2. INTRODUCTION
Customs Act, 1962
is the basic statute
governs entry or exit of different
categories of vessels, aircrafts, goods,
passengers etc.,
into or outside the country.
The Act extends to the whole of the India.
3. Section 12 of the Custom Act provides that
duties of customs shall be levied at such rates
specified under the Customs Tariff Act, 1975
or other applicable Acts on goods imported
into or exported from India.
4. TAXABLE EVENT:
Basic condition for levy of customs duty is
import/export of goods i.e. goods become
liable to duty when there is import into or
export from India.
5. — Import means bringing into India from a
place outside India [Section 2(23)].
— Export means taking out of India to a place
outside India [Section 2(18)].
— "India" includes the territorial waters of
India [Section 2(27)].
The limit of the territorial waters is distance of
twelve nautical miles from the nearest point of
the appropriate baseline.
6. Integrated Goods and Services Act came to
effect from June 22,
Accordingly, goods imported into India are now
subjected to IGST, not CVD and Special CVD.
However, petroleum products and tobacco
products are outside the scope of GST and
Hence CVD and special CVD are applicable to
them as usual.
7. the integrated tax on goods imported into
India shall be levied and collected
in accordance with the provisions of section 3
of the Customs Tariff Act, 1975
on the value as determined under the said Act
under section 12 of the Customs Act, 1962.
8. The integrated tax on the supply of :
petroleum crude,
high speed diesel,
motor spirit (commonly known as petrol),
natural gas and aviation turbine fuel
shall be levied with effect from such date as
may be notified by the Government on the
recommendations of the Council.
9. Section 3 of Customs Tariff Act, 1975 has been
amended and new subsections added as given
below:
Section 3(7) (Substituted): Any article which is
imported into India shall, in addition, be liable to
integrated tax at such rate,
not exceeding forty per cent as is leviable under
section 5 of the Integrated Goods and Services
Tax Act, 2017
on a like article on its supply in India, on the value
of the imported article as determined under sub-
section (8).
10. Types of duties;
(1) BASIC CUSTOM DUTY
Normally, it is levied as a percentage of
Value as determined under section 14(1).
There are different rates for different goods.
But the general basic rate is 10%.
This basic duty may be exempted by a
notification under Section 25.
11. (2) ADDITIONAL CUSTOM
DUTY/COUNTERVAILING DUTY [Section 3(1)]
This is levied under Section 3(1) of the Customs
Tariff Act, 1975.
The amount of this duty is equivalent to the
amount of excise duty payable on like goods
manufactured or produced in India.
Countervailing duty is imposed when excisable
articles are imported in order to counter balance
the excise duty, which is leviable on similar
goods if manufactured in India:
12. (3) ADDITIONAL DUTY/SPECIAL ADDITIONAL
DUTY (SAD) UNDER SECTION 3(5)
It is levied to offset the effect of sales tax,
VAT, local tax or other charges leviable on
articles on its sale, purchase or transaction in
India. It is leviable on imported goods even if
article was not sold in India.
13. The Central Government may levy additional
duty to counter balance the sales tax, value
added tax, local tax or any other charges
leviable in the like article on its sale,
purchase or transportation in India.
The rate shall be notified by the Central
Government which cannot exceed 4%.
14. 4) PROTECTIVE DUTY - SECTION 6 & 7 OF THE
CUSTOMS TARIFF ACT, 1975:
The protective duties should not be very stiff so
as to discourage imports.
It should be sufficiently attractive to encourage
imports to bridge the gap between demand and
supply of those articles in the market.
Section 6 provides that the protective duties are
levied by the Central Government necessary to
take immediate action to provide protection to any
industry established in India.
15. (5) SAFEGUARD DUTY - SECTION 8B OF
CUSTOMS TARIFF ACT, 1975 :The Central
Government may impose safeguard duty on
specified imported goods,
if it is satisfied that the goods are being
imported in large quantities and
they are causing serious injury to domestic
industry.
DURATION -10 YEARS
16. 6.COUNTERVAILING DUTY ON SUBSIDIZED
ARTICLES -
Section 9(1) provides that the countervailing
duty on subsidized articles is imposed
if any country or territory, directly or
indirectly, pays or bestows subsidy upon the
manufacture or production or exportation of
any article. Such subsidy includes subsidy on
transportation of such article.
Such articles are imported into India.
17. (7) ANTI-DUMPING DUTY (ADD) ON DUMPED
ARTICLES - SECTION 9A OF THE CUSTOMS
TARIFF ACT, 1975
Where any article is exported by an exporter
or producer from any country or territory to
India at less than its normal value, then, upon
the importation of such article into India,
the Central Government may, impose an anti-
dumping duty not exceeding the margin of
dumping in relation to such article.
18. The method of valuation of imports
and export goods under
Section 14 :The transaction value:
is the price actually paid or payable for the goods
when sold for export to India for delivery at the
time and place of importation, or
for export from India for delivery at the time and
place of exportation,
where the buyer and seller of the goods are not
related and
price is the sole consideration
19. In case of export goods, the transaction value
shall be:
-the price actually paid or payable for the
goods;
-when sold for export from India
-for delivery at the time and place of
exportation
-where the buyer and seller are not related
-price is the sole consideration for the sale
20. In case of imported goods, the transaction
value shall be
-the price actually paid or payable for the
goods;
-when sold for export to India
-for delivery at the time and place of
importation
-where the buyer and seller are not related
-price is the sole consideration for the sale
21. Adjustment to transaction value
ADJUSTMENTS IN TRANSACTION VALUE (RULE 10)
I. Adjustments specified in Rule 10(1)
In determining the transaction value, there shall
be added to the price actually paid or payable for
the imported goods, —
(a) the following to the extent they are incurred
by the buyer but are not included in the price
(i) commission and brokerage, except buying
commissions;
(ii) the cost of containers imported along with the
goods;
22. iii) the cost of packing whether for labour or
materials;
(b) The value, of the following goods and
services where supplied by the buyer free of
charge or at reduced cost for use in
connection with the imported goods,
but not included in the price actually paid or
payable namely:-
23. Ex materials, components, spare parts etc
(c) royalties and licence fees related to the
imported goods that the buyer is required to
pay,
(d) The value of any part of the proceeds of
any subsequent resale, disposal or use of the
imported goods that accrues, directly or
indirectly, to the seller
24. (e) all other payments actually made or to be
made by the buyer to the seller, or by the
buyer to a third party
25. The following points shall also be considered
while determining the assessable value:
(i) Where the cost of transport is not
ascertainable, such cost shall be 20% of the
free on board value of the goods.
In the case of goods imported by air, even
where the cost of transportation is
ascertainable, such cost shall not exceed 20%
of free on board value of the goods.
26. (ii) where the cost of insurance is not
ascertainable, such cost shall be 1.125% of
free on board (FOB) value of the goods;
(iii) loading, unloading and handling charges
shall be 1% of the free on board (FOB) value of
the goods + the cost of transport + cost of
insurance i.e. CIF Value.
27. Conversion dates: For imported goods the
conversion in value shall be done with reference to
the exchange rate prevailing on the date of filing of
bill of entry
For export goods the conversion in value shall be
done using the exchange rate prevalent on the date
of filling of shipping bill or date of bill of export
under section 50.
Conversion rates: The exchange rate is notified by
three agencies- CBEC; RBI and foreign exchange
dealers association. For the purpose of conversion in
value the rate notified by shall be taken.
28. XYZ limited has imported a machine from
England, it has given the following particulars:
a.Price of the machine 8000 UK Pounds
b.Freight paid (air) 2500 UK pounds
c.Design and development charages paid in UK
Charges 500 UK pounds
d.Commission payable to local agent of
exporter2% of the price of the machine in
Indian Rupees
29. e.Date of bill of entry 24/10/2017 and CBEC
notified exchange rate Rs.100 per pound.
Applicable Basic customs duty rate is 10%
f.date of arrival of aircraft 20/10/2017 and
exchange rate notified by CBEC is Rs. 98 per
pound and applicable BCD rate is 20%
g. integrated tax leviable is 12%
h. insurance charages have been actuall paid but
details are not available
compute customs duty and IGST payable by XYZ
limited
30. Price of machine 8,000 UK Pounds
Design and development
charges paid in UK-note-1
500
Total 8,500
Total in Rs 8500 x100-
note -2
8,50,000
Add local agency
commission
2% of price 8000
pounds=160xRs.100
16,000
FOB value 8,66,000
Add air freight 20% of
FOB
1,73,200
Add insurance-1.125% of
FOB Note-4
9,742.50
31. CIF value 10,48, 942.50
Add landing charges 1% of
CIF value-Note-5
10,489.43
Assessable value 10,59,432
Basic customs duty 10% of
assessable value-Note -6
1,05,943
Education cess 3% on
105943
3,178
Total 11,68,553
Integrated tax 12% on
11,68,553
1,40,226
Total of duty and IGST
payable
=(105943+3178)+140226=
2,49,348
32. section 15 of the act provides that the
applicable BCD rate is rate in force on the
date of bill of entry or the rate in force on
date of arrival whichever is lower
33. 6.Given Assessable Value: Rs. 1,00,000
BCD @10%;
CVD @12%
IGST payable 28% and
GST Compensation cess payable is 15%
You are required to calculate the amount of
total Customs duty (including anti-dumping
duty) payable by Ranga Ltd.
34. Particulars Value Duties
Assessable value 100000
Add BCD !0% 10000 10000
Total 110000
Add CVD 12% on
110000
13200 13200
Total 123200 23200
Add cess 3% on
23200
696 696
35. Total 123896 23896
Add IGST 28%
on 123896
34691 34691
Add
compensation
cess
15% on 123896
18594 18594
Total 1,77,171 77,171
36.
37. Steps in calculation of eligible input tax credit
Compute the total input tax on inputs and input
services-T
Comptue the input tax on inputs and input
services use for non business purposes-T1
Compute the input tax on inputs and input
services used for exempt supplies-T2
Compute the ineligible input tax on ineligible
inputs and services -T3
Compute C1 ie ITC credited to electronic ledger-
C1=T-(T1+T2+T3)
38. Compute T4 ie ITC used exclusively for taxable
supplies and Zero rate supplies.
Compute C2 ie common credit: C2=C1-T4
Compute ITC attributable to exempt supplies ie
D1=(E/F)XC2
Compute credit attributable to non-business
purposes
Compute net eligible Common credit ie C3=C2-
(D1+D2)
Total credit eligible- ie G=T4+C3
39. Example :
Details for the month of May 2018 as follows:
a.Total Input Tax available in the tax period –
1,00,000
b.Value of taxable items sold in her shop –
5,00,000
c.Value of vegetables sold (Agricultural activity) –
2,00,000
d. Input Tax on inputs (transporting charges) for
taxable supplies – 10,000
e.Input Tax for inputs exclusively for agricultural
activity (purchasing seeds, soil, labour charges) –
20,000
40. f.Input Tax for inputs exclusively for personal
purpose (eating out) – 5,000
g.Input Tax for inputs and services on which
availing credit is not eligible (travelling by Ola
to wholesalers)- 10,000
h.ITC credit attributable to personal purposes
is 5%of common credit.
From the above particulars calculate eligible
intput tax credit available
41. PARTICULARS REFERENCE GST TAX
Total Input Tax available in the tax
period
T 1,00,000
Input Tax for inputs exclusively
for personal purpose (eating out)
– 5,000 (T1)
T1 5,000
Input Tax for inputs
exclusively for agricultural
activity (purchasing seeds,
soil, labour charges)
T2 20,000
Input Tax for inputs and services
on which availing credit is not
eligible (travelling by Ola to
wholesalers)-
T3 10,000
ITC credited to electronic ledger C1=T-(T1+T2+T3) 65,000
Input Tax for inputs for taxable
Supplies
T4 10,000
42. Input Tax for
inputs for taxable
Supplies
T4 10,000
Common credit C2=(C1-T4) 55,000
Aggregatte value of
exempt supplies
E 2,00,000
TOTAL TURNOVER F 5,00,000
Credit attributable to
exempt supplies
D1=(E/F)XC2 22,000
Credit attributable to
personal purposes
D2=5% of C2 2,750
NET ELIGIBLE
COMMON CREDIT
C3=C2-(D1+D2) 30,250
TOTAL ELIGIBLE
CREDIT
G=(T4+C3) 40,250
43. STEPS TO BE FOLLOWED FOR COMPUTATION
OF ITC ON INPUT TAX CREDIT ON CAPITAL
GOODS:
In case of Capital Goods is used
commonly for providing taxable supply,
exempt supply or used for personal purpose,
the GST credit shall be calculate as per details
given below:
44. Step : 1 : Take the entire Amount of Credit to
Electronic Credit Ledger.
Step : 2 : The total life of assets is to be taken at
5 years ( 60 Months). Calculate the credit
attributable for each tax period i.e. month based
on estimated life of assets.
Credit for Tax Period: Total Tax Credit / 60
months
Step : 3 : Calculate amount of credit towards
Exempt supply:
Credit toward exempt supply =(Value of Exempt
supply / Total Turnover) X Credit for tax period
as per step 2
45. Step : 4: The amount calculated under step 3
shall be added to output tax liability for that
month.
Step : 5 : The same activity is to be done
separately for CGST SGST IGST
UGST
Note: if depreciation claimed on the GST paid
while purchasing the capital asset, you cannot
claim input tax credit.
46. Example: Mr. Avinash bought a capital asset
for use in exempt supplies only. He paid Rs
1,00,000/- along with GST of Rs 18,000 as
input tax on 01/10/2017. On 15/11/2018 he
wishes to use the capital asset commonly for
both taxable and exempt supplies. The
aggregate turnover is Rs. 160 lakhs and
exempted turnover is 40 lakhs. What is the
eligible input tax credit available to him?
47. Now the eligible common input tax credit will be
calculated as follows:
= Input Tax – 5% of Input tax for every quarter or
part thereof
The no. of quarters from 01/10/2017 to
15/11/2018= 5
= 18,000 – (5% of 18000) * 5 quarters
= 18,000 – 4,500
= 13,500
-Now, this is the common credit available to Mr.
Avinash. He will credit Rs 13,500 to Electronic
Credit ledger.
48. -Now he will calculate the ITC attributable to
exempted supplies as per the formula;
-Common credit for 1 month=
13,500÷60=225
=56.25
49. This amount 56.25 will be reversed in GSTR-
2 under Table 11 ITC Reversal.
Eligible ITC credit available is 225-
56.25=168.75
