Unit VI - Customs Law 3 3 Basic Concepts Understanding the Content: We are going to understand the meaning of term “custom duty” under Customs law. Simply, customs duty is an indirect tax which is levied on import and export of goods. 33.1. INTRODUCTION Since ancient times taxes in form of gifts, cash or exchange of commodities was levied for trading in places other than the regional territories of the trader. With the passage of time, the concept has been modernized and has resulted into the levy of duty termed ascustoms duty. In Indian context, customs duty can be defined as an indirect tax which is levied on imports of goods in India and exports of goods out of India. Entry No. 83 of union list of Constitution of India confers the power of levying customs duty to Central Government. 33.2. BACKGROUND OF CUSTOM LAW [Custom Tarif Act, 1975] rates of import and export duty al [Sean Sasi] ‘of Import duty Rte of Expert duty Preferential Rate 33.3, MEANING OF CUSTOM DUTY in force in 1962 to maintain a smooth flow of exports * Custom Duty Act came } a eared cad exports or imports of goods that harm to the lian society. * Custom duty is 4 variant and a few goods expo of indirect tax and is applicable on all goods imported ed out of the country.316 Goods & Services Tax with Customs Law | Customs Law Duties levied on import of goods are termed as import duty while duties levied on exported goods are termed as export duty. Customs duty on goods is levied as per the value of goods or dimensions, weight and other such criteria according to the goods in question. + If duties are based on the value of goods, then they are called as ad valorem duties, while quantity/weight based duties are called specific duties. Compound duties on goods are a combination of value as well as various other factors. 33.4. CUSTOM DUTY IN INDIA All matters related to custom duty fall under the Central Board of Indirect Taxes and Customs (CBIC). * CBIC, in turn, is a division of the Department of Revenue of the Ministry of Finance. CBIC formulates policies that concern collection or levying of customs duty, customs duty evasion, smuggling prevention and administrative decisions related to customs formations. CBIC has various divisions that take care of the field work including Commissionerate of Customs, Customs (preventive and Central Excise Zones), Central Revenues Control Laboratory and Directorates etc. CBIC also oversees Proper tax administration for foreign and in land travel. POINTS FOR CONSIDERATION 1. Import —Export Code + Itis a reference number for importer-exporter to import or export goods. + Itis like a registration number. 2. FOB (Free on Board) Contract + In case of import of goods + Under FOB contract, exporter is responsible to leave the goods on board (i.e., free on board) i.e., leave in conveyance. + In such contracts, cost of transport and cost of Insurance from foreign port to Indian port (Origin port to Destination port) is borne by the Importer separately. 3. CIF Contract + In case of import of goods + Under CIF contracts, exporter is liable to leave the goods at India custom port (Destination Port) i.c., delivery point = destination port. In CIF contract, importer is not required to pay cost of transport and cost of Insurance separately. In other words, CIF value is inclusive of cost of transport and cost of Insurance, 33.6. RELEVANT DEFINITIONS A. India [Section 2(27) of Customs Act, 1962]: “India” includes the territorial waters of India. B, Import [Section 2(23) of Customs Act, 1962]: “Import” means bringing into India from a place outside India,Basic Concepts a C. Imported Goods [Section 2(25) of Customs Act, 1962]: “Imported goods” means any goods brought into India from a place outside India, but does not include goods which have been cleared for home consumption. D. Importer [Section 2(26) of Customs Act, 1962]: “Importer” in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes an owner or any person holding himself out to be an importer. E. Export [Section 2(18) of Customs Act, 1962]: “Export” means taking out of India to a place outside India. F. Export Goods [Section 2(19) of Customs Act, 1962]: “Export goods” means any goods which are to be taken out of India to a place outside India. G Exporter [Section 2(20) of Customs Act, 1962]: “Exporter” in relation to any goods at any time between their entry for export and the time when they are exported, includes any owner or any person holding himself out to be an exporter. H. Conveyance [Section 2(9) of Customs Act, 1962]: “Conveyance” includes a vessel, an aircraft and a vehicle. I. Person In-charge: [Section 2(31) of Customs Act, 1962]: It means + In relation to a vessel — the master of the vessel. + Inrelation to an aircraft — the commander or pilot-in-charge of the aircraft. + Inrelation toa railway train — the conductor, guard or other person having the chief direction of the train. KNOWLEDGE TESTERS - THEORY 1. What is the meaning of customs duty? 2). Give a brief background of customs law in India. 3. Differentiate between FOB and CIF contract.3 A Territorial Water of India Understanding the Content: We are going to understand the meaning of term “Territorial Waters”. The definition of India as per Section 2(27) includes the territorial waters of India. It is to be remembered that India not only includes the surface of the sca in the territorial waters but also air space above and the ground at the bottom of the sea. 34.1. INTRODUCTION To understand the concept of territorial water, references have to be drawn from the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976. In this Act, “limit”, in relation to the territorial waters, the continental shelf, the exclusive economic zone or any other maritime zone of India, means the limit of such waters, shelf or zone with reference to the mainland of India as well as the individual or composite group or groups of islands constituting part of the territory of India. 34.2. SOVEREIGNTY OVER, AND LIMITS OF, TERRITORIAL WATERS + The sovereignty of India extends and has always extended to the territorial waters of India (hereinafter referred to as the territorial waters) and the seabed and subsoil underlying, and the air space over and above, such waters. + The limit of the territorial waters is the line every point of which is at a distance of 12NM (nautical miles) from the nearest baseline. 34.3. USE OF TERRITORIAL WATERS BY FOREIGN SHIPS + All foreign ships (other than warships including submarines and other underwater vehicles) shall enjoy the right of innocent passage through the territorial waters + The Central Government may suspend, whether absolutely or subject to such exceptions, the entry of all or any class of foreign ships through notification. 34.4. CONTIGUOUS ZONE OF INDIA + The contiguous zone of India (here in after referred to as the contiguous zone) is an area beyond and adjacent to the territorial waters.Territorial Water of India v9 + Thelimit of the contiguous zone isat 24NM (nautical miles) from the nearest baseline. + Indian customs waters mean the waters extending into sea upto the limit of contiguous zone of India and includes any bay, gulf, harbour creck or tidal river. + Central Government may exercise such powers and take such measures in or in relation to the contiguous zone as it may consider necessary with respect to: + The security of India, and + Immigration, sanitation, customs and other fiscal matters. + The Central Government may, by notification in the Official Gazette: + Extend with such restrictions and modifications as it thinks fit. + Make such provisions as it may consider necessary in such notification for facilitating the enforcement of such enactment. 34.5. CONTINENTAL SHELF + The continental shelf of India (here in after referred to as the continental shelf) comprises the seabed and subsoil of the submarine areas that extend beyond the limit of its territorial waters. + Distance of 200NM (nautical miles) from the baseline. + India has, and always had, full and exclusive sovereign rights in respect of its continental shelf. + Without prejudice to the generality of the provisions, the Union has in the continental shelf, ‘Sovereign rights for exploration, exploitation, conservation and management of all resources; « Exclusive rights and jurisdiction for the construction, maintenance or operation of artificial istands, off-shore terminals, installations and other Structure and devices necessary for the exploration and exploitation of the resources of the continental shelf or for the convenience of shipping or for any other purpose; Exclusive jurisdiction to authorise, regulate and contol sciemtifie research; and and protect the marine environment and «+ Exclusive jurisdiction to preserve to prevent and control marine pollution, «+ Noperson (including a foreign government shall, except under, and in accordance rid ihe terms ofa license ora letter of authority ranted by the Central Govem eat Sxplore the continental shelf or explo its resourees or camry out any search ot Se wation or conduct any research within the continental shelf | 34.6. EXCLUSIVE ECONOMIC ZONE «The exclusive economic zone of India (hereinafter referred to as the exclusiv a ene zone) is an area beyond and adjacent tothe territorial waters. «The limit of such zone is 200 NM (nautical miles) from the baseline. Beyond 200 NM are the high seas. « Jn the exclusive economic zone, the Union has sons sereign rights fr exploration, exploitation, conservation and management Sethe natural resources, both living and non-living as well as for producing energy from tides, winds and currents; "320 * No Goods & Services Tax with Customs Law | Customs Law Exclusive rights and jurisdiction for the construction, maintenance or operation of artificial islands, off-shore terminals, installations and other structures and devices necessary for the exploration and exploitation of the resources of the zone or for the convenience of shipping or for any other purpose; Exclusive jurisdiction to authorise, regulate and control scientific research; Exclusive jurisdiction to preserve and protect the marine environment and to prevent and control marine pollution; and Such other rights as are recognised by International Law. person (including a foreign government) shall, except under, and in accordance with, the terms of any agreement with the Central Government or ofa licence or a letter of authority granted by the Central Government, explore or exploit any resources of the exclusive economic zone. 34.7. PICTORIAL CHART 1 2, 3, 4. 5. 6. Baseline of India (India share) sees uo KNOWLEDGE TESTERS - THEORY What is the meaning and limit of territorial water of India? . Can foreign ships use Territorial water of India? Define the term contiguous zone of India? What is the meaning of continental shelf of India? . Define the meaning of exclusive economic zone of India? ). Upto 12 NM from baseline of India is different with 24 NM and the same term is different with distance of 200 NM from baseline. Justify the statement. Foreign Government is not authorised to use and enter EEZ. Clarify the statement.3 5 High Seas Understanding the Content: We are going to understand the concept of “High Seas”, and its taxability under GST regime. 35.1. INTRODUCTION + High seas as per Wikipedia means oceans, seas, and waters outside national jurisdiction, In other words, high seas means all parts of the sea that are not included in the territorial sea or in the internal waters ofa State” and where “no State may validly purport to subject any part of them to its sovereignty”. + High seas sale is a transaction, where in there is transfer of ownership, when the goods are outside Indian territory. + It isa common practice whereby the original importers sell the goods to a third person before the goods are entered for customs clearance. + Point for consideration: Levy and collection [Section 5 of IGST Act]: IGST on goods imported into India shall be levied and collected in accordance to Section 3 of Custom Tariff ‘Act, 1975 on the value as determine under the said act at the point when duty of custom levied on said goods ws 12 of Custom Act, 1962. 35.2. MAJOR ISSUES AND SOLUTIONS « Section 5(1) of IGST Act says that the goods imported into India are subjected to IGST. « Section 7(2) of the IGST Act mentions that the supply of goods during the impor in the Indian territory, until terosses the Indian customs frontiers shall. be counted as a supply in the interstate trade. « So any sale in the course of import until iterosses the customs frontiers will have IGST applied. + Entry No. 8(b) has been inserted vide CGST Amendment Act, 2018 dated 29% August, 2018 under Schedule III of the CGST Act, 2017. ‘After insertion of this entry now High Seas Sale transaction shall not constitute supply & hence IGST shall not be Ieviable on such transactions. 35.3. RELEVANT DEFINITION (a) Custom frontiers of India [Section 2(4) of the IGST Act]: “Custom fronti TS cia means the limit ofthe area of a customs station as defined in Section322 Goods & Services Tax with Customs Law | Customs Law 2 of the Customs Act, 1962 in which imported goods are ordinarily kept before clearance by customs authorities. (&) Import of goods [Section 2(10) of The IGST Act]: “Import of goods" wit grammatical variations and cognate expressions, means bringing goods into India from a place outside India. (c) Importer [Section 2 (26) of Custom Act]: “Importer” in relation to any goods at any time between their importation and time when they are cleared for home consumption, includes any owner or any person holding himself out to be an importer. (d) Inter-state supply [Section 7(2) of IGST Act]: Supply of goods in the course of import into the territory of India till they cross the custom frontiers of India shall be deemed to be a supply of goods in the course of inter-state or commerce. ILLUSTRATION Illustration 35.1: Amrit from Delhi wants to buy an I-phone from Mr. Joseph, US based. Phone costing % 92,000. The same was sold by Amrit to Sukhdev in Punjab, while the phone was in high sea at 7 95,000. Finally from Gujarat port, Sukhdev filed bill of entry. What will be the taxability in this transaction as per GST? Solution: As per CGST Amendment Act, 2018, High Seas Sale is now included in Schedule Ill of the CGST Act, 2017. KNOWLEDGE TESTERS — THEORY 1. Elaborate the meaning of high seas. 2. “Value addition accruing in each such high sea sale shall form part of the value on which IGST is collected at the time of clearance”. Justify the statement, 3. Define the term High Sea Sales? 4. Whether the high sea sales of imported goods would be changeable to IGST twice. Explain the concept.3 6 Type of Customs Duty Understanding the Content: We are going to understand the meaning of and the leviability of different type of customs duty applicable in India. 36.1. INTRODUCTION * There are various type of custom duties which are Jeviable in India. . Custom Act was enacted in 1962 to maintain a smooth flow of exports and imports and to avoid exports or imports of goods that were causing harm to the Indian society. There are some types of custom duties such as basic, additional, safeguard, anti-dumping duty ete. * While custom duties include both import and export duties, but as export duties contributed only nominal revenue as various duties under customs can be levied on almost all imports, whereas, only few goods are subject to export duty. + Import of goods or services will be treated as deemed inter-state supplies and would be subject to integrated tax. While IGST on import of services would be leviable under the IGST Act, the levy of the IGST on import of goods would be levied under the Customs Act, 1962 read with Custom Tariff Act, 1975. + Importer of services will have to pay tax on reverse charge basis. + Basically, Basic Customs Duty (BCD), Integrated Goods and Services Tax (IGST) and Compensation Cess are charged as import duties, which are discussed in the later part of this chapter. 36.2. TYPES OF CUSTOMS DUTY implementation, there are mainly three types of import duties namely — Basic Pees nay (BCD), Integrated Goods and Services Tax (IGST) and Compensation Cess. 36.2.1. Basic Customs Duty (BCD) ‘ods imported into India are chargeable to a duty under Customs Act, 1962 popularly known as basic customs duty. «The rates of BCD are indicated in Schedule I (for Imports) of Customs Tariff ‘Act, 1975. Social welfare surcharge is to be levied @10% of the aggregate Guties of customs, on imported goods. «The duty may be fixed on ad-valorem (% of the value of goods) basis or specific rate basis. + All go324 Goods & Services Tax with Customs Law | Customs Law * Central Government of India has the right to exempt any goods from tax. * Generally, BCD is levied at standard rate of duty but if certain conditions are satisfied (as mentioned below), importer can avail the benefit of preferential rate of duty on imported goods. + Conditions for availing the benefit of preferential rate of duty: + Atthe time of importation, he should make a specific claim for preferential rate, + Import must be from preferential area as notified by Central Government. + The goods should be produced/manufactured in such preferential area. Integrated Goods and Services Tax (IGST) + IGST is a rate of tax under Goods and Services Tax law, which is charged on goods imported into India from other country. + Basically, it is a destination based tax, which is levied on commodities being imported from one place to another. For example: If goods are being imported into India from USA, IGST is applicable on those goods. + As per Notification issued under IGST Act, goods has been classified into six schedule with respective tax rates: + 5% on Goods Specified into Schedule I + 12% on Goods Specified into Schedule II 18% on Goods Specified into Schedule III 28% on Goods Specified into Schedule IV 3% on Goods Specified into Schedule V 0.25% on Goods Specified into Schedule VI IGSTis charged on aggregate of Assessable value, BCD and Social welfare surcharge. 36.2.3. Compensation Cess + Compensation Cess is levied under section 8 of the Goods and Services Tax (Compensation to State) Act, 2017. + Compensation Cess is charged and collected on intra-state and inter-state supply of goods and services to provide compensation to the states for loss of revenue due to implementation of GST in India. 36.3. ADDITIONAL IMPORT DUTIES * Safeguard Duty and Anti-Dumping Duty are also levied on certain goods imported into India. They are levied on import of specific goods to protect domestic industry from an unfair injury. + Both the duties would not apply on commodities imported by 100% EOU (Export Oriented Units), units in FTZ (Free Trade Zone) and SEZ (Special Economic Zones). 36.3.1. Safeguard Duty ; + Safeguard Duty is imposed on goods to safeguard the interest of domestic industries, * Itis calculated based on loss suffered by local businesses,‘Type of Customs Duty 325 . In nutshell, ‘safeguard action is restored to only if it has been established that a sudden rise in imports has caused or threatens to cause serious injury to the domestic industries. 36.3.2, Anti-Dumping Duty + Onexport of commodities, anti-dumping duty is applicable only by way ofa special brand rate of drawback. Most often, many manufacturers from abroad may export commodities at very low prices as compared to the prices in the domestic market. + This may be to cripple domestic industry or to dispose of their excess stock. * This is called dumping of goods. Now to avoid such dumping of goods, Government of India levied anti-dumping duty up to the margin of dumping on such articles, if the commodities are being sold at less than its normal value. 36.4. PROTECTIVE DUTY This is levied for the purpose of protecting indigenous businesses and domestic products against overseas imports. The rate is decided by the Tariff Commissioner. ILLUSTRATIONS Mlustration 36.1: If goods costing 30 lakh are bei what will be the import duty? For your sake presume the following: + Basic Customs Duty: 15% ‘+ Integrated Goods and Services Tax: 3%: + Compensation Cess: 0%° + Social Welfare Surcharge: 10% ‘Solution: The following custom duties will be levied on assessable value of goods under GST regime. Basic Customs Duty: 15% ~ 4.5 lakh Social Welfare Surcharge: 10% of BCD - 0.45 lakh Integrated Goods and Services Tax: 3% ~ 1.035 lakh (3% of (30 lakh + 4.95 lakh) Compensation Cess: 0% Total Duty: 5.985 lakh ‘Ilustration 36.2: Suppose the assessable value of an article imported into India is € 100 lakh. Basic Customs Duty is 10% ad-valorem. ;ported into India from USA on 01.03.2018, Integrated tax rate is 18% Goods importation date 01.01.2018 ‘Solution: The taxes will be calculated as under + Assessable Value=% 100 lakh + Basic Customs Duty (BCD) = & 10 lakh + Social welfare surcharge(SWS) = 10% of BCD ~ | lakh + Value for levying integrated tax=% 100 +2 10+%1=@ 111 lakh, + Integrated Tax = 18% of @ 111 =& 19.88 lakh + Total taxes = % 30.98 lakh Illustration 36.3: Assessable value of shampoo imported into India is & 1,500, Th on shampoo are ~ Basic Customs Duty (12.5%), IGST Rate (18%) and Com; penance ui, Compute total import value. pensation Cess ‘Solution: Calculation of Total Import Duty on Hair Oil (a) Basic Customs Duty: 12.5% of 1,500 = 8 1875326 Goods & Services Tax with Customs Law | Customs Law (b) Social Welfare Surcharge = 10% of BCD —7 18.75 (©) IGST: 18% of (A.V. + BCD + SWS) = 18% of (1,500 + 187.5+18.75) = 18% of 1,706.25= @ 307.125 (d) Compensation Cess: 0% of (A.V. + BCD) = 0% of (1,500 + 187.5 + 18.75) = 0% of 1,706.25 = 0 (Nil) (e) Total Taxes: [(A) + (B) + (C)] = 187.5 + 18.75 + 307.125 = % 513.38. KNOWLEDGE TESTERS - THEORY 1, Write a note on anti-dumping duty and margin of dumping? (DU. [Link]. (Hons.) May 2019] 2. Explain the different types of custom duties in India? 3. What is Safeguard duty? What are exemptions from safeguard duty? 4, What is the difference between Standard rate of duty and preferential rate of duty? Give the conditions to be fulfilled for preferential rate of duty. KNOWLEDGE TESTERS — PRACTICAL P. 1. If goods costing & 10 lakh are being imported into India from France, what will be the import duty? For your sake presume the following * Basic Customs Duty: 25.55%: * Integrated Goods and Services Tax: 4.97% * Compensation Cess: 0% [Ans. % 3,44,718] P.2. Suppose the assessable value of an article imported into India is € 50 lakh. Basic Customs Duty is 25% ad-valorem. Integrated tax rate is 18%. [Ans, % 25,22,500] P.3. Assessable value of air conditioner imported into India is € 15 lakh. The rates of taxes on air conditioner are ~ Basic Customs Duty (15.5%), IGST Rate (18%) and Compensation Cess (Nil). Compute total import value. [Ans. & 5,71,785] P.4, Assessable value of Toys imported into India is ® 14 lakh. The rates of taxes on mobile is — Basic Customs Duty (17.5%), social welfare surcharge (10%), IGST Rate (5%) and Compensation Cess (0%) with goods imported date being 23.02.2018. Compute total import duty. [Ans. & 3,52,975]a 7 Valuation under Customs Act Understanding the Content: + These rules may be called the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. * They shall come into force on the 10 day of October, 2007. + They shall apply to imported goods. 37.1. DETERMINATION OF THE METHOD OF VALUATION [RULE 3] + Subject to Rule 12, the value of imported goods shall be the transaction value adjusted in accordance with provisions of Rule 10; + The price actually paid or payable is the total payment made or to be made by the buyer to or for the benefit of the seller for the imported goods. «The payment need not necessarily take the forr: ofa transfer of money. Payment may be made by way of letters of credit or negotiable instruments. Payment may be made directly or indirectly. For Example: Mr. Hukum buys one laptop from Mr. Joker, USA. On the other hand he sells one mobile to Mr. Joker only. Now he wants settlement of an indirect payment with the buyer, in part, of a debt owed by the seller, the same is considered as indirect payment. “Activities undertaken by the buyer on his own account, other than those for which ‘an adjustment is provided in Rule 10, are not considered to be an indirect payment to the seller, even though they might be regarded as of benefit to the seller, The costs of such activities shall not, therefore, be added to the price actually paid or payable in determining the value of imported goods. The value of imported goods shall not include the following charges or costs, provided that they are distinguished from the price actually paid or payable for the imported goods: (a) Charges for construction, erection, assembly, maintenance or technical assistance, undertaken after importation on imported goods such as industrial plant, machinery or equipment; (b) The cost of transport after importation; (c) Duties and taxes in India. ‘The price actually paid or payable refers to the price for the imported goods. @ Ponder Illustration No. 37.1328 Goods & Services Tax with Customs Law | Customs Law 37.1.1. Transaction Value is Acceptable if Following Four Valuation Conditions are Satisfied + Value of imported goods under sub-Rule (1) shall be accepted provided that — (a) There are no restrictions as to the disposition or use of the goods by the buyer other than restrictions which — + Are imposed or required by law or by the public authorities in India; or + Limit the geographical area in which the goods may be resold; or + Do not substantially affect the value of the goods; (b) The sale or price is not subject to some condition or consideration for which a value cannot be determined in respect of the goods being valued; () No part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer will accrue directly or indirectly to the seller; and (d) The buyer and seller are not related, 37.1.2. Related Party Transaction — Transaction Value Acceptable in Following two Situations Situation 1; Where the buyer and seller are related, the transaction value shall be accepted provided that the examination of the circumstances of the sale of the imported goods indicates that the relationship did not influence the price. For Example: If the price had been settled in a manner consistent with the way seller settle prices for sales to buyers who are not related to him. Situation 2: In a sale between related persons, the transaction value shall be accepted, whenever the importer demonstrates that the declared value of the g00ds being valued closely approximates to one of the following values ascertained at or about the same time. + The transaction value of identical goods, or of similar goods, in sales to unrelated buyers in India. + The deductive value for identical goods or similar goods. + The computed value for identical goods or similar goods. Provided that in applying the values used for comparison,due account shall be taken of demonstrated difference in commercial levels, quantity levels, adjustments; 37.1.3. If Transaction Value is not Acceptable Then Proceed Sequentially to Other Rules for Valuation If the value cannot be determined under the provisions of sub-Rule (1), the value shall be determined by proceeding sequentially through Rule 4 to 9. > Ponder Illustration No. 37.2 37.2. TRANSACTION VALUE OF IDENTICAL GOODS [RULE 4] + Subject to the provisions of Rule 3, the value of imported goods shall be the transaction value of identical goods sold for export to India and imported at or about the same time as the goods being valuedValuation under Customs Act 329 ‘ The transaction value of identical goods in a sale at the same commercial lev el and in substantially the same quantity as the goods being valued shall be used to determine the value of imported goods. + Where no such sale is found, a sale of identical goods that takes place under any one of the following three conditions may be used: + Asale at the same commercial level but in different quantities; or + Asaleata different commercial level but in substantially the same quant + Asale ata different commercial level and in different quantities. + Having found a sale under any one of these three conditions adjustments will then be made, as the case may be, for: + Quantity factors only; + Commercial level factors only; or + Both commercial level and quantity factors. + In applying this rule, if more than one transaction value of identical goods is found, the lowest such value shall be used to determine the value of imported goods. 3 OF 37.3. TRANSACTION VALUE OF SIMILAR GOODS [RULE 5] + Subject to the provisions of Rule 3, the value of imported goods shall be the transaction value of similar goods sold for export to India and imported at or about the same time as the goods being valued. + Alll other provisions contained in note to Rule 4 shall mutatis mutandis also apply in respect of similar goods. 37.4. DETERMINATION OF VALUE WHERE VALUE CANNOT BE DETERMINED UNDER RULES 3, 4 AND 5 [RULE 6] «+ If the value of imported goods cannot be determined under the provisions of rules 3, 4 and 5, the value shall be determined under the provisions of Rule 7 or, When the value cannot be determined under that rule, under Rule 8. Provided that at the request of the importer, and with the approval of the proper officer, the order of application of rules 7 and 8 may be reversed. 37.5. DEDUCTIVE VALUE [RULE 7] Collect sales data of identical/similar goods earlier imported and sold into India and from that deduct ‘post importation expenditure and profits attributable to India’. ~ The term “unit/price at which goods are sold in the greatest aggregate quantity” means the price at which the greatest number of units are sold in sales to persons who rieinot related to the persons from whom they buy such goods atthe first commercial are after importation at which such sales take place subject othe following deduetions: Either the commission usually paid or agreed to be paid or the additions usually made for profits and general expenses in connection with sales in India of imported goods of the same class or kind; «The usual costs of transport and insurance and associated cost incurred within India; 1 The customs duties and other taxes payable in India by reason of importation or sale of goods.330 Goods & Services Tax with Customs Law | Customs Law If imported goods are likely to be sold in another 90 days ~ clearance can be withheld and that sale price can be used = Ifneither the imported goods nor identical nor similar imported goods are sold at or about the same time of importation of the goods being valued, the value of imported goods shall, be based on the unit price at which the imported goods or identical or similar imported goods are sold in India, at the earliest date after importation but before the expiry of 90 days after such importation. Ifimported goods are processed and then sold — then even this increased sale price can be used — but then deduction of ‘value addition of processing in India’ shall also be allowed + Ifneither the imported goods nor identical nor similar imported goods are sold in India in the condition as imported, then, the value shall be based on the unit price at which the imported goods, after further processing, are sold in the greatest aggregate quantity to persons who are not related to the seller in India. >. Ponder Illustration No. 37.6 37.6. COMPUTED VALUE [RULE 8] Cost information of supplier shall be collected and a reasonable profit margin shall be added to arrive at the AV + Subject to the provisions of Rule 3, the value of imported goods shall be based on a computed value, which shall consist of the sum of: + The cost or value of materials and fabrication or other processing employed in producing the imported goods; + An amount for profit and general expenses equal to that usually reflected in sales of goods of the same class or kind as the goods being valued which are made by producers in the country of exportation for export to India. @ Ponder Illustration No. 37.7 37.7. RESIDUAL METHOD [RULE 9] ‘Also known as “Best judgement valuation method” or “Fall back method” + Value of imported goods determined under the provisions of Rule 9 should to the greatest extent possible, be based on previously determined customs values. + The methods of valuation to be employed under Rule 9 may be those laid down in rules 3 to 8, inclusive, but a reasonable flexibility in the application of such methods would be in conformity with the aims and provisions of Rule 9. Provided that the value so determined shall not exceed the price at which such or like goods are ordinarily sold or offered for sale for delivery at the time and place of importation in the course of international trade, when the seller or buyer has no interest in the business of other and price is the sole consideration for the sale or offer for sale. + No value shall be determined under the provisions of this Rule on the basis of + The selling price in India of the goods produced in India; + Asystem which provides for the acceptance for customs purposes of the highest of the two alternative values;Valuation under Customs Act 331 + The price of the goods on the domestic market of the country of exportation; + Thecost of production other than computed values which have been determined for identical or similar goods in accordance with the provisions of Rule 8; + The price of the goods for the export to a country other than India; Minimum customs values; or Arbitrary or fictitious values. 37.8. COST AND SERVICES [RULE 10] * In determining the transaction value, there shall be added to the price actually paid or payable for the imported goods, Following to the extent they are incurred by the buyer but are not included in the price actually paid or payable for the imported goods, namely: () Commissions and brokerage, except buying commissions; (ii) The cost of containers which are treated as being one for customs purposes with the goods in question; (ii) The cost of packing whether for labour or materials; Buying Commission: Buying commission means fees paid by importer to his agent for the service of representing him abroad in the purchase of the goods being valued. &> Ponder Illustration No. 37.8 & 37.9 37.9. DECLARATION BY THE IMPORTER [RULE 11] «The importer or his agent shall furnish «A declaration disclosing full and accurate details relating to the value of imported goods; and «Any other statement, information or document including an invoice ofthe manufacturer or producer of the imported goods where the goods are imported from ot through a person other than the manufacturer or producer, as considered necessary by the proper officer for determination of the value of imported goods under these rules. «- Nothing contained in these rules shall be construed as restricting or calling into Guestion the right ofthe proper officer of customs to satisfy himself as tothe truth or accuracy of any statement, information, document or declaration presented for valuation purposes. «The provisions of the Customs Act, 1962 (52 of 1962) relating to confiscation, penalty and prosecution shall apply to cases where wrong declaration, peformation, statement or documents are furnished under these rules. 37.10, RESECTION OF DECLARED VALUE [RULE 12] « When the proper officer has reason to doubt the truth or accuracy of the value declared in relation to any imported goods, he may ask the importer of such goods to furnish further information including documents or other evidence332 Goods & Services Tax with Customs Law | Customs Law and if, after receiving such further information, or in the absence of a response of such importer, the proper officer still has reasonable doubt about the truth or accuracy of the value so declared, it shall be deemed that the transaction value of such imported goods cannot be determined under the provisions of sub-Rule (1) of Rule 3. At the request of an importer, the proper officer, shall intimate the importer in writing the grounds for doubting the truth or accuracy of the value declared in relation to goods imported by such importer and provide a reasonable opportunity of being heard, before taking a final decision under sub-Rule (1). Explanation: (i This Rule by itself does not provide a method for determination of value, it provides a mechanism and procedure for rejection of declared value in cases where there is reasonable doubt that the declared value does not represent the transaction value; where the declared value is rejected, the value shall be determined by proceeding sequentially in accordance with Rules 4 to 9. (ii) The declared value shall be accepted where the proper officer is satisfied about the truth and accuracy of the declared value after the said enquiry in consultation with the importers. The proper officer shall have the powers to raise doubts on the truth or accuracy of the declared value based on certain reasons which may include: + The significantly higher value at which identical or similar goods imported at or about the same time in comparable quantities in a comparable commercial transaction were assessed; + The sale involves an abnormal discount or abnormal reduction from the ordinary competitive price; + The sale involves special discounts limited to exclusive agents; + The mis-declaration of goods in parameters such as description, quality, quantity, country of origin, year of manufacture or production; + The non-declaration of parameters such as brand, grade, specifications that have relevance to value; + The fraudulent or manipulated documents. WRITER’S ENLIGHTENMENT How to find out value for the purpose of Customs Act Customs duty is payable as a percentage of “Assessable Value”. The assessable value may be calculated as follows: | Step 3 Add: Cost of insurance cover (1.125% of FOB, if actual XXX Step 1 Transaction Value (FOB) XXX Step2 | Add: Cost of transport, loading, unloading & handling XXX charges (upto the place of importation) (Maximum 20% in. case of Air transport) cost is not available) Step 4 | Total = CIF (Assessable Value) XXX ~ Ponder Illustration No. 37.12 & 37.13Valuation under Customs Act 333 37.11. RELEVANT DEFINITION 37.11.1. Computed Value ‘omputed value” means the value of imported goods determined in accordance with Rule 8. 37.11.2. Deductive Value “Deductive value” means the value determined in accordance with Rule 7. 37.1.3, Goods of the Same Class or Kind “Goods of the same class or kind”, means imported goods that are within a group or range of imported goods produced by a particular industry or industrial sector and includes identical goods or similar goods. 3711.4. Identical Goods “Identical goods” means imported goods + Which are same in all respects, including physical characteristics, quality and reputation as the goods being valued except for minor differences in appearance that do not affect the value of the goods; + Produced in the country in which the goods being valued were produced; and + Produced by the same person who produced the goods, or where no such goods are available, goods produced by a different person, but shall not include imported goods where engineering, development work, art work, design work, plan or sketch undertaken in India were completed directly or indirectly by the buyer on these imported goods free of charge or at a reduced cost for use in connection with the production and sale for export of these imported goods. 37.115. Produced “Produced” includes grown, manufactured and mined. 37.11.6. Similar Goods “Similar Goods” means imported goods * Which although not alike in all respects, have like characteristics and like component materials which enable them to perform the same functions and to be commercially interchangeable with the goods being valued having regard to the quality, reputation and the existence of trade mark; + Produced in the country in which the goods being valued were produced; and = Produced by the same person who produced the goods being valued, or where no such goods are available, goods produced by a different person. > Ponder Illustration No. 37.10 & 37.11 put shall not include imported goods where engineering, development work, art work design work, plan or sketch undertaken in India were completed directly or indirectly by the buyer on these imported goods free of charge or at a reduced cost for use in connection with the production and sale for export of these imported goods,334 Goods & Services Tax with Customs Law | Customs Law 37.1.7, Transaction Value “Transaction value” means the value referred to in sub-section (1) of section 14 of the ‘Customs Act, 1962; 37.1.8, Relative “Relative” persons, includes legal person, shall be deemed to be “related” onl: + They are officers or directors of one another's businesses; + They are legally recognised partners in business; + They are employer and employee; + Any person directly or indirectly owns, controls or holds five per cent or more of the outstanding voting stock or shares of both of them; + One of them directly or indirectly controls the other; + Both of them are directly or indirectly controlled by a third person; + Together they directly or indirectly control a third person; or + They are members of the same famil Explanation: Persons who are associated in the business of one another in which one is the sole agent or sole distributor or sole concessionaire, how so ever described, of the other shall be deemed to be related for the purpose of these rules, if they fall within the criteria of this sub-rule. ‘Transaction value shall be converted into Indian currency on the basis of foreign exchange rate which is determined or notified by Central Board of indirect Taxes and ‘customs on the date when bill of entry is presented or when bill of export is presented. ILLUSTRATIONS Mlustration 37.1: Mr. Karan, from USA, received dividend from Arjun and Co., Delhi based. Karan is laptop supplier of Arjun and Co. Custom department consider the same as indirect flow from buyer to Seller. Consider the law and put the light on the situation. Solution: The flow of dividends or other payments from the buyer to the seller that do not relate to the imported goods are not part of the customs value as these are two independent transactions and cannot be called as indirect payment. Mlustration 37.2: Mr. Karan imported product M from unrelated exporter Mr. Justin (USA). AS per contract Karan will remit in addition to the invoice price, 40% of the “gross sale proceeds’ realized on sale of M in India. Case 4 - The contract specify the resale price as % 10,500. Case 2 ~ The contract doesn’t specify the resale p. Solution: Case I - The share of sale proceeds is added to arrive at the assessable value. Case 2- The share of sale proceeds is not determinable. The valuation may be considered under other valuation rules. Mlustration 37.3: Goods are sold from a pricelist which grants favorable unit prices for purchases made in larger quantities: Sale quantity Unit price Number ofsales Total quantity sold at each price 1-10 units 120 10 sales of 6 units 80 5 sales of 4 units 11-25 units 100 5 sales of 14 units 70 Over 25 units 90 2 sales of 35 units us 1 sales of 45 units Which price shail be considered as unit price in this case?Valuation under Customs Act 335 sana tes Satomi of units sold at a price is 115, therefore, the unit price in the greatest {Mustration 37.4: Two sales occur. In the ist sale 1,000 units are soldat «price of 75 currency mais he ond sale 600 units are sold ata price of 90 currency units each, What shall Saete The greatest umber of units olds 1,000, therefore, the unit price inthe greatest aggregate Hlustration 37. “Sales Quantity Unit Price Following situation where various quantities are sold at various prices. 40 Units 100 45 Units 85 15 Units 100 55 Units 7 42 Units 108 35 Units 85 15 Units 100 Solution: Total Quantioy Unit Price 80 85 55 7 70 100 42 108 “The greatest number of units sold is 80, therefore, the unt price inthe greatest aggregate quantity is 85. ‘lustration 37.6: A shipment of Smart Bands do not qualify for Transaction Value (TV) or TV of Identical or Similar Goods. ‘The importer provides you the following information: a Bands are sold to retailers in India (unrelated to importer) at © 2,100 per Band. 2 The general expense and profit in connection with sale of bands of same class or kind is © 200 per Band. 'g expense in India is € 150 per Band. + Total Import duties and IGST is 35%. Determine the customs value? ‘Solution: Sale Price 2,100 General Expense and Profit 200 Packing Expense 2150 Deductive Value 21,750 Custom Value (1,750/1.35) __% 1,296 Cus “tustraton 37.7: An importer of furniture presents bill of entry of 1000 wooden chairs from a sve seller, No other valuation method Is acceptable. “The importer provides the following data directly from the manufacturer y Wood, brackets and screw = $5.00 Cushioning = $ 2.00 Assembly cost = $ 1.00 Design cost = § 1.00 Production expense and profit = $ 1.5 + Packing, shipping and Insurance = $ 0.50 petermine the computed value. |CBEC Notified Rate § 1.00 = 65]336 Goods & Services Tax with Customs Law | Customs Law Solution: Wood, brackets and serew $5 Cushioning $2 Assembly cost $1 Design cost St Production expense and profit S15 Packing, shipping and Insurance $0.50 Total sil Total Value Computed Value (11.1 * 65) a5 Mhustration 37.8: An importer comes to you for consultancy and want to have your expert advice on two different LCD (TV). Explain whether the same shall be considered as similar goods. ee ae c eee eee eee — Company Model Name Features Camera Sale Price XW NS-4 XX 13MP 45,000 xWz, MS-4 xX LSMP___45,000 Solution: The same shall be treated as similar goods as capable of performing same functions and commercially interchangeable. Mlustration 37.9: State your expert view on whether the below mentioned laptop are similar goods or not. Company Model Name Features Weight Sale Price POR XYZ xx 2Kg 52,000 PQR ABC x 18Kg 52,000 ‘Solution: Both are not identical goods, as both are not same in all aspects. However, the same shall be treated as similar goods as capable of performing same functions and commercially interchangeable. Illustration 37.10: Find the assessable value with the following information: FOB Price 1,00,000 Cost of Air transport 40,000 Loading Charges 10,000 Cost of Insurance 5,000 Solution: Step 1 ‘Transaction Value (FOB) 1,00,000 Step 2 Add: Cost of transport (Maximum 20%) 20,000 Step 3. Add: Cost of insurance cover 5,000 Step 4 _ Total = CIF (Assessable Value) 1,25,000 Illustration 37.11: Find the assessable value with the following information: FOB Price 15,00,000 Cost of Sea transport 5,00,000 Loading Charges 10,000 Cost of Insurance Not available Solution: Step 1 Transaction Value (FOB) 15,00,000 Step 2 Add: Cost of transport (20% cap is not applicable) 5,10,000 Step 3. Add: Cost of insurance cover (1.125% of FOB) Step 4 Total = CIF (Assessable Value)Valuation under Customs Act 337 Mlustration 37.12: Find out the custom duty with the following information: ‘Transaction value (FOB) : USD 50,000 Exchange rate notified by central board of indirect tax and custom on the day of presentation of bill of entry : 58 Exchange rate notified by central board of indirect tax and custom on the day of landing of air craft: 55 Insurance cost : © 55,000 Sea transport charges : % 2,50,000 BCD : 10% IGST : 18% Solution: Computation of Assessable Value ‘Step 1 _ Transaction Value /FOB ( $ 50,000 x 58) 29,00,000 Step 2 Add: Cost of transport (20% cap is not applicable) 2,50,000 Step 3. Add: Cost of insurance cover (Actual cost given) '35,000 Step 4 Total = CIF (Assessable Value) 32,05,000 Computation of Custom Duty of Assessable value ie., 32,05,000) 3,20,500 Step 1 Basic Custom Duty ( 10% ‘Add: Social welfare surcharge ( 10% of Custom duty 3,20,500) 32,050 Step 2 Step 3 IGST (18% of (Assessable value & custom duty i. 35,57.550) 640,359 Step 4 Total = (3,20,500 + 32.050 + 640,359) 9.92,905 Itlustrarion 37.13: Compute the FOB value and Assessable value: CIF Value : 50,00,000 Air freight : 12,50,000 Insurance cost : ? ‘Solution: Let FOB value be x FOB = CIF - Freight cost Insurance cost FO® 50,00,000 - 12,50,000 ~ 1.125% of FOB = 37,50,000 - 0.01125x = 37,07,813 (approx.) Computation of Assessable Value Step 1 Transaction Value/FOB 37,07,813, Step 2 Add Cost of transport (20% of FOB or & 12,50,000) 71,563 Step 3 Add: Cost of insurance cover (1.125% of FOB) 56,250 45,05,626, step 4 __ Assessable Value338 Goods & Services Tax with Customs Law | Customs Law ABRIDGED LAW VIEW Assessable Value (AV) = Transaction Value (TV) Rule 12: PO shall not have any doubt as to truth and accuracy of declared value Rule 3: For valuation conditions shalll be satisfied + Unrestricted sale + Unconditional sale + Sharing of subsequent sale proceeds shall be quantifiable + Unrelated person Rule10: Valuation factor shall be adjusted Rule 10 (1): 5 Factors Rule 10 (2): 3 Factors Assessable Value (AV) = Transaction Value (TV) of Identical Goods (IG) Assessable Value (AV) = Transaction Value (TV) of Similar Goods (SG) Assessable Value (AV) = Deductive Value Gey (Unrelated Buyer) = Sale Price (Imported goods! IG/SG) Less: Post-Importation Deductions Rule 6 J Assessable Value (AV) = Computed Value Cost of Production Bee |__| Prot and General Expense +Rule 10 Assessable Value (AV) = Best Judged Value Rule 9 7 Values are prohibited-Never acceptable as AVValuation under Customs Act 339 KNOWLEDGE TESTERS - THEORY 1. Briefly explain the circumstances under which transaction value is considered even if the parties are related to each other? 2, Which date is considered relevant for determining the rate of duty and tariff valuation of imported and export of goods? . There are 3 agencies who notify the rate of exchange of currency. Name these agencies. Which exchange rate should be used for the purpose of valuation under customs? 4. Explain the meaning of Ex-Factory Price? 5 ‘What do you mean by lending charges? In order to determine the assessable value, is there any tule regarding the amount of landing charges to be taken? KNOWLEDGE TESTERS - PRACTICAL BM & Sons exported some goods to USA in a vessel. You are required to determine the rate of exchange for the purposes of computation of export duty from the given information: Date Particulars Exchange Rate notified by CBEC 05-06-2021 Date of presentation of shipping bill S1=%91 18-06-2021_Date of entry outwards S1=%90 to be considered for computation of import duty from the P.2, Determine the rate of import duty following information: Date Particulars Rate of Custom Duty 06-06-2021 Date of filing of Bill of Entry 8% 08-06-2021 Date of arrival of vehicle 11% 11-06-2021 Date on which goods were allowed to be cleared from the land customs station 10% 17-06-2021 _Date of payment ofthe value ofthe goods imported 9% P.3, The actual CIF value has been calculated by the importer by adding a su he com fis In sch dtminion no cosieton en aie ‘maximum pemissible limit of 20% of FOB. The following actual amounts are givens” nme CIF (Actual) + & 16,15,000 ‘Transportation Cost (by air) = 3,00,000 Cost of Insurance = 2 40,000 Find out the FOB value and assessable value for customs valuation,2 8 Baggage Rules and Exemptions Understanding the Content: * Allincoming intemational passengers after immigration clearance must pass through the customs that have the duty to ensure their maximum facilitation and speedy clearance. + Customs must ensure that these passengers do not smuggle out foreign currency, antiques of other wildlife and prohibited items. + Indian customs has thus made provisions for controlling / regulating goods by passenger also. The governing provisions are contained in Section 77 to 81 of Customs Act, 1962. 38.1. COMMERCIAL CARGO * It is cleared as per provision of Sections 46 and 47. Vessel / aircraft carry commercial cargo with it and unload it at custom station, + The unloaded cargo comes in custody of custodian, * The importer comes forward with bill of entry (B/E) to clear these goods. 38.2. BAGGAGE * The term “baggage” has been defined in an inclusive manner, * “Baggage” includes unaccompanied baggage (except where they are specifically excluded) but does not include motor vehicles, The definition does not explain meaning of baggage, as a matter of fact it is interpreted to means ‘luggage’. * In other words, it is the luggage of passen; country to another. + Italso means all dutiable goods imy in his/her baggage. + There is no separate bill of entry required to clear baggage, * It covers only personal and household articles i.e., “personal effect’, Baggage means cases/bags which are used to carry belongs of a passenger. iger travelling by air or sea from one ported by a passenger or a member of crew 38.3 APPLICABILITY + Baggage rules are applicable to: + Resident of India + Tourist visiting India + Person shifting residence to IndiaBaggage Rules and Exemptions : 344 38.4, PERSONAL EFFECT + Itmeans articles (new or used) which « t-wveller may reasonably require for his or her personal use during the journey, considering all the circumstances of the journey and of any intermediary stay, but excluding any goods imported or exported for commercial use. > Ponder Illustration No. 38.1 38.5. UNACCOMPANIED BAGGAGE + It is the baggage which is not carried by the passenger at the time of her/his travel but sent before or after arrival. = Basically, Baggage is articles carried by traveller with him. However, sometimes he sends the article prior to, or after, his coming in India. Such baggage is termed as ‘unaccompanied baggage’. It shall be cleared as ‘baggage’ and not as ‘commercial cargo’. = However, such baggage is not entitled to benefit of general free allowance (GFA) as available to ‘accompanied baggage’. 38.6. GREEN AND RED CHANNELS «The passenger will have to know the applicable !=w, monetary limits and quantity allowed and accordingly decides to choose the channel. = Green channel means if a person does not have any dutiable goods, he can go through it without undergoing any check, along with baggage. Hence, no duty is applicable. Ifa person adopts green channel, technically tis declaration that Te knot carrying any dutiable goods. If a person (going through green card) ‘carries dutiable goods, he can be penalized for false declaration = Red channel means if a person is carrying dutiable goods, he should pass through it and submit declaration under Section 77 mentioning the contents of the bapeage to the proper officer for clearance and his baggage can be inspected by customs authorities. 38.7. DECLARATION BY OWNER OF BAGGAGE [SECTION 77] «The owner of any baggage shall for clearing it (whether import clearance The Sport clearance), make a declaration of its content to the Custom officer. DETERMINATION OF RATE OF DUTY AND TARIFF VALUATION, BAGGAGE [SECTION 78] «The rate of duty and tariff valuation applicable to baggage shall be the rate and valuation in force on the date on which a declaration is made in respect of such baggage under Section 77 388342 Goods & Services Tax with Customs Law | Customs Law 38.9. BONA FIDE BAGGAGE EXEMPTED FROM DUTY (SECTION 79) + The term bona fide baggage has not been defined under customs act, not even under baggage rules. + Whether the baggage is bona fide or not has to be decided on case-to-case basis keeping in mind the status ofa person concerned, the article claimed as baggage, the quantity of article claimed as baggage and other things. @ Ponder Illustration No. 38.2 + If the baggage is bona fide, then only that person can claim exemption from Payment of duty on certain part of that baggage. 38.10. TEMPORARY DETENTION OF BAGGAGE [SECTION 80] Where the baggage of a passenger contains any article, which is dutiable or the import of which is prohibited and in respect of which a true declaration has been made w/s 77 + The proper officer may, at the request of the passenger, detain such article for being returned to him at the time of leaving India. * If for any reason, the passenger is not able to collect the article at the time of leaving India, the article may be returned to him. + Through any other passenger authorised by him + As cargo consigned in his name. 38.11. BAGGAGE RULES, 2016 Rule 1: Short title and commencement Rule 2: Definitions Rule 3: Passengers arriving from countries other than Nepal, Bhutan or Myanmar. + These rules may be called the Baggage Rules, 2016. They shall come into force on the Ist day of April, 2016. “Family” includes all persons who are Tesiding in the same house and form part of the same domestic establishment; “Infant” means a child not more than ‘two years of age; * “Resident” means a person holding a valid passport issued under the Passports Act, 1967 (15 of 1967) and normally residing in India; * “Tourist” means a person not normally resident in India, Who enters India fora stay of not more than six months in the course of any twelve months period for legitimate non-immigrant purposes: * “Personal effects” means things required for satisfying dail Aecessities but does not include jewellery. An Indian resident or Indian origin, not b than Nepal, Bhutan duty articles in his a foreigner residing in India or a tourist of cing an infant arriving from any country othet or Myanmar, shall be allowed clearance free © bona fide baggage, that is to say, (@) Used personal effects and travel souvenirs; and ©) Amicles other than those mentioned in Annexute-t, upto‘? value of ® 50,000 if these are : accompanied baggage of the pas Senger:r Baggage Rules and Exemptions = 343 Provided that a tourist of foreign origin, not being an infant, shall be allowed clearance free of duty articles in his bona fide baggage, that is to say, (a), Used personal effects and travel souvenits; and (b) Articles other than those mentioned in AnnexuresI, upto the Value of € 15,000 if these are carried in person or in the accompanied baggage of the passenger: Provided further that where the passenger is an infant, only used personal effects shall be allowed duty fre. Explanation: The free allowance of a passenger under this rule shall not be allowed to pool with the free allowance of any other passenger. ‘An Indian resident or a forelgner residing in India or a tourist, not being an infant arriving from Nepal, Bhutan or Myanmar, shall be allowed clearance free of duty articles in his bona fide baggage, that is to say (@) Used personal effects and travel souvenirs; and (b) Articles other than those mentioned in Annexure-I up to the Valle of € 15,000 if these are carried on the person or in the accompanied baggage of the passenger: Provided that where the passenger isan infant, only used personal effects shall be allowed duty free: Provided further that where the passenger is ariving by land, only used personal effects shall be <'towed duty free. Explanation: The free allowance of a passenger under this rule hall not be allowsed to pool with the fre allowance of any other passenger Je 5: Jewellery. “A passenger residing abroad for more than I year, on return to Indi Rule hall be allowed clearance free of duty in his bona fide baggage of jewellery upto Gents: 20 grams with a value eap of € 50,000 Rule 4: Passengers arriving from Nepal, Bhutan or Myanmar, Ladies: 40 grams with a value cap of € 1,00,000 2 Transfer of person, who is engaged in a profession abroad, or is transferring Rae 6 ldence. his residence to India, shall, on return, be allowed clearance free of duty in addition to what he is allowed under rule 3 or under rule 4, articles in his bona fide baggage. ‘Duration of | Articles allowed Conditions stay abroad free of duty 3-6 months| Personal & Household | Indian Passenger articles upto an aggre- gate value of % 60,000 (other than Annexure etl) month to | Personal & Household _ | Indian Passenger 1 year articles upto an aggregate value of 2 1,00,000 (other than Annexure | & [1) Tyear to | Personal & Household [nd cho ian Passenger shoul Zyear | articlesuptoan aggregate not have availedi _| Goods & Services Tax with Customs Law | Customs Law Value of €2,00,000 ‘concession in the (other than Annexure | preceding 3 Years, Tem 2years & |" Personal € Household | Indian Passenger | above articles upto an aggregate | should not have | value of € 5,00,000 availed concession in | (other than Annexure | the preceding 3 Years | T&M Minimum stay of 2 | years abroad, immediately preceding the date of arrival. Total stay in India on short visit during the 2 preceding years should not exceed 6 months, Rule 7: Currency. ‘The import and export of currency under these rules shall be governed in accordance the provisions of the Foreign Exchange Management (Export and Import of Currency) Regulations, 2015, and the notifications issued there under. Rule 8: Provisions regarding | These rules shail apply to unaccompanied baggage except where unaccompanied they have been specifically excluded. baggage. Provided that the said unaccompanied baggage had been in the possession, abroad, of the passenger and is dispatched within 1 month of his arrival in India or within such further period as may allow: Provided further that the said unaccompanied baggage may land in India upto 2 months before the arrival of the passenger or within such period, not exceeding 1 year, as may allow, for reasons to be recorded, if he is satisfied that the passenger was prevented from arriving in India within the period of 2 months due to circumstances beyond his control, such as sudden illness of the passenger of a member of his family, or natural calamities or disturbed conditions or disruption of the transport or travel arrangements in the country or countries concerned or any other reasons, which necessitated a change in the travel schedule of the passenger. Rule 9: Application of these | These rules shall also apply to the members of the crew engaged ina rules to members of | foreign going conveyance for importation of their baggage at the time the crew of final pay off on termination of their engagement. Not with standing anything contained in sub-rule (1), a member of crew of a vessel or an aircraft other than those referred to in sub- rule (1), shall be allowed to bring articles like chocolates, cheese, cosmetics and other petty gift items for their personal or family use which shall not exceed the value of one thousand and five hundred rupees. > Ponder Illustration No. 38.3 Rate of duty on baggage is 35% ad valorem plus 10% social welfare surcharge (Effective tariff rate ; 38.50 per cent)Baggage Rules and Exemptions 345 ILLUSTRATIONS Mlustration 38.1: Mr Sharamchand wants to import motor vehicle in his baggage, with a plea that it is of personal effect. Put a light on the situation? Solurion: Motor vehicle has been specifically excluded from the definition of ‘baggage’. Thus, motor ‘Vehicle cannot be bought into India as baggage. Import of ‘motor vehicle’ (whether new or old) can be done only as ‘commercial cargo’. Thus, importer shall have IEC and shall clear it by filling Bill of Entry. ‘Mlustration 38.2: Below mentioned three different situations. Determine in each case whether the same is bona fide or not. Passenger Returning “Article Claimed as Baggage Whether admissible _from Abroad cas ‘Bona fide’ or not ‘Mr. Ram returning India after 15 Canon cameras 4 days of tour in Bangkok Mr. Karam (Indian doctor) I-phone coming to India after staying in Camera Canada for $ years—heisnow — TV1 transferring his residence back — Dog to India Solution: PassengerReturning Article Claimed — Whether admissible Reason from Abroad cas Baggage as ‘Bona fide' or not Mr Ramreturning 15 Canon Not Bona fide ‘Goods imported in India after 4days cameras Baggage commercial quantity tour in Bangkok cartbeemeds, Mr Karam (Indian T-phone Camera AllareBonafide BIC bee permitted doctor) comingtoIndia TV Baggage impor of et ails after staying in Canada 1 Dog Stairs eee for 5 years —he is now transferring his residence to India years of saat toda ae continuous stay abroad. 7-20 after visiting USA. He a az MiiX, resident of Tada, returned to India on 10-7-20 aftr visitng UB rasa USA Mr 0. On his way back to India he bought following goods with him: hhad been Prsonal Effects Like clothes ete. valued at € 50,000 2 1 itr of wine worth © 25,000 J A digital camera worth & 65,000 4, A mobile worth € 50,000 ; A nentate the amount on which duty fs payable? ve serving from any country other than Nepal, Bhutan or Myanmar, shall Am Indian resident arriving ftom any county o Solution’ crane re of Guy ates in is bona fd BABERES: eed article effects, travel souvenirs, and «Used Mother than those mentioned in Annexure I upto the value of & $0,000 ifthese are ‘Aitied on the person or in the accompanied baggage ofthe passenger Personal Effects Like clothes Nil Wine (upto 2ltrcan be accommodate in general free allowance) 25,000 Digital Camera 65,000 Mobile 50,000 ‘Total dutlable goods Imported 140,000 Less: General Free Allowance ‘50,000 Balance goods on which duty Is payable 90,000346 Goods & Services Tax with Customs Law | Customs Law Mlustration 38.4: Mrs. M, a person from Indian origin, aged 40 years came to India on tour along with her baby ged 2 years. She carried with her following goods: 1. Personal effect goods € 45,000 2. Used personal effect of Infant & 50,000 3. Laptop %35,000 4. Ltr wine € 6,000 5. Mobile € 20,000 6. Cigars 20 worth 1,450 Calculate the amount on which duty is payable? Solutio Personal effect goods Exempt Used personal effect of Infant Exempt Laptop Exempt 1 litre wine (upto 2 Itr can be accommodated in GFA) 6,000 Mobile 20,000 Cigars 20 1,450 Total Dutiable Goods 27,450 Less: GFA. 50,000 Balance goods on which duty on payable Nil ABRIDGED LAW VIEW Class of Passenger | Origin country of passenger Article Allowed Free of Duty Indian resident or | Any country other than * Used Personal effects & travel souvenirs: and Foreigner Resident | Nepal Bhutan or Myanmar |* Article upto % 50,000 (excluding used in India or Tourist article), if carried in person or in the of Indian Origin, accompanied baggage of the passenger. Excluding an Infant Tourist of foreign | Any country other than | * Used Personal effects & travel souvenirs: and Nepal, origin Bhutan or Myanmar * Article upto % 15,000 (excluding used excluding infant article), if carried in person or in the accompanied baggage of the passenger. Indian Resident or_| Nepal, Bhutan or Myanmar |* Used Personal effects & travel souvenirs: and Foreigner residing in *+ Article upto @ 15,000 (excluding used India or Tourist, article) if carried in person or in the excluding an Infant accompanied baggage of the passenger. ANNEXURE - I Restricted/Disallowed items under GFA 1. Fire arms; Fire arms exceeding 50; 2) 5 4, ae Alcobolic liquor and wines in excess of 2 litr - Cigarettes exceeding 200 or cigars exceeding $0 or tobacco exceeding 250 ems; Gold or silver in any form other than omaments; Flat Panel television.Baggage Rules and Exemptions 347 ANNEXURE - II 1. Colour Television. 2. Video Home Theatre System. 3. Dish Washer. 4. Domestic Refrigerators of capacity above 300 litres or its equivalent. 5. Deep Freezer. 6. Video camera or the combination of any such video camera with one or more of the following goods, namely: (a) Television receiver; (b) Sound recording or reproducing apparatus; (c) Video reproducing apparatus. 7. Cinematographic films of 35 mm & above. 8. Gold or Silver, in any form, other than omaments. KNOWLEDGE TESTERS — THEORY 1._ Bill of entry is required to clear baggage. Is the statement true? Please explain. 2. Declaration by owner of baggage under Section 77 is like bill of entry and not separate bill of entry is required under Section 46. Justify the statement? 3. Answer the following questions as True or False: (@) Baggage includes motor vehicle. [Ans. FI (b) Bona fide baggage is defined in Law. [Ans. F] (©) Bill of entry shall be required to file to clear commercial cargo. [Ans. T] (@) Bill of entry shall be required to file to clear baggage. [Ans. F] {©) Baggage covers only personal and household articlesi.e., ‘personal effect. [Ans. TL {f Unaccompanied baggage which isnot carried by the passenger atthe time of her/his aye) but sent before or after arrival. fAns. T] (@) Unsecompanied baggage isnot entitled to benefit of genera fecallowance (GFA) Ans. TI Groen channel means ifapersonis carrying dutable goods, he should passthrough + [Ans F (@)_ Red channel means if person does nothave any dutable goods, he can go ikrough [Ans. F] {G) Declaration by owner of Baggage under Section 77 means filing Bit of erty. [Ans. F] The proper officer may, atthe request ofthe passenger, detain article fr the purpose of being retumed to him at the time of leaving India. (Ans. T] tap inbrief about the baggage rules and exemption in case of Custom Laws ? 2 ee (CBCS Q. 5. Nov/Dec. 2018) 5, Write a short note on baggage rules ? (DU Q. 5. (a) Nov/Dec. 2018) KNOWLEDGE TESTERS — PRACTICAL 1. Mr. M, resident of India, returned to India on15-9-17 after visiting USA. He had been to USA aoe 917, On his way back to India he bought following goods with his 1. Personal Effects valued at € 68,000 2. 2itr of wine worth & 52,000 3. Digital camera worth € 92,000 4. Mobile worth & 98,000 Calculate the amount on which duty is payable? [Ans. (52,000 + 92,000 + 98,000) ~ $0,000]348 Goods & Services Tax with Customs Law | Customs Law P.2. Mrs. Kaperson from Indian origin came to India on tour along with her baby aged 1 years. She carried with her following goods: Personal effect goods € 52,000 ‘Used personal effect of Infant € 67,000 Laptop © $3,000 2 Itr wine % 60,000 Mobile € 80,000 6. Cigars 20 worth & 11,500 Calculate the amount on which duty is payable? [Ans. (60,000 + 80,000 + 11,500) ~ 50,000] eee