Customs duty changes in Indian Budget 2006-2007

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Customs duty changes in Indian Budget 2006-2007

The Finance Minister has introduced the Finance Bill, 2007 in the Lok Sabha on 28th February, 2007. Changes in excise and customs duties have been made through the Finance Bill and through Notification Nos.20/2007-Customs to 34/2007-Customs, 3/2007-CE to 18/2007-CE, and 8 /2007-CE (NT) to 14/2007-CE (NT), all dated 1st March, 2007. Details
of the changes are available in the Explanatory Notes. Salient features of these changes in respect of excise and customs duties are indicated below. For full details, relevant provisions of the Finance Bill and the notifications should be referred to.

I. Secondary and Higher Education Cess [Clauses 126, 128 and 129 of Finance Bill] 2.1 A Secondary and Higher Education Cess at the rate of 1% of the aggregate duties of customs, excise and service tax has been imposed. The proceeds from this cess will be utilized to finance secondary and higher education. This will be in addition to the 2% Education Cess imposed in 2004 budget. While the cess will apply in respect of customs and excise duties with effect from 1.3.2007, in respect of service tax, it will come into effect on enactment of the Finance Bill, 2007.

2.2 In the case of customs duties, the Secondary and Higher Education Cess on imported goods will be 1% of the aggregate duties of customs, (but excluding safeguard duty under section 8B and 8C, countervailing duty under section 9, Anti Dumping Duty under section 9 A of the Customs Tariff Act and the two Education Cesses). Items attracting customs duty at bound rates, for example, under the IT Agreement or the Indo-US/Indo-EU Textile Agreement have been exempted from this cess. Suitable provision has been made in the Finance Bill, 2007 (and by notification to cover the period till the date of enactment of the finance Bill) to provide that for calculating the Education Cess of 2004, inter alia, the Secondary and Higher Education cess will not be taken into account. The method of calculation of the Secondary and Higher Education cess will be the same as in the case of Education Cess introduced in 2004 budget.

2.3 In the case of excise duties, Secondary and Higher Education Cess on excisable goods will be chargeable on the aggregate duties of excise (excluding Education cesses) leviable on such goods. The method of calculation of the Secondary and Higher Education cess will be the same as in the case of Education Cess introduced in 2004 budget. Suitable provision has been made in the Finance Bill, 2007 (and by notification to cover the period till the date of enactment of the Finance Bill) to provide that for calculating the Education Cess of 2004, the Secondary and Higher Education cess will not be taken into account. Necessary amendments have been made in the Cenvat Credit Rules, 2004 to allow credit of this Education Cess paid on inputs and capital goods, which can be utilized for payment of Education cesses only.

II. Changes in CUSTOMS matters:
3. Export Duty [Clause 105 (ii) of the Finance Bill]:

3.1 An export duty @ Rs.300 per metric tonne has been imposed on iron ores and concentrates, all sorts. This will cover all iron ores, whether in the form of lumps or fines.
3.2 An export duty @ Rs.2000 per metric tonne has been imposed on chromium ores and concentrates, all sorts. This will cover all chrome ores, whether in the form of lumps or fines.Both the export duties come into effect immediately.
3.3 Chief Commissioners are requested to send a monthly report on revenue from export duties in respect of Commissionerates under their jurisdiction

4. Peak rate of Duty

4.1 Peak rate of customs duty on non-agricultural goods has been reduced from 12.5% to 10% with a few exceptions. As regards textiles, only the ad valorem component has been reduced to 10%, the specific component, wherever applicable, remaining unchanged. The tariff rates in general are being amended accordingly. Since the reduction in tariff rates will come into effect only on enactment of the Finance Bill, 2007, the effective rates are being prescribed through notifications. I would also like to bring to your notice that it is quite likely that a commodity may be covered under more than one notification attracting different rates of duties. In such cases, the benefit of lower rate of duty cannot be denied to the assessee as per various judicial pronouncements on the subject.

5. 4% Additional Duty of Customs

5.1 All edible grade vegetable oils, and their edible grade fractions falling under 15.07 to 15.15 have been exempted from additional duty of customs of 4%. Roasted molybdenum ore and concentrate has also been exempted from this levy.
5.2 Cell phone parts, components and accessories are exempt from additional duty of customs of 4% till 30.04.2007. The exemption has been extended till 30.06.2009.

6. Metals:
Customs duty has been reduced from 20% to 10% on seconds and defectives of iron and steel.

7. Aircrafts:

7.1 Customs duty has been imposed on aircrafts @ 3%. CV duty of 16%, by way of excise duty, and special additional duty of customs of 4% has also been imposed on such aircrafts. Parts of such aircrafts will also attract these duties. Imports by scheduled airline operators will, however, be exempt. Imports by the Government and PSU’s will continue to be exempt (vide S. No.10 of Notification No.39/96-Customs).
7.2 Aircrafts, not registered in India, on flight to or across India and ultimately removed within six months from the date of arrival will be exempt from all duties of customs.

8. Chemicals and Petrochemicals:

8.1 Customs duty has been reduced from 12.5% to 7.5% on goods falling under Chapter 28 (except Titanium Dioxide which will attract customs duty at 10%.), Chapter 29 (except Mannitol, Sorbitol and Caprolactam) and Chapter 31.
8.2 Customs duty has been reduced from 12.5% to 7.5% on goods falling under headings 3201 to 3207 (except pigments and preparations based on Titanium Dioxide, which will attract customs duty at 10%).
8.3 Customs duty has been reduced from 12.5% to 7.5% on goods falling under heading 3403.
8.4 Customs duty has been reduced from 12.5% to 7.5% on goods falling under headings 3801 to 3807 and 3809 (with few exceptions), 3810, 3812, 3816, 3817, 3821 and 3824 (except 3824 60).
8.5 Customs duty has been reduced from 12.5% to 7.5% on goods falling under headings 3901 to 3907 and 3909 to 3915.
8.6 Customs duty has been reduced on glycerol waters and glycerol lyes from 30% to 20%.
8.7 Customs duty has been reduced on denatured ethyl alcohol from 10% to 7.5%.

9. Agriculture:

9.1 Customs duty has been reduced from 7.5% to 5% on:
a) food processing machinery; and
b) sprinklers and drip irrigation systems used for agricultural and horticultural purpose.
9.2 Concessional rate of 5% customs duty plus Nil CVD/excise duty presently available to specified plantation machinery upto 30.04.2007, has been extended upto 30.04.2009.
9.3 Customs duty has been reduced on crude sunflower oil from 65% to 50% and on refined sunflower oil from 75% to 60%.

10. Textiles:

10.1 Customs duty on polyester staple fibres and tow, polyester filament yarns and polyester chips has been reduced from 10% to 7.5%.
10.2 Customs duty on DMT, PTA and MEG has been reduced from 10% to 7.5%.

11. Export Promotion:

11.1 Customs duty on cut and polished diamonds has been reduced from 5% to 3%.
11.2 Customs duty on rough synthetic gemstones has been reduced from 12.5% to 5%.
11.3 Customs duty has been reduced on unworked or simply prepared corals from 30% to 10%.
11.4 Raw, tanned or dressed fur skins have been exempted from CV duty of 8%.

12. Research & Development

12.1 The concessional rate of 5% customs duty plus Nil CV duty on specified items, available to public funded research institutions and non-commercial research institutions, has been extended to all research institutions (other than hospitals) registered with Department of Scientific & Industrial Research subject to certain conditions.

12.2 The concessional rate of 5% customs duty available on specified items for pharmaceutical and biotechnological sector when imported for R&D purposes, by an importer or a manufacturer having an R&D wing, registered with Department of Scientific & Industrial Research, is being extended to15 additional items.

13. Health: Customs duty on medical equipment has been reduced from 12.5% to 7.5%.
14. Project Import: Digital Cinema Development Projects have been notified as project imports under Heading 9801, and will thus attract the project rate of 7.5%
15. Miscellaneous:

15.1 Customs duty has been reduced from 5% to Nil on dredgers. Since dredgers are exempt from excise/CV duty, dredgers will be exempt from the 4% additional duty of customs.
15.2 Customs duty has been reduced from 5% to 2% on natural boron ore.
15.3 Customs duty has been reduced from 10% to 5% on:
a) borax or boric acid;
b) butyl rubber; and
c) frit.
15.4 Customs duty has been reduced from 12.5% to 5% on:
a) ceramic colours;
b) watch dials and movements; and
c) parts of umbrella, including umbrella panels.
15.5 Customs duty has been reduced from 30% to 20% on:
a) dammar batu;
b) dextrose monohydrate; and
c) dog or cat food.
15.6 A uniform customs duty rate of 5% has been prescribed for urea unconditionally.
15.7 Aramid yarns for manufacture of bulletproof jackets for supply to the Armed Forces have been exempted from both customs duty and CV duty.
15.8 Coking coal of high ash content of 12% or more has been exempted from customs duty.
15.9 Customs duty has been reduced from 7.5% to 5% on machinery for manufacturing of particle board, fibre board, etc.

16. Withdrawal of Exemptions:

16.1 Customs duty exemptions/concessions on following items have been withdrawn:
a) Chemicals, for use in the manufacture of Centchroman;
b) Codeine phosphate or Narcotine, imported by Government alkaloid factories;
c) Recorded magnetic tapes for producing TV serials;
d) Specified goods like TV cameras (professional grade), audio recording equipment, tabletop desk production video machine, 8 channel video mixer/switches etc.;
e) Specified goods for manufacture of fly ash based goods.