of the President, the said period of three years shall be reckoned from the date on which the Finance Bill receives assent of the President.

 [92]
11. Section 110AA is being inserted with a view to affirm the principle that, wherever, an original function duly exercised by an officer of competent jurisdiction, is the subject matter of a subsequent inquiry, investigation , audit or any other specified purpose by any other officer of customs, then, notwithstanding, such inquiry, investigation, audit or any other purpose, the officer, who originally exercised such jurisdiction shall have the sole authority to exercise jurisdiction for further action like re­assessment, adjudications, etc. consequent to the completion of such inquiry, investigation, audit or any other purpose. [93]
12. Section 135AA is being inserted to protect the import and export data submitted to Customs by importers or exporters in their declarations by making the publishing of such information unless provided by the law, as an offence under Customs Act. [94]

II. Other Legislative Amendments Pertaining To Customs

S. No. Amendment Clause of the Finance Bill, 2022
1. A clause [] has been inserted in the Finance Bill, 2022. This clause seeks to give validation to any action taken or functions performed before the date of commencement of the Finance Act, 2022, under certain Chapters of the Customs Act by any officer of Customs, as specified in Section 3 of the Customs Act, as amended, where such action was in pursuance of their appointment and assigning of functions by the Central government or the Board under the Customs Act. [96]

III. Amendments in the First Schedule to the Customs Tariff Act, 1975

IV. Pruning and Review of Customs Duty Concessions/ Exemptions

A. Review of concessional rates of BCD prescribed to Capital Goods and Project Imports vide notification No. 50/2017 – Customs dated 30.6.2017:

The Customs duty rate structure on capital goods and project imports has been comprehensively reviewed and exemption on capital goods/ project imports are being phased out in a gradual manner. However, certain exemptions on capital goods would continue. Accordingly, the BCD exemption hitherto available on certain goods are being withdrawn by omitting the following entries of notification No. 50/2017 – Customs dated 30.6.2017, from the dates mentioned against each entry.

V. Proposals Involving Changes in Effective Basic Customs Duty Rates In Respect Of Phased Manufacturing Program [PMP] With Respect To Specific Electronic Goods

S. No. Chapter, heading, sub-heading, or tariff item Commodity From To
2022- 23 2023-24 2024-25 2025-26
PMP for Wrist Wearable Devices (Smart watches)
Following parts [S. No. 1 to 7] for manufacture of wearable devices falling under tariff item 8517 62 90 of the Customs Tariff
1. 8517 79 10 Printed Circuit Board Assembly (PCBA) NIL NIL 10% 15% 15%
2. 8544 Charging Cable 10% NIL 5% 10% 15%
3. 39, 73, 85 Specified parts of wearable devices As
per
CTH		 NIL 5% 10% 15%
4. 8507 60 00/ 8507 80 00 Battery 15% NIL 5% 10% 15%
5. 8517 79 90 Display Assembly NIL NIL NIL 5% 10%
6. 8501 Vibrator Motor 10% 10% 10% 10% 10%
7. Any Chapter Parts, sub-parts, and raw materials for use in the manufacture of the S. Nos 1 to 6 above As
per
CTH		 NIL NIL NIL NIL
8. 8517 62 90 Wrist Wearable Devices (Commonly known as Smart
Watches)		 20% 20% 20% 20% 20%
Note: IGCR conditions shall apply for the items in S. No. 1 to 7 above.

_____

PMP for Hearable Devices
Following parts [S. No. 1 to 6] for manufacture of hearable devices falling under sub-headings 8518 21, 8518 22, 8518 29 or 8518 30 of the Customs Tariff
1. 8518 90 00 PCBA for Hearable Device 10% NIL 10% 15% 15%
2. 8544 USB Cable 10% 15% 15% 15% 15%
3. 73, 74, 85 Specified parts of hearable devices As
per
CTH		 NIL 5% 10% 15%
4. 8507 60 00/ 8507 80 00 Battery 15% NIL 5% 10% 15%
5. 8518 90 00 Speaker Assembly (Pre-assembled speaker driver with protective mesh, but
not including PCBA or battery)		 10% NIL NIL 5% 10%
6. Any Chapter Parts, sub-parts, and raw materials for use in the manufacture of the S. Nos 1, 3, 4, and 5 above As
per
CTH		 NIL NIL NIL NIL
7. 8518 21,
8518 22,
8518 29,
8518 30		 Hearable Devices Note – Hearable devices mean: –

(i) true wireless stereo (TWS), headphones, earphones and
similar devices like earbuds, neckbands, headsets, etc., whether or not combined with a microphone, being capable of
connecting through a wireless medium; and

(ii) portable bluetooth speakers comprising of an amplifier and
loudspeaker(s) with maximum output power not exceeding 40 Watts, having battery as a source of power and capable of wireless connectivity through bluetooth.

 15% 20% 20% 20% 20%
Note: IGCR conditions shall apply for the items in S. No. 1 to 6 above.
PMP for Smart Meters
Following parts [S. No. 1 to 6] for manufacture of smart meters falling under tariff item 9028 30 10 of the Customs Tariff
1. 9028 90 10 Assembled / Populated PCB for Smart Meters 7.5% 20% 20% 20% 20%
2. 8517 69 90 Communication
Module		 10% NIL NIL 5% 10%
3. 8536 49 00 Relay 10% 5% 10% 10% 15%
4. 8517 71 00 Antenna NIL NIL NIL 5% 10%
5. 8524 11 00/

8524 91 00

 LCD & Backlight for LCD 15% NIL 5% 10% 10%
6. 8506 50 00 Battery 10% NIL 5% 10% 10%
7. Any Chapter Parts, sub-parts, and raw materials for use in the manufacture of the S. Nos 1 to 6 above As
per
CTH		 NIL NIL NIL NIL
8. 9028 30 10 Smart Meters 15% 25% 25% 25% 25%
Note: IGCR conditions shall apply for the items in S. No. 1 to 7 above.

VI. Other Proposals Involving Changes in Basic Customs Duty Rates/Health Cess in Respective Notifications [With Effect from 2.2.2022, Unless Specified Otherwise]

S. No. Chapter, heading, sub­heading, or tariff item Commodity From To
Agricultural Products and By Products
1. 0306 Live Black tiger shrimp (Penaeus monodon) 30% 10%
2. 0306 19 00 Frozen Krill 30% 15%
3. 1518 Algal Oil for manufacturing of aquatic feed 30% 15%
Fuels, Chemicals and Plastics
4. 2710 19 Fuel oil 5% 2.5%
5. 2710 19 Straight run fuel oil 5% 2.5%
6. 2710 19 Low sulphur wax residue 5% 2.5%
7. 2710 19 Vacuum residue, Slurry 5% 2.5%
8. 2710 19 Vacuum gasoil 5% 2.5%
9. 2837 11 00 Sodium cyanide 7.5% 10%
Paper
1. 4707 Recovered (waste and scrap) paper or paperboard for use in manufacturing of paper, paperboard or
newsprint		 NIL 2.5%
Gems and Jewellery Sector
2. 7102 21 7102 31 00 Simply Sawn Natural Diamonds imported under Kimberley Process Certification Scheme (KPCS) Applica ble Rate NIL
3. 71 Cut and Polished Diamonds 7.5% 5%
4. 71 (except 7104 99 00) Cut and Polished Natural Gemstones 7.5% 5%
Metals
5. 7204 Iron and steel scrap, including stainless steel scrap [Exemption hitherto available till 31.3.2022 is being extended up to 31.03.2023] NIL [upto 31.3.20 22] NIL [upto 31.3.20 23]
Electrical and Electronics Sector
15. 3920 99 99,

9002 11 00

 Camera lens for use in manufacture of Camera Module for Cellular Mobile Phone 10%/ 15% 2.5%
16. Specific
CTH		 Specified parts for use in manufacture of transformers of chargers/adapters 10%/ 15% 5%
17. 74 or 76 Copper/Aluminium based Copper clad laminate for use in manufacture of PCB/MCPCB 5%/ 7.5% NIL
18. 90 Following items used in manufacture of X-ray items:

a) X-Ray grid

b) Multi Leaf Collimator/ Iris

c) Static User Interface

 5% 10%
19. 90 X-Ray Machines 7.5% 10%
Medical devices
20. 9018 32 10 Surgical needles imported for manufacture of Surgical sutures Health
Cess @ 5%		 Health
Cess @
Nil
Toys
21. 9503 Parts of electronic toys for manufacture of electronic toys 15% 25%
Capital Goods
22. 7325 10 00 S. G. Ingot Castings used in manufacturing of Plastic Processing Machinery 10% 7.5%
23. 8483 40 00, 8477 90 00 Ball Screw and Linear Motion Guide used in manufacturing of Plastic Processing Machinery 7.5% 5%
24. 84 Bushing (made up of platinum and rhodium alloy, imported in exchange of worn-out bushing exported for refurbishment) 10% 7.5%
25. 8419 Coffee roasting, brewing or vending machineries for use in the manufacturing or processing of coffee 10% 7.5%

VII. Duty Concessions on Specified Items When Imported By Bonafide Exporters

1. A scheme for duty-free imports for the purpose of use in goods meant for export, based on end-use monitoring is being introduced for bonafide exporters subject to the requirement of exporting value added products manufactured using inputs imported under these exemptions, within a period of six months. Importer shall be required to follow the procedure under the Import of Goods at Concessional Rate (IGCR) Rules, 2017.

2. The following changes are being made to operationalize the scheme as detailed under:

  • Conditions required for availing exemptions vide No. 257 are being amended.
  • No. 257A is being inserted to provide for conditional exemptions for import of specified items like decorative papers, motifs, back of photo frames, etc. to be used in manufacture of handicraft products meant for exports.
  • No. 257B is being inserted to provide for conditional exemptions for import of specified items like fasteners, inlay cards, lining and inter-lining materials, wet blue chrome tanned leather, etc. to be used in manufacture of textile or leather garments meant for exports.
  • No. 257C is being inserted to provide for conditional exemptions for import of specified items like buckles, buttons, locks etc. to be used in manufacture of leather or synthetic footwears, or other leather products meant for exports.
  • No. 288, having been subsumed under new S. No. 257B, is being omitted.

VIII. Review Of Levy Of Social Welfare Surcharge [SWS] On Various Items By Amending Notification No. 11/2018- Customs Dated 02.02.2018

S. No. Amendment
1. All goods falling under tariff items 0802 91 00, 0802 92 00 and 0802 99 00 have been exempted from SWS.
2. All goods falling under sub-headings 1509 90 and 1510 90 have been exempted from SWS.
3. All goods falling under tariff items 2515 12 90, 2516 11 00, 2516 12 00 have been exempted from SWS.
4. All goods falling under the sub-headings 5208 39, 5209 31, 5209 32, 5209 39, 5209 49, 5210 39, 5211 31, 5211 32, 5211 39, and 5211 49 have been exempted from SWS.
5. All goods falling under the sub-heading 5407 61 have been exempted from SWS.
7. All goods falling under tariff items 5516 22 00 and 5516 23 00 have been exempted from SWS.
8. All goods falling under tariff item 5802 30 00 have been exempted from SWS.
9. The current SWS exemption has been withdrawn for all goods falling under tariff item 6001 92 00.
10. The current SWS exemption has been withdrawn for all the goods falling under tariff item 6101 20 00; goods falling under sub-heading 6101 30; goods falling under tariff items 6102 10 00 & 6102 20 00; goods falling under sub-heading 6102 30; goods falling under sub-heading 6104 19 (except of wool or fine animal hair or cotton); and goods falling under tariff items 6104 62 00 , 6104 63 00.
11. SWS exemption has been withdrawn for all the goods falling under sub­headings 6201 30, 6201 40, 6202 30, 6202 40; falling under tariff items 6204 11 00, 6204 13 00; goods falling under sub-heading 6204 19, 6204 31; goods falling under tariff items 6204 32 00 & 6204 33 00; and goods falling under sub-headings 6204 39 & 6204 69.
12. In the heading 6203, the exemption from SWS has been narrowed down to all the goods falling under tariff items 6203 22 00, 6203 23 00; goods falling under sub-heading 6203 29; goods falling under tariff item 6203 41 00; and goods falling under sub-heading 6203 42.
13. SWS exemption has been withdrawn for all the goods falling under Sl. No. 3 [Men’s or boy’s overcoats, car coats, capes, cloaks, anoraks (including ski-jackets), wind-cheaters, wind-jackets and similar articles, knitted or crocheted, other than those of heading 6103, of wool or fine animal hair, falling under tariff item 6101 90 90] and Sl. No.4 [Upholstery fabrics falling under the following headings or sub-headings – 5208 39, 5209 31, 5209 32, 5209 39, 5209 49, 5210 39, 5211 31, 5211 32, 5211 39, 5211 49, 5407 61, 5516 22 00, 5516 23 00, 5802 30 00] of the notification No. 11/2018 – Customs dated 02.02.2018.

IX. Other Miscellaneous Changes in Various Notifications Providing Concession on Imports

S. No. Notification No. Amendment
1. Notification 148/94- Customs dated 13.07.1994 The notification prescribes exemption from customs duty on imports of specified free gifts, donations, relief and rehabilitation material imported by Charitable organizations, Red Cross Society, CARE and Government of India. This notification has been amended to provide exemption from Health Cess, Agriculture Infrastructure and Development Cess (AIDC) and Road and Infrastructure Cess (RIC) for goods imported under this notification.
2. Notification No.38/96- Customs dated 23.07.1996 The notification grants customs duty exemption on trans-shipment of goods either imported from foreign country for export to Bhutan/Nepal, all goods imported from Bhutan/Nepal for export to other countries and certain other specified goods. This notification has been amended to provide exemption from Health Cess, Agriculture Infrastructure and Development Cess (AIDC) and Road and Infrastructure Cess (RIC) for goods imported under this notification.
3. Notification No. 104/10-
Customs dated 01.10.2010		 The notification prescribes exemption from customs duty on specified goods imported from Nepal. This notification has been amended to provide exemption from Agriculture Infrastructure and Development Cess (AIDC) for goods imported under this notification.
4. Notification No. 60/2011- Customs dated 14.07.2011 The notification prescribes exemption from customs duty on imports of specified goods locally produced in border districts of Bangladesh. This notification has been amended to provide exemption from Agriculture Infrastructure and Development Cess (AIDC) for goods imported under this notification.
5. Notification No. 40/2017- Cus. dated 30.06.2017 The notification prescribes exemption from customs duty on imports of the specified goods from Bhutan, Bangladesh and China. This notification has been amended to provide exemption from Health Cess, Agriculture Infrastructure and Development Cess (AIDC) and Road and Infrastructure Cess (RIC)for goods imported under this notification.
6. Notification No. 50/2017 – Customs dated 30.06.2017 Treatment of rare diseases: A new entry at S. No. 167A is being introduced to exempt drugs or medicines, falling under Chapter 30 or Heading 9804 of the First Schedule to the Customs Tariff Act, 1975, which are used for the treatment of rare diseases, when imported by 8 Centre of Excellence (CoE) listed in the List 2 (inserted) or any other person/institution on their recommendation. This is in tune with the National Policy for Rare Diseases, 2021.

X. Other Changes (Including Certain Clarifications/ Technical Changes by Amending Notification No. 50/2017-Customs Dated 30.06.2017

S. No. S. No. of notification No. 50/2017 Description
1. 6 The condition of Specific Pathogen Free (SPF) for Live L. Vannamei Shrimp has been removed from the notification No. 50/2017 – Customs, as the same is being regulated by the Department of Fisheries.
2. 525, 526A and 531A Certain clarificatory amendments have been made to entry no. 525, 526A and 531A of notification No. 50/2017 dated 30.06.2017, in order to bring clarity about the scope of exemptions in relation to imports of completely knocked down/semi knocked down forms (CKD/SKD) of electric vehicles (EV) (including commercial, passenger and two-wheeled electric vehicles). These amendments clarify that for an EV kit to be eligible for the duty benefits available to a CKD form of an EV, each individual component in the kit need not be in a dis­assembled form. Further, it has been clarified that even if some components are missing in the EV kit, the benefit of concessional rate of duty available to CKD/SKD kits would still be available provided that the kit as presented has the essential character of an EV.
3. 531A This entry provides for concessional rate of Customs duty on imports of two-wheeled electrical vehicles. The words ‘electric compressor’ and ‘contactor’ have been deleted from this entry as these parts are not used in two-wheelers.

XI. Anti-Dumping Duty (ADD)/ Countervailing Duty (CVD)/ Safeguard Measures

1. Anti-Dumping duty is being permanently revoked, on imports of the following-

a) Straight Length Bars and Rods of alloy-steel, originating in or exported from People’s Republic of China, imposed vide notification No. 54/2018-Cus (ADD) dated 18.10.2018;

b) High Speed Steel of Non-Cobalt Grade, originating in or exported from Brazil, People’s Republic of China and Germany, imposed vide notification No. 38/2019-Cus (ADD) dated 25.09.2019;

c) Flat rolled product of steel, plated or coated with alloy of Aluminum or Zinc, originating in or exported from People’s Republic of China, Vietnam and Korea RP, imposed vide notification No. 16/2020-Cus (ADD) dated 23.06.2020.
2. Countervailing duty is being permanently revoked on imports of Certain Hot Rolled and Cold Rolled Stainless Steel Flat Products, originating in or exported from People’s Republic of China, imposed vide notification No. 1/2017-Cus (CVD) dated 07.09.2017.

XII. Changes In Export Duty Rates in Notification No. 27/2011 – Customs [With Effect from 02.02.2022

S. No. Chapter Commodity From To
Leather
1. 41 Raw hides and skins of buffalo 40% 30%

CHANGES IN RULES UNDER THE CUSTOMS ACT, 1962

S.
No.		 Amendment(s)
1. Trade Facilitation- Amendment to IGCR rules, 2017

Customs (Import of goods at concessional rate of duty) Rules, 2017 are being amended to provide the following facilities:

a) To introduce end to end automation in the entire process. Requirement of submitting all the necessary details electronically, through a common portal, is being brought out in the Rules itself.

b) Standardizing and notifying the various forms in which details are to be submitted electronically.

c) Leveraging the advantage of such submissions electronically, the need for any transaction based permissions and intimations are all being done away with.

d) Consequently, the procedure to claim the notification benefit is being simplified and automated.

e) For effective monitoring of the use of goods for the intended purposes, a Monthly Statement is being proposed which is to be submitted by the importer on the Common Portal.

f) An option for voluntary payment of the necessary duties and interest, through the Common Portal is being provided to the importer.

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