Budget 2010-11: Summary of Major Amendment in Custom duty Laws

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

(b) “CVD” means the Additional Duty of Customs levied under section 3 of the Customs Tariff Act, 1975. Changes come into effect immediately unless otherwise specified.

Major proposals about customs duties are the following:

A. PETROLEUM

1)         Customs duty on crude petroleum is being increased from Nil to 5%.

2)         Customs duty on Motor Spirit (petrol) and HSD (diesel) is being increased from 2.5% to 7.5%.

3)  Customs duty on some other specified petroleum products is being increased from 5% to 10%.

B. PRECIOUS METALS

1)         Customs duty on serially numbered gold bars (other than tola bars) and gold coins is being increased from Rs.200 per 10 gram to Rs.300 per 10 gram.

2)         Customs duty on other forms of gold is being increased from Rs.500 per 10 gram to Rs.750 per 10 gram.

3)         Customs duty on silver is being increased from Rs.1000 per kg to Rs.1500 per kg.

4)         Customs duty on platinum is being increased from Rs.200 per 10 gram to Rs.300 per 10 gram.

The above change in rates would also be applicable when gold, silver and platinum (including ornaments) are imported as personal baggage.

C. ADDITIONAL DUTY OF CUSTOMS OF 4 % (SPECIAL CVD)

Goods imported in pre-packaged form and intended for retail sale and certain specified goods namely, ready-made garments, mobile phones and watches are being provided an outright exemption from additional duty of customs of 4%. In addition, outright exemption from this duty is also being provided to Carbon Black Feedstock, waste paper and paper scrap.

The existing exemption by way of refund would continue on other items.

D. FOOD/AGRO PROCESSING

1)         Project imports status is being granted to the initial setting up or substantial expansion of, a cold storage, cold room (including farm pre-coolers) for preservation or storage or an industrial unit for processing of agricultural, apiary, horticultural, dairy, poultry, aquatic & marine produce and meat. These projects would attract concessional rate of basic customs duty of 5%.

2)         Project imports status is being granted to installation of Mechanized Handling Systems & Pallet Racking Systems, in mandis or warehouses for food grains and sugar, with concessional rate of basic customs duty of 5%. Such systems are also being exempted from additional duty of customs (CVD) and special additional duty of customs.

3)         Truck Refrigeration units for the manufacture of refrigerated vans/trucks are being fully exempted from basic customs duty. Such units are already exempt from excise duty.

4)         Basic customs duty is being reduced from 7.5% to 5% on specified agricultural machinery such as 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 etc.

E. AGRICULTURE/HORTICULTURE

1)         Basic customs duty on long pepper is being reduced from 70% to 30%.

2)         Basic customs duty on ‘asafoetida’ (heeng) is being reduced from 30% to 20%.

3)   Full exemption from basic customs duty is being provided to bio-polymer/bio-plastics (HS Code 39139090) used for
manufacture of bio-degradable agro mulching films, nursery plantation & flower pots.

F. CAPITAL GOODS

1)   Mono Rail Projects for urban transport are being granted project imports status under Heading No. 98 01 and would accordingly attract concessional rate of 5% basic customs duty.

2)         Tunnel Boring machine for hydro-electric power projects is being fully exempted from basic customs duty with Nil CVD.

3)         Concessional rate of customs duty of 5% presently available upto 06.07.2010 on specified machinery for tea, coffee and rubber plantation is being extended upto 31.03.2011. Excise duty exemption is also being re-introduced on these items upto 31 .03.2011.

4) Specified road construction machinery items are presently fully exempt from customs duty subject to specified conditions. Sale or disposal of such machinery items at depreciated value is being allowed on payment of customs duties on depreciated value at the rates applicable at the time of import subject to specified conditions.

G. CONCESSIONS TO ENVIRONMENT-FRIENDLY ITEMS

1)       Full exemption from basic customs duty and special additional duty of customs is being extended to specified parts namely, batteries including battery chargers, electric motors and AC or DC motor controllers imported for manufacturing all categories of electrical vehicles including cars, two wheelers and three wheelers (like Soleckshaw). These parts will attract CVD of 4%. The concession is subject to actual user condition. This concession will be available till 31 .03.2013.

2)       A concessional rate of basic customs duty of 5% is being provided to machinery items, instruments, appliances required for initial setting up of solar power generation projects or facilities. These items have been exempted from CVD also by way of excise duty exemption provided to them.

3) Ground source heat pump (for geo-thermal energy applications) is being fully exempted from basic customs duty and special additional duty of customs.

H. HEALTH SECTOR

1)       At present, medical 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%].

2)         Parts required for the manufacture and accessories of medical equipment will also attract 5% concessional basic customs duty with Nil special CVD.

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

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).

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.

I. ELECTRONICS HARDWARE

1)       Battery chargers and hands-free headphones are the basic accessories of mobile phones. Full exemption from basic customs duty and CVD presently available for parts, components, accessories for manufacturing of mobile handsets including cellular phones and parts thereof is being extended to parts for the manufacture of battery chargers and hands-free headphones also.

2)         Full exemption from 4% special additional duty of customs presently available upto 06.07.2010 on parts, components and accessories for manufacture of mobile handsets including cellular phones, parts thereof (except accessories) is being extended to parts of two specified accessories also upto 31.03.2011.

3)         Basic customs duty is being reduced from 10% to 5% on magnetrons of upto 1,000 kw for the manufacture of microwave ovens.

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

J. ENTERTAINMENT/MEDIA

1)         Films for exhibition are imported on cinematographic films or digital media. Digital masters/Stampers of films are also imported for duplication and distribution of CD/DVDs. It is being provided that customs duty would now be charged only on the value of the carrier medium and the customs duty on the balance value will be exempt.

2)       Similar tax treatment, as provided to films above, is being extended to music and gaming software (other than pre-packaged form) for retail sale imported on digital media for duplication. Pre-packaged Movies, Music and Games (meant for use with gaming consoles) will continue to be charged to import duties on value determined in terms of the provisions of the Customs Act.

3)       Promotional material like trailors, making of films etc. imported free of cost in the form of electronic promotion kits (EPK)/ Betacams are being fully exempted from basic customs duty and CVD.

4)       Project imports status is being accorded to ‘Setting up of Digital Head End’ with 5% concessional basic customs duty and Nil special additional duty of customs.

K. GOLD REFINING

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.

L. EXPORT PROMOTION

1)                   Basic customs duty on Rhodium is being reduced from 10% to 2%.

2)       The current limit of Rs. 1 lakh per annum for duty free import of samples is being enhanced to Rs. 3 lakh per annum

3) At present specified components, raw materials and accessories for the manufacture of sports goods are exempt from basic customs duty. Some additional items are being added to the list of exemption.

M. ELECTRICAL ENERGY

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. 26^th June, 2009. Exemption on supplies or imports of electrical energy, other than the above, would continue.

N. AMENDMENTS IN CUSTOMS ACT, 1962

Section 127 dealing with Settlement Commission is being amended so as to restore certain provisions as they obtained prior to the enactment of the Finance Bill, 2007. Accordingly, the prohibition on filing of applications for the settlement of cases where an assessee admits short-levy in respect of goods not included in the entry made under the said Act. (i.e. cases of misdeclaration, suppression etc.) is being removed. Similarly, the restriction that an assessee may seek only one-time settlement is also being relaxed. The Commission is being empowered to extend the time limit of nine months for disposal of applications by another three months, for reasons to be recorded in writing.

O. AMENDMENTS IN CUSTOMS TARIFF ACT, 1975

1)                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.

2)       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.

3) In Chapter 27, sub-heading 2712 20 and the tariff items 2712 20 10 and 2712 20 90 are being substituted by 2712 2000 covering ‘Paraffin Wax containing by weight less than 0.75% of oil’. Further, tariff item 2712 90 40 covering ‘Paraffin wax containing by weight 0.75% and more of oil’ is being inserted.