CUSTOMS DUTY PROPOSALS
Additional duty of customs under section 3 Section 3 of the Customs Tariff Act (CTA), 1975 is being substituted vide clause 72 of the Finance Bill, 2005. The new section 3, inter alia, also enables the Government to impose an additional duty, at a rate not exceeding 4% ad valorem, to countervail the sales tax, value added tax, local taxes and other charges leviable on like goods on their sale or purchase or transportation in India. Value for the purposes of the said levy would include the assessable value, basic customs duty, any sum chargeable as a duty of customs under section 12 of the Customs Act and the additional duty of customs leviable under sub-section (1) of section 3 of CTA, but shall exclude the countervailing duty referred to in section 9 of CTA, anti-dumping duty referred to in section 9A of CTA and safeguard duty referred to in sections 8B and 8C of CTA. This new levy will not be included in the assessable value for the purposes of levy
of education cess on imported goods. The substituted section 3, by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931, has the force of law, and comes into effect immediately w.e.f. 1st March 2005. For the present, this additional duty at 4% has been imposed with immediate effect from 1st March 2005 only on items bound under the Information Technology Agreement, and on specified inputs / raw materials for manufacture of electronics / IT goods. However, IT software and documents of title conveying the right to use IT software will not be subject to this levy. It may be noted that except for these goods, this duty will not apply to any other goods for the present. The Cenvat Credit Rules, 2004 are being amended to allow domestic manufacturers to take credit of this additional duty of customs for payment
of any excise duty on their finished goods. Service providers are not allowed to take credit of this additional duty. Credit of this additional duty can be utilized for payment of excise duty (including special excise duty and additional excise duties) on final products, but not for paying service tax. Credit of this additional duty in respect of capital goods can be taken in one installment (as against two installments in other cases). All provisions relating to Cenvat Credit, including those relating to rebate and refunds are applicable to this additional duty, as are applicable to the excise duty leviable under the Central Excise Act. Peak rate of customs duty Peak rate of customs duty on non-agricultural goods has been reduced from 20% to 15%, subject to certain exceptions. In general, tariff rate is also being reduced to 15%. Ad valorem component of customs duty on textile fabrics and garments has
been reduced from 20% to 15%. There has, however, been no change in specific component of customs duty. Metals and their Inputs ¨ Customs duty has been reduced from 15% to 10% on primary and semi-finished forms of following metals:-
(a) Stainless steel, other alloy steel and ferro-alloys (b) Aluminium (c) Copper (d) Zinc (e) Tin (f) Base metals of Chapter 81 (such as, Tungsten, Magnesium, Cobalt, Titanium, etc.)
¨ Customs duty on lead has been reduced from 15% to 5%, on articles of lead from 20% to 10% and on battery separators
from 20% to 5%. ¨ Customs duty on calcined alumina has been reduced from 20% to 10%. ¨ Articles of iron and steel, copper, zinc, other base metals, aluminium (7615) and miscellaneous articles (Chapters 82 and 83) will attract customs duty of 15%. Articles of lead (7805 and 7806) will attract customs duty of 10%. Cermets and articles thereof (8113) will attract 15% duty. Inputs for Manufacture of Steel: ¨ Customs duty has been reduced from 15% to 10% on:-
(a) Refractories and graphite electrodes (b) Raw materials for refractories namely, natural graphite powder, aluminous cement, boron carbide, reactive alumina, silicon metal (99% purity), micro/fumed silica, brown fused alumina, fused zirconia,
silicon carbide, sodium hexameta phosphate, phenolic resin, sintered/tabular alumina and fused silica.
Ashes and Residues ¨ Customs duty has been reduced from 15% to 10% on ashes and residues of copper and zinc. Catalysts: ¨ Customs duty has been reduced from 15% to 10% on catalysts of heading 38.15. Agriculture & Food Processing:
¨ Concessional rate of 5% customs duty + Nil CVD, presently available to specified plantation machinery upto 30.4.2005, has been extended by one more year. ¨ Customs duty on cut flowers including orchids has been increased from 30%
to 60%. ¨ Customs duty on cloves has been reduced from 70% to 35%. ¨ Customs duty on oleo pine resin has been reduced from 10% to 5%. ¨ Customs duty on Alpha pinene has been reduced from 15%/20% to 5%. ¨ Customs duty on refrigerated goods transport vehicles has been reduced from 20% to 10%. ¨ The additional duty of customs on tea and tea waste, levied under section 128 of the Finance Act, 2003, is being exempted.
Research and Development:
¨ Customs duty on 9 specified equipment for biotech and pharmaceutical sectors has been reduced from 20% to 5%. ¨ Customs duty exemption presently available to
capital goods and raw materials to a company for any Research and Development (R&D) project funded by Government or CSIR has been extended to R&D projects funded by CSIR, ICMR, ICAR, UGC, DRDO and AICTE also.
Information Technology:
¨ Customs duty has been exempted on specified items covered under the Information Technology Agreement (ITA). With this, all 217 ITA bound items are now fully exempt from customs duty. ¨ All goods imported for the manufacture of ITA bound items have been exempted from customs duty subject to end-use condition. ¨ Customs duty has been exempted on specified electronic components. ¨ Customs duty exemption presently available to specified capital goods for Information Technology/Electronics sector has been extended to some
more capital goods. ¨ Customs duty has been reduced from 20% to 10% on optical fibers / bundles and optical fiber cables of heading 9001. ¨ Customs duty exemption presently available to specified telecom network equipment and parts thereof upto 31.3.2005, when imported by telecom service providers, has been continued without any time limit.
Petroleum Products: ¨ Customs duty on crude petroleum and petroleum products has been reduced as follows:-
Product |
Pre budget |
Post Budget |
Crude petroleum oil |
10% |
5% |
Petrol and diesel |
15% |
10% |
Kerosene (for PDS) |
5% |
Nil |
Liquified petroleum gases (for domestic use) |
5% |
Nil |
Other petroleum products |
20% |
10% |
¨ Additional duty of customs on motor spirit and high speed diesel oil has been increased from Re.1.50 per liter to Rs.2 per liter. Chemicals and Petrochemicals:
¨ Customs duty has been reduced from 15% to 10% on Polymers of Ethylene (LDPE, LLDPE, HDPE, LHDPE, LMDPE), Polypropylene and Propylene copolymers, Polymers and copolymers of Styrene and Polymers of Vinyl Chloride. ¨ Customs duty has been reduced on Ethylene, Propylene, Butylene, Butadiene, Benzene, Toluene, O-Xylene, Styrene, Ethylbenzene, Ethylene Dichloride, Vinyl Chloride Monomer and Acrylonitrile, from 10% to 5%. ¨ Customs duty on other organic chemicals falling under headings 2901 to 2904, has been reduced to 10%. ¨ Customs duty on Ethyl Vinyl Acetate has been reduced from 20% to 10%. ¨ Customs duty on molasses has been reduced from 15% to 10%. ¨ Customs duty on industrial (denatured) ethyl alcohol has been reduced from 15% to 10%. ¨ Customs duty on Alpha Pinene falling under chapters 29 or 38 is being reduced from 15% or 20% to 5%.
Capital Goods:
¨ Customs duty of 5% on mono or bi-polar membrane electrolysers and parts thereof presently available to caustic soda industry, has been extended to caustic potash industry. ¨ Customs duty on railway locomotives, railway rolling stock and railway equipment and their parts (of chapter 86) has been reduced from 20%
to 10%. ¨ Concessional rate of customs duty of 5% presently available to specified goods designed for use in leather / footwear industry has been extended to 7 more specified machinery. ¨ Customs duty on specified parts of printing presses has been reduced from 20% to 10%. ¨ Customs duty on specified textile machinery, and raw materials and parts for manufacture of such machinery, has been reduced from 20% to 10%. ¨ Customs duty on specified machinery/equipment for use in Inland Container Depot (ICD)/Container Freight Station (CFS) has been reduced from 20% to 10%. ¨ Customs duty exemption for specified inputs for manufacture of leather goods, travel goods, footwear, etc. for export has been extended to some more items, subject to the existing 3% overall value limit.
National Calamity Contingent Duty (NCCD):
¨ For replenishment of the National Calamity Contingent Fund, duty of Rs. 50 per metric tonne on imported crude oil, and a duty of 1% on polyester filament yarn, motor cars, multi-utility vehicles, and two-wheelers, was imposed in Finance Act, 2003. This levy was valid for one year (upto 29.2.2004) and subsequently extended upto 31.3.2005. It is proposed to extend this levy without any time limit.
Baggage: ¨ Customs duty on passenger baggage has been reduced from 40% to 35%. Miscellaneous:
¨ Customs duty on second hand motor cars / motor cycles has been reduced from 105%
to 100%. ¨ Customs duty on coking coal of high ash content (12% or more) has been reduced from 15% to 5%. ¨ Customs duty on boron ore has been reduced from 15% to 5%. ¨ Customs duty on Atmospheric Water Generators has been reduced from 20% to 5%. ¨ Customs duty on specified parts of battery operated road vehicles has been reduced from 20% to 10%. ¨ Customs duties on refractories (6902 and 6903) and specified raw materials for the manufacture of refractory products is being reduced from 15% to 10%.
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