Custom Duty and GST - 1 PDF

Customs Duty & GST - 1 IV Sem. M.com.
GOVERNMENT FIRST GRADE COLLEGE
GUBBI
(AUTONOMOUS)
CUSTOMS DUTY & GST-1
4th semester M.Com
2019-2020
DEPARTMENT OF COMMERCE
Rakesha H K, Dept. of Commerce, Government First Grade College, Gubbi Page 1

UNIT-1
Basic Concepts
Syllabus:
Basic Concepts: Meaning and Features of Indirect Tax; Tax Incidence; Various Indirect Taxes in India;
Revenue Trends in Indirect Tax.
Prepared By
Dayashankar K V
Geethamma R
Nandish Kumar T S
Kavya R
Tax:
Tax is money that people have to the Government, which is used to provide public service.
Types of Tax:
Direct Tax
Indirect Tax
Direct Tax:
Direct taxes are the taxes that are levied on the income of the individuals or organizations. Income tax,
corporate tax, inheritance tax are some instances of direct taxation. Income tax is the tax levied on individual
income from various sources like salaries, investments, interests, etc. Corporate tax is the tax paid by the
companies or firms on the incomes they earn.
Indirect Tax:
Indirect taxes are those paid by the consumers when they buy goods and services. These include excise and
custom duties. Custom duty is the charge levied when they buy goods is imported into the country and is paid
by the importer or exporter. Excise duty is a levy paid by the manufacturer on items manufactured within the
country. Usually, these charges are passed to the consumers.

Indirect tax is the charges that are levied on goods and services. Some of the significant indirect taxes
include Value Added Tax, Central Sales Tax Unlike direct taxes; indirect taxes are not levied on individuals,
but on goods and services. Customers indirectly pay this tax in the form of higher prices.
For examples, it can be said that while purchasing goods from a retail shop, the retail sales tax is
actually paid by the customers. The retailer eventually passes this tax to the respective authority. The indirect
tax actually raises the price of goods and the customers purchase by paying more for that product.
Definition of Indirect Tax:
The term indirect tax can be defined from different views. In the colloquial sense, an indirect tax is the
charge that is collected by intermediary (like retail stores) from the individual who holds the actual economic
burden of the tax (like customer). The intermediary files a tax return and eventually passes to the government.
The indirect tax can be alternatively defined as the charge that is paid by one individual at the beginning, but
the burden of which will be passed over to some other individual, who eventually holds the burden. In a
colloquial sense, one example of indirect tax includes VAT (value added tax).
Basic difference: direct and indirect taxes:
The primary difference between a direct and indirect tax is that direct tax is levied directly by the
government from the tax payer, but indirect taxes are collected by the intermediary.
Indirect tax in India:
The indirect tax in India constitutes a group of tax laws and regulation. The indirect taxes in India are
enforced upon different activities including manufacturing, trading and imports. Indirect taxes influence all the
business lines in India.
There are a number of indirect taxes applied by the government. Taxes are levied on import, manufacture, sale
and even purchases of goods and services. These laws aren‟t also well-defined in terms of acts from the
government, order, circulars and notifications are given out by relevant government bodied to this end. As such
it can be cumbersome trying to understand every feature of indirect taxes in India.
Indirect taxes are touted to be streamlined following the introduction of the uniform goods and services (GST).
The GST is under deliberation in the parliament and mat be approved by mid-2016. The points below will help
you understand more about the types of indirect taxes and where they are applicable from a consumer‟s
perspective.

Features of indirect taxes:
Levied on goods and services sold by an intermediary to final consumers. Consumers then pay the tax in the
form of higher price of items.
Broadly divided into categories such as sale of goods, imported or exported of goods, offering of
services and manufacture of goods.
Indirect taxes are levied on clearance of goods and services from the origin, instead of actual sale of the
products to the customers. What this means is that intermediary will pay excise duties irrespective of whether
they could sell the good or services to consumers.
Indirect taxes fall under both the central and state government according to specific type of indirect tax. For
instance, VAT is levied by the state government whereas CST is levied by the central governments.
Tax Incidence:
An economic term for the division of a tax burden between buyers and sellers. Tax incidence is related to the
price elasticity of supply and demand. When supply is more elastic then demand, the tax burden falls on the
buyers. If demand is more elastic then supply, producers will bear the cost of the tax.
The relative burden, or incidence, of an indirect tax is determined by the price elasticity of demand
(PED) of the consumers in response to a price rise. If the consumer is unresponsive, and PED is inelastic, the
burden will fall mainly on the consumer. However, if the consumer is responsive to the price rise, and PED is
elastic, the burden will fall mainly on the firm.
Tax burden on the consumer:
When demand is inelastic the burden is mainly on the consumers.

Tax burden on producer
When demand is elastic, the tax burden is mainly on the producers.
Tax burden evenly split
In this case, the tax burden is split evenly between the consumers and producers.

Examples -the incidence of a tax on cigarettes
If a government puts a f1 tax on each packet of cigarettes, the legal incidence is on the cigarette smoker.
However, the local market may have many sellers, and be competitive. This means that a retailor, fearing they
will lose sales, may decide to up the price by only 50p, and pay the balance both are worse off.
Various indirect taxes in India:
1. Goods and Services Tax:
The law on GST was brought to action in July 2017, with 17 indirect taxes under its purview. All major
services and service tax has been subsumed under the GST-
On the state level:
 State excise duty
 Additional excise duty
 Service tax
 Countervailing duty
 Special additional custom duties

At the central level, it covers:
 Sales Tax
 Entertainment Tax
 Central sales Tax
 Octroi and entry Tax
 Purchase Tax
 Luxury Tax
 Taxes on lottery gambling and betting
 Levies on products outside GST purview:
Taxes on products that use alcohol and petroleum products.
Sales Tax:
The tax levied on the sales of goods. The Union Government imposes this sales tax on the Inter-State sale,
while the sale tax on Intra-state sale is levied by the State Government. This tax has a three-segment bifurcation
along
 Inter-State Sale
 Sale during import/export
 Intra-State Sale
Service Tax:
Service tax is indirect indices which taxpayers pay on various paid services. These paid services include-
 Telephone
 Tour operator
 Architect
 Interior decorator
 Advertising
 Health centre
 Banking and financial service
 Event management
 Maintenance service
 Consultancy service
 Service tax interest is 15%

Value Added Tax:
The state governments collect this category of taxes. For instance, when a person buys a product that it is
important, we pay an additional tax known as Value Added Tax. Paid to the government, the VAT has a rate
that is composed along nature of item and respective state of sale.
Custom Duty and Octroi Tax:
Levied upon goods imported into the country from abroad. The tax of custom duty is paid at the entry port of a
country such as the airport. The rate of taxation is variable as per product‟s nature. Octroi is charged upon the
goods entering a municipal zone.
Excise Duty:
Excise duty is an indirect tax form that is charged on the goods produced inside a country. This duty is different
from the custom duty. This is also known as CVAT, or Central Value Added Tax.
Anti-Dumping Duty:
This is levied upon goods that are exported at a rate less than the standard rate by the nation to some other
nation. This tax is levied upon by the Central government.
Newly Implemented Indirect Tax (GST)
GST is a highly regarded tax system for the country. It is amongst the latest indirect tax systems operating
under the constitution of India. The importance of this taxation regime lies in the fact that it covers under itself
various other indirect taxes operating inside the country. This tax regime has been brought in mark a change in
the economy of the country and to lessen the cascading effects from tax duties that deliver overall market
inflation.
Features of Indirect Taxes
 Payment and Tax Load - The service provider makes payment of indirect taxes and this is transferred
to a final consumer.
 Liability of Tax – Here the seller or service provider makes payment on indirect taxes which are
transferred to final consumer.
 Nature – Initially, indirect taxes used to have a regressive nature. Yet, now with the coming of GST,
they have become quite progressive.

 Evasion - Indirect taxes are hard to evade due to direct implementation through goods and services.
 Investment and Saving - Most indirect taxes are largely growth-oriented since they de-motivate the
consumer and encourage savings.
 Social Coverage - The indirect tax has a much larger coverage since their charge falls upon each
individual buying products or services.
Advantages of indirect tax:
The following are the merits of indirect taxes:
 Convenient:
Indirect tax is imposed on production, sale, and movements of goods and services. These are
imposed on manufacturers, sellers and traders, but their burden may be shifted to consumers of goods
and services who are the final taxpayers. In the form of higher prices, are paid only on purchases of a
commodity or the enjoyment of services.so tax payers do not feel the burden of these taxes. besides,
money burden of indirect tax is not completely felt since the tax amount is actually hidden in the price
the of the commodity bought. They are convenient because generally they are paid small amounts and
at intervals and are not in one lump sum. They are convenient from the point of view of the
government also, since the tax amount is collected generally as a lump sum from manufactures or
traders.
 Difficult to evade:
Indirect taxes have in built safeguard against tax evasion. The indirect tax are paid by customers,
and the sellers have to collect it remit it to the government. In the case of many products, the selling
price is inclusive o indirect tax. Therefore .the customer has no option to evade the indirect taxes.
 Wide coverage:
Unlike direct taxes, the indirect taxes have a wide coverage. Majority of the products or services
are subjects to indirect taxes. The consumers or users of such products and services have to pay them.
 Elastic:
Some of the indirect taxes are elastic in nature. When governments feels it necessary to increases
its revenues, it increases these taxes. In times of prosperity indirect taxes produce huge revenues to the
government.

 Universality:
Indirect taxes are paid by all the classes of people and so they are broad based. Poor people may be out
of the net of the income tax, but they pay indirect taxes while buying goods.
 Influence on pattern of production:

By imposing taxes on certain commodities or sectors. The government can achieve better allocation of
resources. For e.g. imposing taxes on luxury goods and making them more expensive, government can
divert resources from these sectors to sector producing necessary goods.
 May not affect motivation to work and save:

The indirect taxes may not affect the motivation to work and to save .since, most of the indirect
taxes are not progressive in nature, individuals may not mind to pay them. In other words, indirect
taxes are generally regressive in nature. Therefore, individuals would not be de motivated to wok and
to save, which may increase investment.
 Social welfare:
The indirect taxes promote social welfare. The amount collected by way of taxes is utilized by
the government for social welfare activities, including education, health, and family welfare. Secondly,
very high imposed on the consumption of harmful products such as alcoholic products, tobacco
products, and such other products.
 Flexibility and buoyancy:

The indirect tax more flexible and buoyant. Flexibility is the ability of the tax system to generate
proportionately higher tax revenue with a change in tax base, and buoyancy is a wider concept, as it
involves the ability of the tax system to generate proportionately higher tax revenue with a change in
tax base, as well as tax rates.
Disadvantages of indirect taxes:
Although indirect taxes have become quite popular in both developed and under developed
countries like, they suffer from various demerits, of which the following are important.

 High cost of collection:

Indirect tax fails to satisfy the principle of economy. The government has to set up elaborate
machinery to administer indirect taxes. Therefore, cost of tax collection per unit of revenue raised is
generally higher in the case of most of the indirect taxes.
 Increase income inequalities:

Generally, the indirect taxes are regressive in nature. The rich and the poor have to pay the same
rate of indirect taxes on certain commodities of mass consumption .this may further increase income
disparities among the rich and the poor.
 Affects consumption:
Indirect taxes affect consumption of certain products. For instance, a high rate of duty on certain such
as consumer durables may restrict the use o such products. Consumers belonging to the middle class
group delay their purchase, or they may not buy at all. The reduction of consumption affects the
investment and production activities, which in turn hampers economic growth.
 Lack of social consciousness:

Indirect tax do not create any social consciousness as the taxpayers do not feel the burden if the
taxes they pay.
 Uncertainty:
Indirect taxes are often rather uncertain. Taxes on commodities with elastic demand are particularly
uncertain, since quantity demanded will greatly as prices go to the imposition of tax. In fact a higher
rate of tax on a particular commodity may not bring in more revenue.
 Inflationary:
The indirect taxes are inflationary in nature. The tax charged on goods and services increase their
prices. Therefore, to reduce inflationary pressure, the government may reduce the tax rates, especially,
on essential items.
 Possibility of tax evasion:
There is a possibility of evasion of indirect taxes as some customers may not pay indirect taxes with the
support of sellers. For instance, individuals may purchase items without a bill, and therefore, may not pay
sales tax or VAT (Value Added Tax), or may obtain the services without a bill, and therefore, may evade
the service tax.
Direct and indirect tax revenues of central and state government:

The data provides the revenue received by central and state government through direct and indirect
taxes.
Rupees in crore: sources RBI.

Unit – 2
Customs duty
Syllabus:
Nature and types of customs duty .scope and coverage of customs law, classification of duty under customs.
History of customs Act 1962. Customs tariff valuation, customs valuation (determination of price of imported
goods) rules 1988, levy and exemptions, prohibition on import and export, special provisions regarding
baggage, goods imported and exported by post, offences, adjudications, appeals, revision an draw back.
Prepared By
Arpitha S
Rajani L
Mangalagawramma R B
Veena B R
Praveen Kumar B C
Sachin C
Nature and types of customs duty
Customs duty is imposed under the Indian customs Act formulated in 1962 by the constitution of India under
the article 265, which states that “no tax shall be levied or collected except by authority of law”. So, the Indian
customs Act was introduced that allow the central government to collect the taxes under the name of custom
duty,
Custom duties are usually levied with ad valorem rates and their base is determined by the domestic value „the
imported goods calculated at the official exchange rate‟. Similarly, export duties are imposed on export values
expressed in domestic currency.
Export duties are levied occasionally to clear up excess profitability in international price of goods in respect of
which domestic prices may be low at given time. But the concept of import duty is wide and almost universal,
except for a few goods like food grains, fertilizer, lifesaving drugs and equipment etc...

Custom duty not only raises money for the central government but also helps the government to prevent the
illegal imports and illegal exports of goods from India. The central government has emergency powers to
increase import or export duties whenever necessary after a notification in the session of parliament.
History of Indian customs:
The custom duty in its present form dates back to 1786, when Britishers formed the first revenue board in
Calcutta. In 1808, a new trade board was introduced for export and import of goods from India. Once again, in
1859 customs duties Act was introduced in which provincial import duties were replaced by uniform tariff Act
and was applicable to all Indian territories within the country.
In the subsequent year several changes in the custom policy took places and are as follow:
 Sea customs Act was passed by government in 1878

 Indian tariff Act was passed in 1894
 Air customs having been covered under the Indian air crafts act of 1911
 Land customs Act was passed in 1924
After independence , the sea customs Act and other allied enactments were replaced by a consolidating and
amending legislation entitled the customs Act, 1962 (CA). Similarly the Act of 1934 was replaced by the
customs tariff Act 1975 (CTA).
Governing body:
As per section 12 of the Indian customs act, custom duty is imposed on goods, belonging to government as well
as goods not belonging to government. Section 2(22), given inclusive definition of „goods‟ as – „Goods‟
includes:
Goods –
As per the Indian customs Act, custom duty is imposed on goods, belonging to government as well as goods not
belonging to government. Section 2(22), gives inclusive definition of „goods‟ as – „Goods‟ includes:
 Vessels, aircrafts and vehicles

 Stores
 Baggage
 Currency and negotiable instruments and
 Any other kind of movable property.

Objectives of custom duties
 Restricting imports for conserving foreign exchange

 Protecting Indian industry from undue competition
 Prohibiting imports and exports of goods for achieving the policy objectives of the government
 Regulating export
 Coordinating legal provisions with other laws dealing with foreign exchange such as foreign trade Act,
foreign exchange regulation Act, conservation of foreign exchange and prevention of smuggling Act,
etc...
Mode of levy of customs duty
Basically there are three modes of imposing customs duty:
1. Specific duties: specific custom duty is a duty imposed on each and every unit of a commodity
imported or exported. For example, Rs.5 on each meter of cloth imported or Rs.500 on each T.V. set
imported. In this case, the value of commodity is not taken into consideration.
2. Advalorem duties: advalorem custom duty is a duty imposed on the total value of a commodity
imported or exported. For example, 5% of F.O.B. value of cloth imported or 10% of C.L.F value of TV
sets imported. In case of ad valorem custom duty, the physical units of commodity are not taken into
consideration.
3. Compound duties: compound custom duty is the combination of specific and advalorem custom
duties. In this case, the quantities as well as the value of the commodity are taken into consideration
while computing tariff. For example, 5%of F.O.B value plus, 50 paisa per meter of cloth imported.
Decline in customs duty
India‟s customs tariff rates have been declining since 1991. The “peak” rate has come down from 150%in
1991-92 to 40%in 1997-98. The downward momentum was reversed the next year with the imposition of a
surcharge. This momentum has resumed with the reduction of the “peak” rate to 35% in 2001-02 and 30%in
2002-03.
Territorial waters of India
Territorial waters mean that portion of sea which is adjacent to the shores of a country. On 22nd march, 1956,
president of India had issued a proclamation that territorial waters of India shall extend up to 6 nautical miles

from the base line. This was extended to 12 nautical miles w.e.f. 30thsept , 1967. Later, territorial waters,
continental shelf, exclusive economic zone and other maritime zone Act 1976 was passed. Section 3 of the said
act specify that territorial water extend upto12 nautical miles from the base line on the coast of India and
include any bay, gulf, harbour, creek or tidal river. (1 nautical mile = 1.1515miles = 1.853kms)
Indian customs waters – section 2(28)
Define that „Indian customs waters‟ means the waters extending into the sea up to the limit of contiguous zone
of India under section 5 of the territorial waters, continental shelf, exclusive economic zone and other maritime
zones Act 1976, and includes any bay, gulf, harbour, creek or tidal river. As per provisions of that Act,
contiguous zone of India comes immediately after territorial waters. The outer limit of contiguous zone is 24
nautical miles from the nearest point of base line. Thus, area beyond 12 nautical miles and up to 24 nautical
miles is „contagious zone of India‟. The central government has power to take measures in this area for security
of India and immigration, sanitation, customs and other fiscal matters. [Section 5(4) of territorial waters Act,
1976].
Thus, „Indian customs waters‟ extend up to 12 nautical miles beyond territorial waters. Significance of
definitions of „Indian customs water‟ is as follows-
Custom officer has power to arrest a person in India or within Indian customs waters. [Section 104].
Customs offices has power to stop and search any vessel in India or with in Indian customs waters. [Section
106]
If such vessel does not stop, it can be fired upon. It can be confiscated [section 115(1) (c)]. A vessel which is
within Indian customs waters or which has been in Indian customs waters can be confiscated which is
constructed or fitted in any manner for purpose of concealing goods. [Section 115(1) (a)].
Thus, powers of customs officers extend up to 12 nautical miles beyond territorial waters
The Custom act, 1962
The customs act 1962 is the basic act for levy and collection of custom duty in India. I contain various
provisions relating to Imports and Exports goods and merchandise as well as Baggage of persons arriving in
India. The main purpose custom act, 1962 is the prevention of illegal imports and exports of goods. The act
extends to the whole of India. It was extended to Sikkim w.e.f 1st October 1979.
The Custom Tariff Act
All goods imported or exported from India at the rates specified under Customs Tariff Act, 1975. The act
contains two schedules – schedule 1 gives classification and rate of duties for imports, while schedule 2 give

classification and rate of duties for exports. In the present Act, the tariff schedule was replaced in 1986. The
new schedule is based on harmonized system of nomenclature (HSN) the internationally accepted harmonized
commodity description and coding system.
Scope and Coverage of Custom Law
Section 12 of Custom act provides levy of duty on imports as well as exports .The rate of duty is a prescribed in
custom tariff Act, 1975 read with relevant exemption notifications. Import duty is levied on almost all items,
while export duty is levied only on a few limited products, where Indian goods are in commanding position.
Raising revenue for central government is the main but not the only purpose customs Act, Customs act is used
to
Regulate Imports and Exports:
Protect Indian industry from Dumping
Collect revenue of custom duty. In addition provisions of custom act are used for other acts like foreign trade
(development and Regulation) Act. Foreign exchange management Act (FEMA) etc…Custom law is covered
under various Acts, Rules, regulations and notifications as follows:
Custom Act, 1962
This is the main Act, which provides for levy and collections of duties import/export procedures, prohibitions
on Importation and exportation of goods, penalties and offence etc……
Custom tariff Act 1975
The Act contains two schedules – Schedule 1 gives classification and rate of duties for imports, while schedule
2 gives classification and rates of duties for exports. In Addition, the CTA (Custom tariff Act) makes provides
for duties like addition duty (CVD), preferential duty, anti-dumping duty, protective duties etc…
Rules under Customs Act
Under section 156 of customs Act 1962, central government has been empowered to make rules, consistent
with provisions of the Act, to carry out the purpose of the Act. Various rules have been framed under these
powers major among them are: Customs valuations rules and central excise duties, drawback rules 1995 : mode
of calculating rates of duty drawback on exports : Baggage Rules, 1998 : rules and allowances for bringing in
baggage from abroad by Indians and tourists : Customs ( Import of goods at Concessional rate of duty for
manufacture of excisable goods) Rules, 1996 : Provides procedure to be followed when goods are imported fir
export purposes ; other rules are : rules regarding notified goods, specified goods, determination of additional
duty for dumping, determination of origin of goods etc….

Regulations Under customs Act
Under section 157 of customs Act, 1962, Board (CBE&C ) has been empowered to make regulations,
consistent with provisions of the Act, to carry out the purpose of the Act, various regulations have been framed
under these powers.
Major among these are : project import regulations, 1986 : procedures for project imports; customs house
agents licensing regulations, 1984 : Regulations of CHA, other regulations regarding transshipment of goods,
import and export report, import and export manifest, manufacture in warehouse, shipping bill and bill of
export (form) etc… have been made. In sukhdev v. bhagatramsardarsingh (1975) 1 SCC 421 =AIR 1975 SC
1331 (SCC constitution bench), It was g=held that regulations framed under statutory provisions would have
the force of law.
Notifications under Customs Act
Various sections authorize central government to issue notifications. The main are : section 25 (1) to grant
partial or full exemption from duty and section 11 to prohibit import or export of goods. Others are : Specifying
notified gods (section 11B), specifying specified goods (section 11-1) etc….
BOARD CIRCULARS – CBE&C is empowered u\s 151a of customs act to issue, for purpose of uniformity in
classification of goods or with respect to the levy of duty thereon, issue such instructions and directions to
officers of customs and they are required to observe and follow such orders, instructions and directions of
Board. CBE&C issues giving various instructions /prescribing various procedures etc… Normally, followed
these instructions should be followed.
Customs manual, 2001
Customs manual, 2001 was released by CBE&C in September, 2001. The manual gives an overview of customs
law and procedures. It is not stated that the customs manual is issued under any provisions of customs Act or
rules, however, normally; instructions in customs manual, 2001 should be followed.
Public Notices
Often, commissioners of customs issue public notices. Often they just forward the board circulars, but
sometimes, public notices for local requirements are also issued.
Classification for Customs and rate of Duty
Classification is as per central excise tariff Act for central excise and as per customs tariff Act for customs.
Both are based on HSN. Customs tariff Act, 1975 earlier contained schedule based on CCCN –Customs Co-
operation council nomenclature. This was replaced by schedule based on harmonized commodity descriptions

and coding system w.e.f. 28thfeb. 1986. Central Excise Tariff Act, Based on HSN was also brought into force
on same day. Through both tariffs are based on HSN, they are not copies of HSN. Many changes gave been
made to suit requirements of customs and excise. Customs tariff and excise Tariffs are also not identical and
both vary from each other. However, broad sections and chapter headings are same. Sections and chapters in
custom Tariff – division of sections and chapters is similar under customs Tariff Act and Central excise Tariff
Act, but there are quite a few changes.
Some chapters Blank In CETA
Central excise Tariff is only up to chapter 96 and has blank chapter heads. Out of these, chapter number 77 is
blank in customs Tariff too, which is kept to future use. Other chapters are: Chapter 1: Live Animals; Chapter
6: Live trees and other Plants, cut flowers; Chapter 10: cereals and chapter 12: Oil seeds, seed and fruit. The
obvious reason is that these items are not excisable and hence not required in central excise Tariff, but these can
be imported and hence required in custom Tariff.
Additional Section and Chapters
Excise tariff contains 20 sections up to chapter 96. Customs tariff contains one additional section XXI, covering
chapters 97 to 99n.Chapter 99. Chapter 97 of Customs Tariff is devoted to „Work of art collectors‟ pieces and
antiques „ chapter 98 is used for „project imports , passenger‟ s baggage, personal importations by air or post
and ship stores ,chapter 99 of Custom Tariff act for „Miscellaneous Goods‟ like blood, postage stamps, paper,
money, work of art and antiques imported for national museum etc… thus, Customs has 98 used chapters ( 1 to
99 with chapter No. 77 blank), while Excise tariff has 91 chapters ( 1 to 96 with chapter 1,6,10,12,and 77
Blank). Principles of classification – Method of classification in heading and sub-heading and rule for
interpretation of Tariff are same as per Central excise principles of classification like trade parlance etc….are
also same.
Classification of Parts
Principles for classification of parts is also same as central excise however, often some accessories and spare
parts and maintenance implements are compulsory supplied with the machine and its cost is included in the cost
of machine itself, in such cases, the duty chargeable is the same as duty on the main article, as per accessories
(condition) rules, 1963 and section 19 of Customs Act, if the importer is unable to give breakup.
Classification of Containers/Packing cases
Central Excise tariff does not make a separate provision for classification of containers/packing cases.
However, rules5 for interpretation of schedule to customs Act specifically provides that cases for camera,

music, instruments, drawing instruments, necklaces etc. …. Specially shaped for that article, suitable for long
term use will be classified along with that article, if such article are normally sold along with such cases,
Further packing materials and containers are also to be classified with the goods except when the packing is for
repetitive use. This provision is obviously made to ensure that the packing and the goods are charged at same
rate of duty.
Cost packing is not to be included when the packing is for repetitive use. (This provision is similar to provision
of „durable and returnable packing‟ in central excise„) preferential Area rates – Central Excise Tariff has only
four columns in each chapter i.e. Heading No, Sub-heading No, Description and rate of Duty, Customs tariff
have Five columns i.e. Heading No, sub-heading No, Description, Standard rate of duty and rate of duty for
preferential area. If no rate is mentioned in the Column „Rate for preferential area‟, then Standard rate is
applicable.
Export Tariff under Custom act- Custom Tariff Act has two schedules – First schedule is in respect of import
tariff, which we have discussed above. Second schedule is „Export Tariff‟, showing export duties leviable.
Since most of exports are exempt from export duty, the schedule contains only 26 items, Out of which 24 items
are exempt by way of a notification Rate of duty applicable – provisions in respect of rate of duty are as
follows: Basic Customs duty the rate of custom duty is applicable will be as provided in customs Act, subject to
exemption notifications if any applicable. In case imports from preferential area, the preferential rate is
applicable, if mentioned in the Tariff. It is needless to mention that if partial or full exemption has been granted
by a notification, the effective rate (as per notification) will apply and not the Tariff (as mentioned in Customs
tariff). Rate for additional duty- Rate for additional duty (CVD) will be as mentioned in central excise Tariff
Act, subject to any general exemption notification. Any specific exemption notification (e.g. Exemption to
goods manufactured by SSI unit or goods manufactured without aid of power) is not considered while
calculating CVD.
Types of customs duties in India, Before GST/ before 01/07/2017
While customs duties include both import and export duties, but as export duties contributed only nominal
revenue due to emphasis on raising competitiveness of exports, imports duties alone constituted major part of
the revenue from customs duties and include the following:
Basic customs duty
All goods imported into India are chargeable to a duty under Customs Act, 1962. The rates of this duty,
popularly known as basic customs duty, are indicated in the first schedule of the Customs Tariff Act, 1975 as
amended from time to time under Finance Acts. The duty may be fixed on ad-valorem basis or specific rate

basis. The duty may be a percentage of the value of the goods or at a specific rate. The Central government has
the power to reduce or exempt any goods from these duties. Basic customs Duty @10%
Additional [Countervailing] Duty of Customs
This countervailing duty is liveable as additional duty on goods imported into the country and the rate structure
of this duty is equal to the excise duty on like articles produced in India. The base of this additional duty is c.i.f.
value of imports plus the duty levied earlier. If the rate of this duty is on ad –valorem basis, the value for this
purpose will be the total of the value of the imported article and the customs duty on its [both basic and
auxiliary].Additional Customs duty 12%
Export Duties
Under Customs Act, 1962, goods export from India is chargeable to export duty. The items on which export
duty is chargeable and the rate at which the duty is levied are given in the customs tariff act , 1975 amended
from time to time under Finance Acts. However, the Government has emergency powers to change the duty
rates and levy fresh export duty depending on the circumstances.
Auxiliary Duty of Customs
This duty is levied under the Finance Act and is leviable all goods imported into the country at the rate
of 50 percent of their value. However this statutory rate has been reduced in the case of certain types of
goods into different slab rates based on the basic duty chargeable on them.
Cesses
Cesses are leviable on some specified articles of exports like coffee, coir, lac, mica, tobacco [unmanufactured],
marine products cashew kernels , black pepper, cardamom, iron ore , oil cakes and meals , animal feed and
turmeric in charge of the administration of the concerned commodities.
Education cess on customs duty
An education cess has been imposed on imported goods w.e.f. 9-7-2004 The cess will be 2% and wef
01.03.2007 2%+1% of the aggregate duty of customs excluding safeguard duty, countervailing duty, Anti-
Dumping Duty.
(But today cess 4% 2019-20 AY)
Protective Duties
Tariff Commission has been established under Tariff Commission Act, 1951. If the tariff Commission
recommends and central Government is satisfied that immediate action is necessary to project interests

of Indian industry, protective customs duty at the rate recommended may be imposed under section 6 of
customs Tariff Act . The protective duty will be valid till date prescribed in the notification .
Countervailing Duty on subsidized goods
If a country pays any subsidy [directly or indirectly] to its exporters for exporting goods to India ,
Central Government can impose can Countervailing duty up to the amount of such subsidy under
section 9 of Customs Tariff Act.
Anti-Dumping Duty on dumped articles
Often , large manufacturer from abroad may export goods at very low prices compared to prices in his
domestic market. Such dumping may be with intention to cripple domestic industry or to dispose of
their excess stock . This is called „dumping „. In order to avoid such dumping , Central Government can
impose , under section 9A OF Customs Tariff Act, anti-dumping duty up to margin of dumping on such
articles, if the goods are being sold at less than its normal value . Levy of such anti –dumping duty is
permissible as per WTO agreement. Anti-dumping action can be taken only when there is an Indian industry
producing „like articles
Safeguard Duty
Central Government is empowered to impose safeguard on specified imported goods if central government is
satisfied that the goods are being imported large quantities and under such conditions that they are causing or
threatening to cause serious injury to domestic industry ,such duty is permissible under WTO agreement.
Safeguard duty is step in providing a need-based protection to domestic industry for limited period, with
ultimate objective of restoring and fair competition.
National Calamity Contingent Duty
A National Calamity Contingent Duty (NCCD) of customs has been imposed vide section of 129 of finance act
2009.this duty is imposed on pan masala, chewing tobacco and cigarettes it varies from 10% to 45% NCCD of
customs of 1% was imposed on PFY, motor cars, multi utility and two wheelers and NCCD of Rs 50 per ton
was imposed on domestic crude oil, vide section 134 of finance act,2003 20.3.5 Rate of duty applicable there
are different rates of duty for different goods are different rates of duty for goods imported from certain
countries in terms of bilateral or other agreement with such countries which are called preferential rate of duties
the duty may be percentage of the value of the goods are or at specified rate.
There are two Acts, which form part of customs law in India, namely, the customs Act 1962 and Customs tariff
act 1975

Types of Customs Duties, After GST
In India, customs duties are levied on the goods at the rates specified in the Schedules to the Customs Tariff
Act, 1975. The taxable event is import of goods into India or its export out of India. Export duties as specified
in the Second Schedule are levied on a very few items only. But import duties are levied universally, barring a
few items such as food grains, fertilizers, lifesaving drugs and equipment‟s, etc.
Basic Customs Duty (BCD)
This duty is levied on imported goods in terms of section 12 of the Customs Act, 1962, at the rates
prescribed under the First Schedule to the Customs Tariff Act, 1975 in terms of section 2 of the Customs Tariff
Act. The rates are either standard rates or in the case of imports from certain specified countries at preferential
rates.
Additional Customs Duty (CVD)
This duty, commonly referred to as countervailing duty (CVD), is levied on imported goods in terms of
section 3 of the Customs Tariff Act, 1975 and is equal to the Central Excise duty leviable on the like goods if
produced or manufactured in India. In cases where like article is not so produced or manufactured in India, this
duty will be at such rate which is leviable on the class or description of articles to which the imported article
belongs. If there is more than one rate of excise duty, then the rate to be applied will be the highest. This duty is
calculated on a value base of aggregate of value of the goods including landing charges and basic customs duty.
Other duties such as anti-dumping duty, safeguard duty, additional customs duty of 4% etc. are not taken into
account. Except tobacco; manufactured tobacco substitutes; mineral fuels, mineral oils and products of
their distillation; bituminous substances; mineral waxes, this duty has been subsumed in the IGST after
the introduction of GST w.e.f. 01-07-2017.
In the case of goods covered by provisions of the Standards of Weights and Measures Act, 1976, the value
base would be the retail sale price declared on the package of the goods less the rebate as notified under section
4A of the Central Excise Act, 1944 for such goods. From 01.03.2001, packaged consumer goods are being
charged to this duty on the basis of their Maximum Retail Price (MRP) in India and are also required to
conform to Bureau of Indian Standards (BIS) quality standards and MRP labelling. This practice has been
discontinued after the introduction of GST w.e.f. 01-07-2017.
In the case of alcoholic liquors, the additional duty at present is chargeable at a uniform rate as specified by
the Central Government irrespective of varying rates in force in the States.

Special Additional Duty (SAD)
A 4% Special Additional Duty (SAD) under section 3(5) of the Customs Tariff Act, 1975 was first imposed
in the Union Budget 2005-2006 to counter balance various internal taxes like Sales Tax and Value Added Tax
(VAT) and to provide a level playing field to indigenous goods which have to bear these taxes. This was
extended in general to all goods in the Budget 2006-2007. Manufacturers will be able to take credit of this
additional duty for payment of excise duty on their finished products. In the case of most of the items, this
duty has been subsumed in IGST after the introduction of GST w.e.f. 01-07-2017.
Preferential Rate of Duty (PRD)
In the case of imports from certain specified countries at prescribed preferential rates.
National Calamity Contingent Duty (NCCD)
It is imposed at present @ Rs. 50/- per MT, on imported crude oil and @ 1% on polyester filament yarn,
two-wheelers, motor cars and multi-utility vehicles.
Anti-dumping duty / Safeguard Duty (ADD/ SD)
Anti-dumping duty or Safeguard duty is imposed on import of specified goods with a view to protecting
domestic industry from unfair injury. It would not apply to goods imported by a 100% Export Oriented Units
(EOU) and units in Free Trade Zone (FTZ) and Special Economic Zone (SEZ). On export of goods, anti-
dumping duty is rebatable only by way of a special brand rate of drawback. Safeguard duties do not require the
finding of unfair trade practice such as dumping or subsidy on the part of exporting countries but they must not
violate the most favoured nation provision, that is, they should not discriminate between imports from different
countries. Provisional safeguard duty shall remain in force for a period not exceeding 200 days. Safeguard
action is resorted to only if it has been established that a sudden increase in imports has caused or threatens to
cause serious injury to the domestic industry. Safeguard action can restrict import of a product for a temporary
period by raising the tariffs.
Education Cess (EC)
In the Budget 2004-2005, an education cess on the customs duties had been levied on items imported into
India. It is chargeable @ 2%, on the aggregate of duties of customs (except safeguard duty and anti-dumping
duty) leviable on such goods. This came into effect on 9th July, 2004. No credit of this cess will be available. In
addition to this, in the Budget 2007-2008, the Central Government again imposed a Secondary and Higher
Education Cess on goods specified in the First Schedule to the Customs Tariff Act, 1975, being goods imported

into India. The rate of this cess is one per cent, calculated on the aggregate of duties of customs. If the goods
are fully exempted from duty or are chargeable to nil rate of duty or are cleared without payment of duty under
bond, no cess will be leviable. Imported goods are exempted from these cesses w.e.f. 02-02-2018 as the
Finance Bill, 2018 proposed to abolish the same.
Integrated Goods and Services Tax (IGST)
With effect from 01-07-2018, under the GST regime, Article 269A constitutionally mandates that the
supply of goods or of services or both in the course of import into the territory of India shall be deemed to be
supply of goods, or of services, or both in the course of inter-State trade or commerce for levy of integrated tax.
So import of goods or services are treated as deemed inter-State supplies and subjected 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 the Custom Tariff Act, 1975. The importer of services
will have to pay tax on reverse charge basis. However, in respect of import of online information and database
access or retrieval services (OIDAR) by unregistered, non-taxable recipients, the supplier located outside India
shall be responsible for payment of taxes. Either the supplier will have to take registration or will have to
appoint a person in India for payment of taxes. Supply of goods or services or both to a Special Economic Zone
(SEZ) developer or a unit shall be treated as inter-State supply and shall be subject to levy of integrated tax.
Import of goods has been defined in the IGST Act, 2017 as bringing goods into India from a place outside
India. All imports shall be deemed as inter-State supplies and accordingly integrated tax shall be levied in
addition to the applicable Custom duties. The IGST Act, 2017 provides that the integrated tax on goods
imported into India shall be levied and collected in accordance with the provisions of the Customs Tariff Act,
1975 on the value as determined under the said Act at the point when duties of customs are levied on the said
goods under the Customs Act, 1962. The integrated tax on goods shall be in addition to the applicable Basic
Customs Duty (BCD) which is levied as per the Customs Tariff Act.
The Customs Tariff Act, 1975 has accordingly been amended to provide for levy of integrated tax and the
compensation cess on imported goods. Accordingly, goods which are imported into India shall, in addition to
the Basic Customs duty, be liable to integrated tax at such rate as is leviable under the IGST Act, 2017 on a
similar article on its supply in India. Further, the value of the goods for the purpose of levying integrated tax
shall be, assessable value plus Customs Duty levied under the Act and any other duty chargeable on the said
goods under any law for the time being in force as an addition to, and in the same manner as, a duty of customs.

GST Compensation Cess (GCC)
Under the GST regime, i.e. w.e.f. 01-07-2018, in addition to IGST, a GST compensation cess, is also levied
on certain luxury and demerit goods under the Goods and Services Tax (Compensation to States) Cess Act,
2017.
The Customs Tariff Act, 1975 has accordingly been amended to provide for levy of integrated tax and the
compensation cess on imported goods. Accordingly, goods which are imported into India shall, in addition to
the Basic Customs duty, be liable to integrated tax at such rate as is leviable under the IGST Act, 2017 on a
similar article on its supply in India. Further, the value of the goods for the purpose of levying integrated tax
shall be, assessable value plus Customs Duty levied under the Act, and any other duty chargeable on the said
goods under any law for the time being in force as an addition to, and in the same manner as, a duty of customs.
The value of the imported article for the purpose of levying cess shall be, assessable value plus Basic
Customs Duty levied under the Act, and any sum chargeable on the goods under any law for the time being, in
force as an addition to, and in the same manner as, a duty of customs. The integrated tax paid shall not be added
to the value for the purpose of calculating cess.
Social Welfare Surcharge (SWS) Finance Bill, 2018 while abolishing the Education Cess and Secondary and
Higher Education Cess on imported goods w.e.f. 02-02-2018, imposed a Social Welfare Surcharge, at the rate
of 10% of the aggregate duties of Customs, on imported goods, to provide for social welfare schemes of the
Government. Goods which were hitherto exempted from Education Cesses are exempted from this Surcharge
also. In addition, certain specified goods, attract the Surcharge at the rate of 3% of the aggregate duties of
customs only.
Road and Infrastructure Cess
An additional duty of customs, called the Road and Infrastructure Cess, on the specified imported goods for
the purpose of financing infrastructure projects has been introduced w.e.f. 02-02-2018. This additional duty of
customs is in addition to other duties of customs chargeable on scheduled goods under the Customs Act, 1962
or any other law for the time being in force.
Customs tariff valuation and customs valuation [determination of price of imported goods] Rules 1988;
Valuation in customs act has to be done as per valuation rules, these rules based on WTO valuation agreement
[Earlier termed as GATT valuation code], these rules are only for valuation of imported goods and not
applicable to export goods.

WTO valuation agreements- general agreement on tariff and trade [GATT] was an international forum for
discussion on custom and other related problems so that barriers to world trade are removed. [Now GATT is
replaced by WTO] it was realized that there should be a common code for valuation to provide for greater
certainty and utility.”GATT valuation code” was formed with this concept in view, the new code into effect on
1st January 1981. Some members like USA and EEC introduced the GATT valuation system immediately.
India implemented the code from 18th august 1988 by amending „customs valuation rules‟, under the WTO
valuation agreement [earlier GATT code], „transaction value i.e. price at which the goods are actually sold is
principal however, it is not the only criteria for determining „value‟ for custom purpose.
Value to be determined as per valuation rules only –section 14[1A] provide that „price‟ for purposes of section
14[1] will be determined in accordance with rules made by central government. Accordingly, customs valuation
[determination of price for imported goods] rules, 1988 have been framed. These rules, which came into effect
on 18th august, 1988, are based on WTO valuation agreement [earlier termed as GATT valuation code]. These
rules are
[a] subject to section 14[1] i.e. provisions of section 14[1]will supersede provisions of the customs valuation
rules.
[b] The rules are for valuation of imported goods only not of export goods.
[c] These rules are statutorily required to be followed. [In central excise, valuation rules are required to be
applied only if valuation as per section 4 is not possible, while in customs, valuation has to be as per valuation
rules only) rules contain exhaustive interpretive notes as schedule to this rules to facilitate correct application of
this rules. These interpretive notes give suitable example the provisions of rules.
Customs value - Inclusions
Some costs, service and expenses are to be added to the price paid or payable, if these are not already included
in the invoice price, rule 9 of customs valuation rules provide that following cost and services are to be added
 Commission and brokerage.

 Cost of container which are treated as being one with the goods for customs purposes
 Cost of packing whether labour or materials.
 Materials, components, tools, dies, etc. supplied by buyer.
 Royalties and license fees.
 Value of proceeds of subsequent sales.
 Other payments as condition of sale of goods being valued.
 Cost of transport up to place of importation.

 Landing charges.
 Cost of insurance.
These are discussed below:
Commission and brokerage includible – commission and brokerage except buying commission is
includible [rule 9(1) (a) of customs valuation rules,] buying commission means fees paid by importer to
his agent for the service of representing him abroad in purchase of gods being valued, commission to
local agent – exporter from abroad often appoint local agent in India to promote their sales in India.
These agents get commission in Indian rupees which are paid directly by Indian reporter. [Amount net
of commission is paid to foreign exporter in foreign currency] this commission is includible for purpose
of valuation. Charges of purchasing agent abroad not includible –charges to purchasing agent abroad
are not includible [Probably because it was held as „buying commission‟.]
Service charges paid to cancelling agency includible –in some cases, when imports are made by
canalizing agency, goods are sold Indian buyer on „high sea sale‟ basis. The imported goods are cleared
by Indian buyer. In such cases, „service charges payable‟ to the canalizing agency has to be included for
calculation of „assessable value‟. These charges are incurred before clearance of goods and these cannot
be termed as „buying commission‟.
Packing cost is includible- cost of container which are treated as being part of goods for custom
purposes are addible for valuation purposes (e.g. ; “ cases for camera, necklaces etc. especially shaped
for the article suitable for long term” packing materials are classified along with that article, hence, its
cost will be includible). Similarly, cost of packing both labour and material is to be included. [Rule 9(1)
(a) of customs valuation rules].
Cost of durable and re-usable containers not to be added: Modern trend is to pack goods in
containers for convenience of transport. These containers are durable and re-usable. Hence, cost of such
container is not added for customs valuation; if importer agrees to execute a bond to re- export the
containers within six months. Value of goods supplied by buyer to be added if buyer has supplied
goods free of cost or at reduced cost in connection with production or exporter of goods, these should
be included. The goods may be
(a) Materials, components, parts and similar items incorporated in imported goods.
(b) Tools, dies, moulds and similar items used in production of imported goods.
(c) Consumables uses in production of imported goods, [rule 9(1)(b)] (i)(ii) and (iii) Ascertaining cost,
of tooling –

Cost of tooling supplied by importer to exporter should be ascertained as follows:
(a) if importer has purchased the tooling from unrelated seller, the purchase cost should be
considered or
(b) If he has manufactured the tooling himself, the cost of production of tooling should be
considered, if the tooling was previously used by importer, its original cost of purchase or cost
of production should be suitably reduced [e.g., by suitably depreciating the cost] to reflect its
present cost. Apportioning of cost of tools – tools, dies; moulds etc. [called tooling for
abbreviation in subsequent discussion in this paragraph] are not consumed immediately, but are
consumed over a period of time. Cost of the „tooling‟ should be apportioned over the quantity
produced, e.g., assume that cost of moulds is Rs 100000 and the mould is expected to produce
10000 pieces. If the importer imports 1000 pieces in the first lot, 10% of cost of such tooling
(10% of RKs 100000) – Rs 10000 may be apportioned to the1000 pieces and Rsc10000 may be
added to transaction value for arriving at “value” or “custom value”. Such apportionment should
be made on basis of documentation provided by importer. Services/documents technical know-
how supplied buyer to be added- cost of engineering, development, artwork, design work and
plans and sketches undertaken by buyer which is necessary for production of imported goods is
includible, only if such work is undertaken outside India. [Rule9 (1) (b) (iv) of customs
valuation rules]
The addition should be done on objective and quantifiable data. Data available with importer should
be used as for as possible. If the services are purchased or leased by importer, such purchase / lease cost should
be added. If the importer has himself done the work abroad, its cost should be added on basis of structure and
management practices of importer and his accounting methods (in other words, if development work, plans,
sketches etc. is done by importer himself outside India, its cost should be calculated based on normal
accounting practices – like apportionment of overheads, apportionment over various jobs if the development
work, design work etc. is used for more than one job etc.)
Cost of Drawings if there is Separate Tariff Headings - It has been held that cost of technical documents and
drawings cannot be included in the customs value. However, if part of cost of equipment is transferred to value
of engineering drawings, there will be under-valuation of equipment and this can be examined. [Note that
engineering drawings are exempt from customs duty]. [This was because there was a separate heading in
Customs Tariff for „drawings‟. Otherwise, the cost would have been includible]. [This decision, which is also of
3 member bench, appears to be contrary to other decisions of SC, but it is probably because there is a separate
heading in the Customs Tariff for drawings].

Royalties and licence fee – If buyer has paid royalties and licence fees separately in relation to imported
goods; these are includible, unless these are already included in selling price. Royalty may include payments in
respect of patents, trademarks or copyrights. However, following i.e. (a) charges for the right to reproduce the
goods in India shall not be added and (b) payments made by buyer (importer) for right to distribute or resale the
imported goods shall not be added if such payment is not a condition for export to India.
Royalties and license fees related to imported goods that the buyer is required to pay, directly or indirectly, as a
condition of sale of a goods being valued, to the extent that such royalties and fees are not included in the price
actually paid or payable. [Rule 9(1) (c) of Customs valuation Rules].
Royalty payment to collaborators un-connected with imported goods not to be added- Often, a lump-sum
payment of royalty is made to foreign collaborators for technical know-how. In addition, components / parts /
CKD packs are procured from foreign collaborators. Customs department normally holds that the price of parts
/ CKD packs should be loaded, on assumption that the part of price of components parts / CKD packs has been
paid as „royalty payment‟.
Value of subsequent re-sale if payable to foreign supplier-if any part of proceeds of subsequent re-sale of
imported goods is payable to seller, directly or indirectly, its cost is includible. (This may happen if a distributor
/ agent imports goods and once he sells these goods in India, part of sales proceeds may be payable to foreign
seller). [Rule 9(1)(d)]. Charges for reproduction of software in India not to be added – At present, many popular
software‟s like Page Maker, Norton, Windows are directly imported. If such software‟s are licensed to be
reproduced in India by the foreign owner of these software‟s, charges for reproducing these software‟s will not
to be added. [As per press note dated 17-12-1992 of DOE of GOI, the purpose is to bring down cost of software
in India and to save foreign exchange outflow on several copies of software]. Other payments made to seller to
be added – if buyer has made, directly or indirectly, any payment to seller as a condition of sale, such payment
should be included for obvious reason that „ordinary‟ selling price has been reduced due to such payment. [Rule
8(1)(e)].
Cost of transport up to port should be added – Cost of transport from exporting country to India is to be
added in „assessable value‟. [Rule 9(2) (a) of Customs Valuation Rules]. In other words, CIF value is the basis
for valuation. If the goods are imported by air, the air freight will be very high. Hence, in case air freight is
higher than 20% of FOB price of goods, only 20% of FOB price will be added for Customs Valuation purposes.
If cost of transport is not ascertainable, it will be taken as 20% of FOB value of goods. However, cost of
transport within India is not to be considered. Landing charges to be added – Cost of unloading and handling
associated with delivery of imported goods in port, (called landing charges) shall be added. These will be
calculated @ 1% of CIF value, i.e. FOB plus freight plus insurance. [Rule 9(2) (b)].

Insurance cost should be added – Insurance charges on goods are to be added. [Rule 9(2)(C)]. If these are not
ascertainable, these will be calculated @ 1.125% of FOB Value of goods.
Exclusions from Assessable Value Note to rule 4 provide that following charges shall be excluded:
1. Charges for construction, erection, assembly, maintenance or technical assistance undertaken after
importation of plant, machinery or equipment.
2. Cost of transport after importation.
3. Duties and taxes in India other payments from buyer to seller that to not relate to imported goods are not
part of the Customs Value. It has been held that this note does not mean that charges other than those
covered in clauses (a) to (c) are available to be included in the value of imported goods.
Cost of erection, test and commissioning is not includible.
Demurrage Charges payable to Port Trust – Demurrage charges payable to port trust authorities for delay in
clearing goods are not to be added.
Bank Charges – Bank charges paid to banker for service rendered by them is not consideration of goods given
to seller. It is not includible.
Computer Software – Computer software is a distinct item and is classifiable separately. Hence, even if
software is supplied with the machine, its price is not includible in value of machinery.
Import Procedures
Procedures have to be followed by „person in charge of conveyance‟ as well as the importer. WHO IS
„PERSON IN CHARGE‟- As per section 2(31), „person in charge‟ means (a) In case of vessel – its master (b)
In case of aircraft – its commander or pilot-in-charge (c) In case of train – its conductor or guard and (d) In case
of vehicle or other conveyance – its driver or other person in charge.
The significance of this definition is – He is responsible for submitting Import Manifest and Export Manifest.
He is responsible to ensure that the conveyance comes through approved route and lands at approved place
only.
He has to ensure that goods are unloaded after written order, at proper place. Loading also has to be only after
permission.

He has to ensure that conveyance does not leave without written order of Customs authorities.
He can be penalised for (a) Giving false declaration and statement (b) Shortage or Non accounting of goods in
conveyance Procedure to be followed by the Carrier – The „person in charge of conveyance‟ (carrier of goods)
has to follow prescribed procedure. Arrival at customs port / airport only – Section provides that person-in-
charge of a vessel or an aircraft entering India shall call or land at customs port or customs airport only. It can
land at other place only if compelled by accident, stress of weather or other unavoidable cause. In such case, he
should report to nearest police station or Customs Officer. While arriving by land route, the vehicle should
come by approved route to „land customs station‟ only.
Import Manifest / report- person-in-charge of vessel, aircraft or vehicle as to submit Import Manifest /
Report.[also term as IGM – Import General Manifest]. (In case of a vessel or aircraft, it is called import
manifest, while in case of vehicle, it is called import report). The import manifest in case of vessel or aircraft is
required to be submitted prior to arrival of a vessel or aircraft. Import report (in case of vehicle) has to
submitting within 12 hours of arrival at the customs station. If the report / manifest could not be submitted
within prescribed time, person-in-charge or any person specified as responsible by a notification is liable to
penalty up to Rs 50,000. Such penalty will not be imposed if the excise officer is satisfied that there was
sufficient cause for the delay.[Section30(1)]. IGM can be submitted electronically through floppy where EDI
facility is available.
Import Manifest is required to be submitted Before Arrival of Aircraft or Vessel -Section 30(1) of
Customs Act provides that Import Manifest should be filed before arrival of ship or aircraft. Normally, the
agent submits the Import Manifest before arrival, so that maximum possible formalities are completed before
vessel or aircraft arrives. This also enables importers to fill „Bill of Entry‟ in advance. Grant of entry Inwards
by Customs Officer – Unloading of cargo can start only after Customs Officer grants „Entry Inwards‟. Such
entry inwards can be granted only when berthing accommodation is granted to a vessel. If there is heavy
congestion at port, shipping berth may not be available and in such case, „Entry Inwards‟ cannot be granted.
This date is highly relevant for determining rate of customs duty applicable.
Carrier responsible for shortages during unloading – If the goods are short landed, the carrier is liable to pay
penalty up to twice the amount of duty payable on such short landed goods. It has been held that tally sheet
prepared by Port Trust authorities on unloading of goods is a statutory document and should be accepted in
preference to steamer survey – SC India Steam Navigation.
Procedure by Importer:
The importer importing goods has to follow prescribed procedures for import by ship/air/road. (There is
separate procedure for goods imported as a baggage or post).

Bill of Entry – This is a very vital and important document which every importer has to submit under
section 46. The Bill of Entry should be in prescribed form. The standard size of Bill of Entry is 16” x 13”.
However, for computerization purpose, 15” x 12” size is permitted.(Mumbai Customs Public Notice No.
142/93 dated 3-11-93).
Bill of Entry should be submitted in quadruplicate – original and duplicate for customs, triplicate for the
importer and forth copy is meant for bank for making remittances. Under EDI system, Bill of Entry is actually
printed on computer in triplicate only after „out of change‟ order is given. Duplicate copy is given to importer.
Types of Bill of Entry – Bill of Entry should be of one of three types. Out of these, two types are for clearance
from customs while third is for clearance from warehouse.
Bill of Entry for Home Consumption – This form, called „Bill of Entry for Home Consumption‟, is used
when the imported goods are to be cleared on payment of fully duty. Home Consumption means use within
India. It is white coloured and hence often called „white of entry‟.
Bill of Entry for Warehousing – If the imported goods are not required immediately, importer may like to
store the goods in a warehouse without payment of duty under a bond and then clear from warehouse when
required on payment of duty. This will enable him to defer payment of customs duty till goods are actually
required by him. This Bill of Entry is printed on yellow paper and often called „yellow Bill of Entry‟. It is also
called „Into Bond Bill of Entry‟ as bond is executed for transfer of goods in warehouse without payment of
duty.
Bill of Entry for Ex-Bond Clearance – The third type is for Ex-bond Clearance. This is used for clearance
from the warehouse on payment of duty and is printed on green paper. The goods are classified and value is
assessed at the time of clearance from customs port. Thus, value and classification is not required to be
determined in this bill of entry. The columns in this bill of entry are similar to other bill of entry. However,
declaration by importer is not required as the goods are already assessed.
Rate of Duty for Clearance from Warehouse – It may be noted that rate of duty applicable is as prevalent on
date of removal from warehouse. Thus, if rate has changed after goods are cleared from customs port, customs
duty as assessed on yellow of entry and as paid on green bill of entry will not be same.
Mention of BIN on Bill of Entry – A BIN (Business Identification Number) is allotted to each importer and
exporter w.e.f. 1.4.2011. It is a 15 digit code based on PAN of Income Tax (PAN is a 10 digit code). [Earlier an
EC (Import Export Code) number used by DGFT was required to be mentioned on Bill of Entry].

Filing of Bill of Entry – Normally, Bill of Entry is filed by CHA on behalf of the importer. Customs work at
some ports has been computerized. In that case, the Bill of Entry has to be filed electronically, i.e. through
Customs EDI system through computerization of work.
Procedure for the same has been prescribed videos Bill of Entry (Electronic Declaration) Regulations, 1995.
Documents to be submitted by Importer – Documents required by customs authorities are required to be
submitted to enable them to (a) check the goods (b) decide value and classification of goods and (c) to ensure
that the import is legally permitted. The documents that are essentially required are:
(i) Invoice (ii) Packing List (iii) Bill of Landing / Delivery Order (iv) GATT declaration form duly filled in (v)
Importers / CHAs declaration duly signed (vi) Import License or attested photocopy when clearance is under
license (vii) Letter of Credit / Bank Draft wherever necessary (viii) Insurance Memo or Insurance Policy (ix)
Industrial License if required (x) Certificate of country of origin, if preferential rate is claimed (xi) Technical
Literature (xii) Test report in case of chemicals (xiii) Advance License / DEPB in original, where applicable
(xiv) split up of value of spares, components and machinery (xv) No commission declaration.
A declaration is prescribed form about correctness of information should be submitted. – Chapter 3 Para 6 and
7 of CBE&C‟s Customs Manual, 2001. The noting is now done electronically in large ports, while it is done
manually in small ports. Tahoka Number (Serial Number) is given while noting the Bill of Entry.
Electronic submission under EDI system – Where EDI system is implemented, formal submission of Bill of
Entry is not required, as it is generated in computer system. Importer should submit declaration in electronic
format to „Service Centre‟. A signed paper copy of declaration for non-reputability should be submitted. Bill of
Entry number is generated by system which is endorsed on printed check list. Original documents are to be
submitted only at the stage of examination.

UNIT- 3
BAGGAGE RULES, 1998
Syllabus:
Special provisions regarding baggage, Goods Imported and Exported by various modes, Offences and Penalties,
Adjudication, Appeals, Revision and Draw back.
Prepared By
Ashwini K M
Gangamalamma D
Yashodha A
Jyothi J
Learning objectives
 Bonafide baggage
 Transferring residence without payment of duty
 Postal articles
6.1 Introduction
The term Baggage means luggage of the passenger if they travel by Air or Sea or by Road from one country to
another country. Sometimes this baggage amounts to import thereby import duty may be levied. It is essential
for us to know whether baggage is exempted or not, if exempted in what circumstance it is exempted.
6.2 Baggage
Baggage means all dutiable goods imported by a passenger or a member of a crew in his baggage,
Baggage may be accompanied baggage. It includes all dutiable articles, imported by passenger or a member of
a crew in his baggage, un-accompanied baggage means if baggage is dispatched previously or subsequently
within a prescribed period. It means the baggage may be sent by him earlier or after his departure from abroad.

Basically baggage can be classifiable into the following lines:
Baggage
Applicable goods Not Applicable goods
All dutiable goods

Motor vehicles Alcoholic drinks Goods imported through
Courier
Green Channel: mean if a person does not have any dutiable goods, he can go through green channel without
undergoing any check along with baggage.
Red Channel: means if carrying dutiable goods he should pass through red channel and should submit the
declaration and his baggage can be inspected by the customs authorities.
Rate of duty on Baggage is @ 35% plus 2% education cess plus 1% secondary and higher education cess.

6.3 Assessable value of gold in some cases
Particulars New rates Old rate from Maximum General free

(w.e.f.17-01- 27-2-2010 up Allowance (GFA) of
2012(vide NT- to 16-1-2012 Rs35,000
3/2012-cus dt. 16-
01-2012)
Serially @2% on the Tariff RS 300 per 10 Up to 10 Kgs Not allowed
numbered gold Value. Tariff value grams
bars (other than for calculating duty
told bars) and on gold is US526
gold coins per 10 gms. for 10
having gold grams Rs3,127
content not
below 99.5%.
Other forms of @5% on the Tariff Rs 750 per 10 Up to 10 kgs Not allowed
gold including value, tariff value grams
tila bars and for calculating duty
ornaments, but on gold is USD 530
excluding per 10 Gms.
ornaments
studded with
stones or pearls.
Silver @6% on the Tariff Rs1500 per kg Upto 100 kgs Not allowed
value. Tariff value for 1 kilogram
for calculating duty Rs 3,880
on gold is USD 953
per kg.
Platinum Rs 300 per 10 gms. Rs 300 per 10 Not allowed
grams
The above duty rates are applicable only when the following conditions are satisfied:
 The person should have been staying abroad for over six months(i.e. more than six months)
 Duty must be paid only convertible foreign currency (i.e. dollar, pound, yen, mark (DM),franc etc.)
If any one of the above condition is not satisfied then, normal rate of duty @36.4 % (inclusive of cess) is
required to be paid.

6.4 Personal effects are exempted from duty within the limits of general free allowances of Rs 50,000 on
01-04-2016
 Personnel jewellery(i.e. Less than one year stay in foreign country)
 One camera with films-rolls not exceeding 20
 One portable colourt.v.(not exceeding 15 cms in size)
 One computer
 Professional equipment‟s
 One cell phone etc.
 One video camera
 One pair of binoculars
 One music system including compact disc player
 One perambulator
 One electronic diary
 One transistor i.e. radio
 Professional equipment
 Sports equipment sports equipment
 Two litters of liquor
No duty on laptop (i.e. one is allowed)
General free allowance (GFE) is Rs 50000 (w.e.f 50000) in addition to one laptop and value of personal
wearing clothes. GFE of Rs 50000 cannot be pooled for husband and wife in respect of one item (i.e. Rs
50000 for husband and Rs 50000 wife is not allowed in respect of one item through they are eligible
individually Rs 50000 each)
GFA is a maximum amount up to which the basic Customs duty is Nil. If any passenger brings value of
articles in to India (in addition to personal clothes and one laptop) over and above the permissible GFA,
such excess amount attracts @36.05% of customs duty (including cess). The general free allowance is
not applicable to un-accompanied baggage.

6.4.1 GFA to Indian resident or a foreigner residing in India retuning from other countries other
than Nepal, Bhutan, Myanmar or china (w.e.f)
Individual age Period of stay (abroad) GFA allowed
<=10 years <= 3 days Rs.3000
<=10 years > 3 days Rs. 17,500
> 10 years <= 3 days Rs. 17,500
> 10 years > 3 days Rs. 50,000
6.4.2 GFA for India resident or a foreigner residing in India returning from Nepal, Bhutan, Myanmar or
China other than by land route
Individual age Period of stay (abroad) GFA allowed Remarks
<= 10 years > 3 days Rs. 1,500 No GFA - if period of

stay < 3 days
> 10 years > 3 days Rs. 6,000 No GFA- if period of stay

< 3 days
GFA not allowed to Indian resident or a foreigner residing in India retuning from Nepal, Bhutan, Myanmar or
china by land route hence, period of stay in this case is immaterial.
6.4.3 GFA to professional in respect of their professional equipment
Indian passenger who rendered their service abroad and returns to India, he shall be allowed general
free allowance as follows:
372 Customs act 1962 division II
Period of stay (abroad) GFA allowed
House hold articles professional articles
After at least 3 months Rs. 12,000 Rs. 20000
After at least 6 months Rs. 12,000 Rs. 40,000

Transfer of residence after stay abroad at least 365 days during preceding 2 years, he is not availed the benefit
of GFA during preceding three years. Then GFA is allowed for all used household articles and personal effects,
not exceeding Rs.75000 in aggregate.
Note:
Tourists of foreign origin other than those of Pakistani origin coming from Pakistan GFA are Rs.8, 000, for
Pakistani origin GFA is 6,000. If passenger is returning from Pakistan by land route, the GFA is Rs.6, 000 for
passengers above 10 years and Rs.1, 500 for passengers up to 10 years of age.
6.5 Bona fide baggage:-
Bona fide baggage accompanying passenger is exempt from the import duty as per section 79 of the customs
Act 1962.
Any articles in the baggage of a passenger or a member of the crew in respect of which the said officer is
satisfied that it has been in his use for such minimum period as may be specified in the rules.
Any article in the baggage of a passenger in respect of which the said officer is satisfied that it is for the use of
the passenger or his family or is a bona fide gift or souvenir, provided that the value of each such article and the
total value of such articles does not exceed such limits as may be specified in the rules.
6.5 Bonafide baggage’s

Bonafide baggage accompanying passenger is exempt from the import duty as per section 79 of the customs
duty act 1962.
 Any articles in the baggage of a passenger in respect of which the said officer is satisfied that it has been
in his use for such minimum period as be specified in the rules
 Any article in the baggage of a passenger in respect of which the said officer is satisfied that it is for the
use of the passenger or his family or is a bona fide gift or is a bona fide gift or souvenir; provided that
the value of each such articles does not exceed such limits as may be specified in the rulers.
6.6 Transferring residence to India

As per the baggage rules, the concessions for persons transferring their residence to India may be availed by a
person including foreigners coming for residing in India:
Residing abroad at least 2 years and during this period short visit not exceeding 6 months is permissible. The
provision regarding maximum 6 months stay can be relaxed by Commissioner of Customs.
 Two years stay can be condoned up to 2 months by Assistant Commissioner.
 The passenger should not have utilized this concession in preceding three years.
 Jewellery up to Rs 50000 for male and Rs 100000 or female passenger can be imported free of customs
duty. Even if the passenger was residing abroad for over one year, jewellery can be imported duty free
up to Rs 50000 in case of gentleman passenger and Rs 100000 in case of female passenger.
 Goods under Annexure III worth for Rs 500000 are fully exempt from customs duty.
6.7 Postal Articles

As per sections 82 to 84 of the custom act, 1962 goods can clear by post. Any label or declaration
accompanying the goods showing the description, quantity and value thereof, shall be treated as “an entry for
import under the customs act.
The rate and duty and tariff value applicable to goods imported by post shall be the rate and valuation in force
on the date on which the postal authorities present to the proper officer a list containing the particulars of such
goods for the purpose of assessment of duty.
The procedure for clearance
(1) Post parcels are allowed to pass from port/airport to foreign parcel department of government post offices
without payment of custom duty.
(2) The postmaster hands over to principal appraiser of customs the memo showing
 Total number of parcels from each country of origin,
 parcel bills or senders declaration,
 customs declaration and dispatch notes, and
 Other information that may be required.
(3) The mail bags are opened and scrutinized by postmaster under supervision of principal postal appraiser of
customs.
(4) Packets suspected of containing dutiable goods are separated and presented to customs appraiser with letter
mail bill and assessment memos.
(5) The customs appraiser marks the parcels which are required to be detained if-
 necessary particulars are not available, or
 Miss declaration or undervaluation is suspected or
 Goods are prohibited for import.
Appraiser has the power to examine any parcel. After inspection, the parcels are sealed with a distinctive seal.
Any miss declaration or undervaluation is noted or goods are prohibited goods for imports these be detained
and the same intimated to commissioner of customs.

If everything is in order after verification, goods will be handed over to post master, who will hand over the
same to the addressee on receipt of customs duty.
6.8 Imported of Samples

In the international trade it is considered often necessary that samples of the goods manufactured in one country
be sent to another country for being shown or demonstrated for customer appreciation. There are duty free
imports of genuine commercial samples into the country for smooth flow of trade.
The commercial samples are basically specimens of goods that may be imported by the traders or
representatives of manufacturers. However, goods which are prohibited under foreign Trade (development and
Regulation) Act, 1992 are not allowed to be imported as samples (I.e. wild animals, wild birds and parts of wild
animals, arms and ammunitions and so on).
Samples can be imported by the traders, industry, individuals, and research institutes and so on. These samples
can also be brought by the persons as part of their personal baggage or through port or in courier.
The current limit of Rs 1lakh per annum for duty free import of samples in terms of terms of NT 154/94
Customs Dt.13.7.1994 is enhanced to Rs3 lakh per annum (w.e.f.27.2.2010).
Baggage (Amendment) Rules, 2006 (Baggage Rule, 1998).

[Notification No. 30/98-Cus. (N.T.), dated 2-6-1998 amended vide Notification No. 50/2014-Customs (N.T.)
dated 11-07-2014, 84/2013-Customs (N.T.) dated 19-08-2013, 25 /2013-Customs (N.T.) dated 01-03-2013, 37
/2012-Customs (N.T.) dated 23-04-2012;. 21/2012- Customs (N.T.) dated 17-03-2012; 71/2011- Customs
(N.T.) dated 14-11-2012;. 76/2006 - Customs (N.T.) dated 30/06/2006; 30/2005 - Customs (N.T.) dated
04/04/2005; 05/2004 - Customs (N.T.) dated 08/01/2004; 13/2004 - Customs (N.T.) dated 03/02/2004; 11/2002
- Customs (N.T.) dated 01/03/2002; 50/2000 - Customs (N.T.) dated 09/08/2000; 29/1999-Cus (N.T.) dated 11-
05-1999]
1. Short title and commencement.

 (i) These rules may be called the Baggage Rules, 1998.
 (ii) They shall come into force on the date of their publication in the Official Gazette.
2. Definitions- In these rules, unless the context otherwise requires

 (i)"appendix" means an Appendix to these rules;
 (ii)"resident" means a person holding a valid passport issued under the Passports Act, 1967 (15 of 1967)
and normally residing in India;

 (iii)"tourist" means a person not normally resident in India, who enters India for a stay of not more than
six months in the course of any twelve months period for legitimate non-immigrant purposes, such as
touring, recreation, sports, health, family reasons, study, religious pilgrimage or business;
 (iv)"family" includes all persons who are residing in the same house and form part of the same domestic
establishment;
 (v)"professional equipment" means such portable equipment‟s, instruments, apparatus and appliances as
are required in his profession, by a carpenter, a plumber, a welder, a mason, and the like and shall not
include items of common use such as cameras, cassette recorders, Dictaphones, personal computers,
typewriters, and other similar articles.
3. Passengers returning from countries other than Nepal, Bhutan, Myanmar or China. -
An Indian resident or a foreigner residing in India, returning from any country other than Nepal, Bhutan,
Myanmar or China, shall be allowed clearance free of duty articles in his bona fide baggage to the extent
mentioned in column (2) of Appendix A.
Provided that such Indian resident or such foreigner coming by land route as specified in Annexure IV, shall be
allowed clearance free of duty articles in his Bonafide baggage to the extent mentioned in column (2) of
Appendix 'B'."
4. Passengers returning from Nepal, Bhutan, Myanmar or China.-

An Indian resident or a foreigner residing in India, returning from Nepal, Bhutan, Myanmar or China, other
than by land route, shall be allowed clearance free of duty articles in his bona fide baggage to the extent
mentioned in column (2) of Appendix B.
5. Professionals returning to India. -

An Indian passenger who was engaged in his profession abroad shall on his return to India be allowed clearance
free of duty, in addition to what he is allowed under rule 3 or, as the case may be, under rule 4, articles in his
bona fide baggage to the extent mentioned in column (2) of Appendix C.
6. Jewellery. -
A passenger returning to India shall be allowed clearance free of duty jewellery in his bona fide baggage to the
extent mentioned in column (2) of Appendix D.

7. Tourists. -
A tourist arriving in India shall be allowed clearance free of duty articles in his bona fide baggage to the extent
mentioned in column (2) of Appendix E.
8. Transfer of residence. -
 (1)A person who is transferring his residence to India shall be allowed clearance free of duty, in addition
to what he is allowed under rule 3 or, as the case may be, under rule 4, articles in his bona fide baggage
to the extent mentioned in column (1) of Appendix F, subject to the conditions, if any, mentioned in the
corresponding entry in column (2) of the said Appendix.
 (2) The conditions may be relaxed to the extent mentioned in column (3) of the said Appendix.
9. Provisions regarding unaccompanied baggage.

 (1)Provisions of these Rules are also extended to unaccompanied baggage except where they have been
specifically excluded.
 (2) The unaccompanied baggage had been in the possession abroad of the passenger and is dispatched
within one month of his arrival in India or within such further period as the Assistant Commissioner of
Customs or Deputy Commissioner of Customs may allow.
 (3)The unaccompanied baggage may land in India up to 2 months before the arrival of the passenger or
within such period, not exceeding one year, as the Assistant Commissioner of Customs or Deputy
Commissioner of Customs may allow, for reasons to be recorded, if he is satisfied that the passenger
was prevented from arriving in India within the period of two months due to circumstances beyond his
control such as sudden illness of the passenger or 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.
10. (1) Application of these Rules to members of the crew.

The provisions of these Rules shall apply in respect of members of the crew engaged in a foreign going vessel
for importation of their baggage at the time of final pay off on termination of their engagement.
Provided that except as specified in this sub-rule, a crew member of a vessel shall be allowed to bring items like
chocolates, cheese, cosmetics and other petty gift items for their personal or family use which shall not exceed
the value of rupees one thousand five hundred.
(2)Notwithstanding anything contained in these rules a crew member of an aircraft shall be allowed to bring
items gifts like chocolates, cheese, cosmetics and other petty gift items at the time of the returning of the

aircraft from foreign journey for their personal or family use which shall not exceed the value of rupees one
thousand five hundred.
--------------------------------------------------------------------------------------------------------------------------------------
Appendix A
(See rule 3)
(1) Articles allowed free of duty (2)
(a) All passengers of and above 10 years of (i) Used personal effects, excluding jewellery,
age and returning after stay abroad of more required for satisfying daily necessities of life.
than three days. (ii) Articles other than those mentioned in
Annex. I up to a value of Rs. 45,000/- if these
are carried on the person or in the accompanied
baggage of the passenger.
(b) All passengers of and above 10 years of (i) Used personal effects, excluding jewellery,
age and returning after stay abroad of three required for satisfying daily necessities of life.
days or less. (ii) Articles other than those mentioned in
Annex. I up to a value of Rs.17, 500/- if these
(c) All passengers up to 10 years of age and (i) Used personal effects, excluding jewellery,
returning after stay abroad of more than three required for satisfying daily necessities of life.
days. (ii) Articles other than those mentioned in
Annex. I up to a value of Rs. 17,500/- if these
(d) All passengers upto 10 years of age and (i) Used personal effects, excluding jewellery,
returning after stay abroad of three days or required for satisfying daily necessities of life.
less. (ii) Articles other than those mentioned in
Annex. I put a value of Rs.. 3,000/- if these are
carried on the person or in the accompanied
Explanation. - The free allowance under this rule shall not be allowed to be pooled with the free allowance of
any other passenger.

APPENDIX B (See rule 4)
(1) (2)
(i) Passengers of and above 10 years of age and (i) Used personal effects, excluding jewellery,
Annex. I up to a value of `. 6,000 if these are
(ii) Passengers up to 10 years of age and (i) Used personal effects, excluding jewellery,
Annex. I up to a value of `1500 if these are
Explanation. - The free allowance under this rule shall not be allowed to be pooled with the free allowance of
any other passenger.
APPENDIX C (See rule 5)
(a) Indian passenger returning after at least 3 (i) Used household articles up to an aggregate
months. value of ` 12,000 (ii) Professional equipment
up to a value of ` 20,000.
(b) Indian passenger returning after at least 6 (i) Used household articles unto an aggregate
months. value of `.12,000 (ii) Professional equipment
up to a value of ` 40,000.
(c) Indian passenger returning after a stay of (i) Used household articles and personal
minimum 365 days during the preceding 2 effects, (which have been in the possession and
years on termination of his work, and who has use abroad of the passenger or his family for at
not availed this concession in the preceding least six months), and which are not mentioned
three years. in Annex I, Annexure II or Annexure III up to
an aggregate value of `75,000.

(Item (c), in column(2), in entry (i), for the figures 30,000, the figures 75,000 has been
substituted vide Notification No. 11/2002 - Customs (N.T.) dated March 1st, 2002)
APPENDIX D (See rule 6)
(1) Jewellery (2)

Indian passenger who has been residing abroad (i) Jewellery up to an aggregate value of `.
for over one year. 50,000 by a gentleman passenger, or (ii) Up to
aggregate value of ` 1,00,000 by a lady
passenger.
APPENDIX E (See rule 7)
a) Tourists of Indian origin coming to India (i) used personal effects and travel souvenirs, if
other than tourists of Indian origin coming by - (a) these goods are for personal use of the
land routes as specified in Annexure IV; tourist, and (b) these goods, other than those
consumed during the stay in India, are re-
exported when the tourist leaves India for a
foreign destination. (ii) Articles as allowed to
be cleared under rule 3 or rule 4.
(b) Tourists of foreign origin, other than those (i) used personal effects (ii) articles other than
of Pakistani origin coming from Pakistan, those mentioned in Annexure I upto a value of
coming to India by air. ` 8000 for personal use of the tourist or as gifts
and travel souvenirs if these are carried on the
person or in the accompanied baggage of the
passenger.
(c) Tourists - (i) of Pakistani origin coming (i) used personal effects (ii) articles other than
from Pakistan other than by land routes; (ii) of those mentioned in Annexure I up to a value of
Pakistani origin or foreign tourists coming by ` 6000 for personal use of the tourist or as gifts
land routes as specified in Annexure IV; (iii) of and travel souvenirs if these are carried on the
Indian origin coming by land routes as person or in the accompanied baggage of the
specified in Annexure IV. passenger."

APPENDIX F (See rule 8)
Articles allowed free of duty Conditions Relaxation that may be

considered
(a) Used personal and (1) Minimum stay of two (a) For condition (1) Shortfall
household articles, other than years abroad, immediately of up to 2 months in stay
those listed at Annex. I or preceding the date of his abroad can be condoned by
Annex. II, but including the arrival on TR, (2) total stay in Assistant Commissioner of
article listed at Annexure III India on short visit during the Customs or Deputy
and jewellery up to fifty 2 preceding years should not Commissioner of Customs if
thousand rupees by a exceed 6 months, and (3) the early return is on account
gentleman passenger or one passenger has not availed this of : (i) terminal leave or
lakh rupees by a lady concession in the preceding vacation being availed of by
passenger. three years. the passenger; or (ii) any other
special circumstances. (b) For
condition (2) Commissioner of
Customs may condone short
visits in excess of 6 months in
deserving cases. (c) For
condition (3) No relaxation
(b) Jewellery taken out earlier Satisfaction of the Asset. --
by the passenger or by a Commissioner of Customs
member of his family from regarding the jewellery having
India. been taken out earlier from
India.
Annexure I
1. Firearms.
2. Cartridges of fire arms exceeding 50.
3. Cigarettes exceeding 100 or cigars exceeding 25 or tobacco
exceeding 125 gms.
4. Alcoholic liquor or wines in excess of two liters.
5. Gold or silver, in any form, other than ornaments.
6. Flat Panel (LCD/LED/Plasma) Television.

Annexure II
1. Colour Television or Monochrome Television.

2. Digital Video Disc Player.
3. Video Home Theatre System.
4. Dish Washer.
5. Music System.
6. Air-Conditioner.
7. Domestic refrigerators of capacity above 300 liters or its equivalent.
8. Deep Freezer.
9. Microwave Oven.
10. 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.
11. Word Processing Machine.
12. Fax Machine.
13. Portable Photocopying Machine.
14. Vessel.
15. Aircraft.
16. Cinematographic films of 35 mm and above.
17. Gold or Silver, in any form, other than ornaments.

Annexure III
1. Video Cassette Recorder or Video Cassette Player or Video Television Receiver or Video Cassette Disk
Player.
2. Washing Machine.
3. Electrical or Liquefied Petroleum Gas Cooking Range
4. Personal Computer( Desktop Computer)
5. Laptop Computer( Notebook Computer)
6. Domestic Refrigerators of capacity up to 300 liters or its equivalent.

UNIT – 4
INTRODUCTION TO GOODS AND
SERVICES TAX (GST)
Syllabus:
Objectives and basics scheme of GST, meaning- salient Features of GST – subsuming of taxes- benefits of
implementing GST – Apportionment of GST between central and states ; Input tax credit under GST;
Constitution Amendments – structure of GST (dual model) – Central GST – state / union territory GST –
integrated GST – GST council: structure, powers and functions. Provisions for Amendments. GST Rate
structure: GST Rates in prominent countries; zero ratings of exports; GST on imports; and special industrial
area schemes.
Prepared By
Arun kumar H
Srimala M
Shiva kumar H S
Ravikiran B P
Umashankari S S
Kavya T
WHAT IS GST?
• GST (Goods and Services Tax) is a indirect tax levied on goods and services.
• GST is a single tax on the supply of goods and services
• GST improve overall economic growth of the nation.
• GST is a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as
services at the national level.
• It will replace all indirect taxes levied on goods and services by states and Central.
DEFINITION OF GST
• Goods and services tax (GST) is a tax on goods and services with value addition at each stage having
comprehensive and continuous chain of set of benefits from the producer‟s / service provider‟s point up
to the retailers level where only the final consumer should bear the tax.
Goods and services are divided into five tax slabs for collection of tax – 0, 5%, 12%, 18% and 28%.
However, Petroleum products, alcoholic drinks, electricity, are not taxed under GST and instead are
taxed separately by the individual state governments, as per the previous tax regime.

MEANING OF GOODS
• Goods means every kind of movable property other than money and securities but includes actionable
claim, growing crops, grass and things attached or forming part of the land, which are agreed to be
served before supply or under a contract of supply
OBJECTIVES / PURPOSE OF GST

• One country – one tax
• Consumption based tax instead of manufacturing
• Uniform GST registration, payment
• To eliminate cascading effect of indirect taxes/ doubling tax/ tax on tax
• Subsume all indirect taxes at centre and state level
• Reduce tax evasion and corruption
• Increase productivity
• Increase Tax to GDP and revenue surplus
SALIENT FEATURES OF GST

1. Dual GST Model
2. Destination based consumption tax
3. Taxes to be subsumed Central tax
 central excise duty
 service tax
 Surcharges and cess
 State tax
 VAT
 Entertainment tax
 Luxury tax
 Taxes on lottery, betting
 Octroi
 Entry tax
4. GST on Export and Import
5. Computation of GST on the basis of invoice credit method
6. Payment of GST - CGST AND SGST are paid through GST

BASIC SCHEME / COMPOSITION SCHEME OF GST

A. Intimation and effective date for composition levy
• For persons already registered under pre-GST regime
• For persons who applied for fresh register under GST to opt scheme
• Registered under GST and person switches to composition scheme B. Effective
B. Effective date for composition levy
• Option to pay tax under composition scheme shall be effective.
• For persons who applied for fresh register under GST to opt scheme
C. Conditions and Restrictions for composition levy
• Person opting for scheme must neither be casual taxable person nor non- resident taxable person.
• Goods must be interstate purchase, imported goods, branch situated outside the state.
• Mandatory display of invoices.
D. Validity of composition levy
– Fulfilment of conditions, filing application.
E. Composition scheme under GST
– Compliance
F. Rate of tax
SUBSUMING OF TAXES / EXISTING TAXES
GST
CENTRAL GST STATE GST
It Will Subsume the Following Taxes It Will Subsume the Following Taxes
1. Central Excise Duty 1.VAT / SALES TAX

2. Additional Excise Duty 2.PURCHASE TAX
3. Service Tax 3.entertainment tax
4. Additional Duty Of Cost 4.luxury tax
5. Surcharge, Education 5.lottery tax
6. Secondary Higher Education Cess 6.state surcharge and cesses
Levi-able on above as of now

PRINCIPLES SUBSUMED THE TAXES UNDER GST

i. Taxes To Be Subsumed Should Be Primarily On Indirect Taxes, Either On The Supply Of Goods Or On
The Supply Of Services.
ii. Taxes To Be Subsumed Should Be Part Of The Transaction Chain Which Commences With Import/
Manufacture/ Production Of Goods Or Provision Of Services At One End And The Consumption Of
Goods And Services At The Other.
iii. The Subsumation Should Result In Free Flow of Tax Credit in Intra and Inter-State Levels.
iv. Revenue Fairness For Both The Union And The States Individually Would Need To Be Attempted.
ADVANTAGES / BENEFITS OF IMPLEMENTION OF GST IN INDIA
Advantages of GST:
(i) Simpler tax system

(ii) Reduction in prices of goods and services due to elimination of cascading
(iii) Uniform prices throughout the country
(iv) Transparency in taxation system
(v) Increase in employment opportunities
(vi) Boost to make in India
(vii) Increase the Government Revenue
(viii) Reduced ovation
(ix) Boost to Economic Growth
(x) Tax payers friendly
(xi) No corruption
(xii) Electronic presentation
(xiii) Neutral Effect
(xiv) Export from India are Zero rated
Disadvantages of GST
i. Increased cost
ii. Multiple Tax rate
iii. Not a single tax
iv. Professionals needed
v. Old wine in new bottle

vi. Problems due to dual control

vii. Computerised GST
viii. Multiple state Registration
INPUT TAX CREDIT (ITC):
Input tax credit or it is the tax that a business pays on a purchase and that it can use to reduce its tax liability
when it makes a sale. In other words, businesses can reduce their tax liability by claiming credit to the extent of
GST paid on purchases.
Goods and services tax (GST) is an integrated tax system where every purchase by a business should be
matched with a sale by another business. This makes flow of credit across an entire supply chain a seamless
process.
ELIGIBILITY AND CONDITIONS TO CLAIM ITC
To claim it‟s, you must meet the conditions laid down in section 16 of the CGST act. As a supplier of goods or
services:
1. Firstly, you must be registered under the GST law.

2. Then, you must have the tax invoice or the debit note issued to you by the supplier of inputs or input
services.
3. You must receive the goods or services or both.
4. Your inputs supplier must have paid government the GST charged in respect of such a supply.
5. You should have filed returns as per section 39.
6. In case you receive goods in lots or instalments, you can claim it when the last lot is received.
7. If you have claimed depreciation on the tax part of the cost of your capital goods, then you cannot avail it‟s
on the said tax component.
8. You shall not be entitled to take it if the same is not claimed within the time limit.
9. Only 20% of eligible amount can be claimed if suppliers don‟t upload GSTR – 1.
10. ITC Claim restricted to 120% of GSTR – 2A.
CONTITUTIONAL AMENDMENT OF GST
There are several articles in the constitution of India which define the financial Relations between union and
state. Since GST involves a huge financial interest of the centre and the state governments and the distribution
of revenue between them, such a Historical Tax reform needed suitable changes to the constitution.. The 101st
constitution amendment was passed this act received the assent of the president of India on 8thSep,2016

The Important Changes Made in Constitution (New Articles / amended articles) via this law is -
Article 246 (A)
Article 269A
Article 279-A
Changes in the 7th Schedule Union List &State List
Article 246 (A):
This is a new article inserted in the constitution. It says that-
(1) Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause
(2), the Legislature of every State, have power to make laws with respect to goods and services tax imposed by
the Union or by such State.
(3) Parliament has exclusive power to make laws with respect to goods and services tax where the supply of
goods, or of services, or both takes place in the course of inter-State trade or commerce.
Notable points from articles 246A
1. Both Union and States now have “concurrent powers” to make law with respect to goods & services.
2. The intra-state trade now comes under the jurisdiction of both centre and state; while inter-state trade
and commerce is “exclusively” under central government jurisdiction.
Article 269A:
This is a new article which reads as follows:
(1).Goods and services tax on supplies in the course of inter-State trade or commerce shall be levied and
collected by the Government of India and such tax shall be apportioned between the Union and the States in the
manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax
Council.
Explanation.-For the purposes of this clause, supply of goods, or of services, or both in the course of import
into the territory of India shall be deemed to be supply of goods, or of services, or both in the course of inter-
State trade or commerce.
(2) The amount apportioned to a State under clause (1) shall not form part of the Consolidated Fund of India.
(3) Where an amount collected as tax levied under clause (1) has been used for payment of the tax levied by a
State under article 246A, such amount shall not form part of the Consolidated Fund of India.
(4) Where an amount collected as tax levied by a State under article 246A has been used for payment of the tax
levied under clause (1), such amount shall not form part of the Consolidated Fund of the State.
(5) Parliament may, by law, formulate the principles for determining the place of supply, and when a supply of
goods, or of services, or both takes place in the course of inter-State trade or commerce.‟
Notable points from article 269A
This article denotes that in case of the inter-state trade, the tax will be levied and collected by the Government
of India and shared between the Union and States as per recommendation of the GST Council.
Article 279-A:
This Article provides for constitution of a GST council by president within sixty days from this act coming
into force. The GST council will constitute the following members:
Union Finance Minister as chairman of the council,
Union Minister of State in charge of Revenue or Finance,
One nominated member from each state who is in charge of finance or taxation.
Changes in the 7th Schedule
This amendment has made following changes in 7th schedule of the constitution:
Union List:
The entry 84 of Union List earlier comprised the duties on tobacco, alcoholic liquors, opium, Indian hemp,
narcotic drugs and narcotics, medical and toilet preparations. After this amendment, it will comprise of
Petroleum crude, high speed diesel, motor spirit (petrol), natural gas, and aviation turbine fuel, tobacco and
tobacco products. Thus, these are now out of ambit of GST and subject to Union jurisdiction.
Entry 92 (newspapers and on advertisements published therein) has been deleted thus, they are now under
GST.
Entry 92-C (Service Tax) has been now deleted from union list.
State List
Under State list, entry 52 (entry tax for sale in state) has been deleted.

In Entry 54, Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of Entry
92-A of List I.; has been now replaced by Taxes on the sale of petroleum crude, high speed diesel, motor spirit
(commonly known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption, but
not including sale in the course of inter-State trade or commerce or sale in the course of international trade or
commerce of such goods.”
Entry 55 (advertisement taxes) have been deleted.
Entry 62 (Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling) has been
replaced by these taxes only to be levied by local governments (panchayats, municipality, regional council or
district council).
STRUCTURE OF GST (DUAL MODEL)
The dual GST is assumed to be a simple tax with one or two central goods and service tax (CGST) and state
goods and service tax (SGST) RATES
Both the Centre and the States have the powers to levy and collect taxes through appropriate legislation.
Many countries in the world have a single unified GST system i.e. a single tax applicable throughout the
country. However, in federal countries like Brazil and Canada, a dual GST system In India, a dual GST is
proposed whereby a Central Goods and Services Tax (CGST) and a State Goods and Services Tax (SGST) will
be levied on the taxable value of every transaction of supply of goods and services.
Benefits of Dual GST: –
The Dual GST is expected to be a simple and transparent tax with one or two CGST and SGST rates. The dual
GST is expected to result in:-
• Reduction in the number of taxes at the Central and State level
• Decrease in effective tax rate for many goods
• Removal of the current cascading effect of taxes
• Reduction of transaction costs of the taxpayers through simplified tax compliance
• Increased tax collections due to wider tax base and better compliance
• Better for business

• Good balance between centre and states
• Better for business
• Least changes, most benefits
CGST (Central Goods and Services Tax).
CGST refers to the Central GST tax that is levied by the Central Government of India on any transaction of
goods and services tax taking place within a state. It is one of the two taxes charged on every intrastate (within
one state) transaction, the other one being SGST (or UTGST for Union Territories).
CGST replaces all the existing Central taxes including Service Tax, Central Excise Duty, CST, Customs Duty,
SAD, etc. The rate of CGST is usually equal to the SGST rate. Both taxes are charged on the base price of the
product
SGST (State Goods and Services Tax).

SGST (State GST) is one of the two taxes levied on every intrastate (within one state) transaction of goods and
services. The other one is CGST. SGST is levied by the state where the goods are being sold or purchased.
It will replace all the existing state taxes including VAT, State Sales Tax, Entertainment Tax, Luxury Tax,
Entry Tax, State Cesses and Surcharges on any kind of transaction involving goods and services. The State
Government is the sole claimer of the revenue earned under SGST.
IGST (Integrated Goods and Services Tax).

Integrated GST (IGST) is applicable on interstate (between two states) transactions of goods and services, as
well as on imports. This tax will be collected by the Central government and will further be distributed among
the respective states. IGST is charged when a product or service is moved from one state to another. IGST is in
place to ensure that a state has to deal only with the Union government and not with every state separately to
settle the interstate tax amounts.
UTGST (Union Territory Goods and Services Tax):

The Union Territory Goods and Services Tax, commonly referred to as UTGST, is the GST applicable on the
goods and services supply that takes place in any of the five Union Territories of India, including Andaman and
Nicobar Islands, Dadra and Nagar Haveli, Chandigarh, Lakshadweep and Daman and Diu, Jammu and
Kashmir, Ladakh. This UTGST will be charged in addition to the Central GST (CGST) explained above. For
any transaction of goods/services within a Union Territory: CGST + UTGST

The reason why a separate GST was implemented for the Union Territories is that the common State GST
(SGST) cannot be applied in a Union Territory without legislature. Delhi and Pondicherry UTs already have
their own legislatures, so SGST is applicable to them.
Difference between Different Types of GST Taxes:
Types of CGST SGST IGST UGST/UTGST

Differences
Applicable Intrastate Intrastate Inter-state Within one Union
transactions (Within (Within (between two Territory (UT)
(Goods & one state) one state) states or one
Services) state and one
UT) and imports
Collected by Central State Govt. Central Govt. UT Govt.
Govt.
Benefitting Central State Govt. Central Govt. & UT Govt.
Authority Govt. State Govt.
Tax Credit CGST SGST IGST UTGST
Use Priority IGST IGST CGST IGST
SGST

GST COUNCIL
• The GST council, the key decision-making body that will take all important decisions
regarding the GST, will have representation from the central government as well as all the
state governments.
• The Goods & Services Tax Council {GST Council} has been created in September 2016
under Article 279-A of the Constitution of India. The main objective of GST is to develop a
harmonized national market of goods and services. It has its Secretariat office in New Delhi.
GST Council structure
The Goods and Services Tax (GST) is governed by the GST Council. Article 279 (1) of the
amended Indian Constitution states that the GST Council has to be constituted by the
President within 60 days of the commencement of the Article 279A.
According to the article, GST Council will be a joint forum for the Centre and the States. It
consists of the following members:
 The Union Finance Minister, Nirmala Seetharaman will be the Chairperson
 As a member, the Union Minister of State will be in charge of Revenue of Finance
 The Minister in charge of finance or taxation or any other Minister nominated by each
State government, as members.s
Functions of the GST Council
 Taxes, cesses, and surcharges levied by the Centre, States and local bodies which may be subsumed in
the GST;
 Goods and services which may be subjected to or exempted from GST;
 Model GST laws, principles of levy, apportionment of IGST and principles that govern the place of
supply;
 Threshold limit of turnover below which goods and services may be exempted from GST;
 Rates including floor rates with bands of GST;
 Special rates to raise additional resources during any natural calamity;

 Special provision with respect to Arunachal Pradesh, Jammu and Kashmir, Manipur, Meghalaya,
Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand; and
 Any other matters.
POWER OF GST COUNCIL
As per Article 279A (4), the Council will make recommendations to the Union and the States on important
issues related to GST, like
 a) The goods and services that may be subjected or exempted from GST.
 b) Principles that govern Place of Supply.
 c) Threshold limits.
 d) GST rates including the floor rates with bands, special rates for raising additional resources during
natural calamities/disasters or RNR.
 e) Special provisions for certain States, etc.
 f) Transition Provisions.
PROVISIONS FOR AMENDMENTS OF GSTC:
The article number 246a (2): covers the provision of interstate supply of goods or service or both, in such
circumstances only parliament (i e. Central Govt) can make the law.
Amendment of article 248(residuary power of legislation): under article 248(1) parliament as exclusive
power into make any law in respect of any item not covered under state list and concurrent list subject to
provision article 246A.
Amendment of article 249(1): parliament under article 249(1) can make the law in respect of any item
specified in the state list in the national interest, if the council of states as declared by resolution and supported
by 2/3rd of number present and vote.
Amendment of article 250(1)(proclamation of emergency): in the event of announcement of emergency,

parliament of India as power to makes the laws in respect of any item covered state list for the whole India or
part of the India under article 250(1).
Amendment of article 268(1) (duties levied by the union but collected the states): article 268(1) provides
the provision of levy of stamp duty and excise duty on medicinal and toilet preparation by union government
and collection by state (in case if state) or by union (in case of union territory).

Amendment of article 268a (service tax levied by union government and collected and appropriated by
union and states).
Amendment of article 269 and insertion of new article 269a (interstate sale and purchase).
Amendment of article 270(1) (levy and distribution between union and state).
Amendment of article 271(surcharge on taxes by union).
Insertion of article 279a (constitution of goods and service tax council).
TAX RATES:
The tax rates for 1211 items were released in GST Council meeting on 18th May, 2017 and for services
On 19th May, 2017. The tax rates for 74% of the items are at or below 18% and balance items at 28% rate. One
of the major changes in Goods and Services is that there are multiple tax rates based on the Usage of the
services. This is a significant shift from the existing process of having a single rate for all the Services. The
final rates for the goods and services have been notified on 28th June 2017 wide various notifications For the
Central Taxes and States have notified the same accordingly.
Tax Rates Products

0 Mostly agriculture products
5% Household necessities such as edible oil, spices, tea, and coffee (except
instant) are included. Coal, Mishti /Mithai (Indian Sweets) and Life –saving
drugs are also covered under this GST slab.
12% This includes computed and processed food
18% Hair oil, toothpaste and soaps, capital goods and industrial intermediaries are
covered in this slab.
28% Luxury items such as small cars, consumer durables like AC and
refrigerators, premium cars, cigarettes and aerated drinks High- end motor
cycles are included here.
Though edible items like sugar, tea and coffee are included in the 5% slab, milk does not attract any tax under
the new GST regime. The idea behind this is to ensure that basic food items are available for everyone but
instant food is kept out of this category.

 Basic household items like toothpaste and hair oil, which currently attract 28% tax, will be taxed at 18%
only.
 Sweets will also be taxable at 5%.
 Tax rates on coal has also been reduced from 11.69% to just 5% in order to relieve the pressure on
power industries.
 GST also gives a major push to domestic industries as they will be able to procure seamless input credit
for capital goods. Make in India campaign is set to flourish after this reform.
UPDATE: As per 37th GST Council Meeting, cut and semi-polished stones will be taxed at 0.25% GST.
This is a 5th GST tier that only includes a few products.
GOODS AND SERVICES TAX - KEY CONCEPTS

Goods and Services Tax (GST) is a comprehensive tax on supply of goods or services or both. It eliminates
The cascading effect of taxes, as GST is imposed at every stage of supply chain and the input credit is available
in across the supply chain. The uninterrupted credit in the supply chain ensures that the End consumer
purchases goods and services at a lower price and to ensure this the government has introduced the Anti-
profiteering clause based on the experience in Malaysia where GST was implemented from 1st April 2015.
Under GST, taxes are paid at All stages in the supply chain i.e. From manufacturing to the end sale to The
consumer. Taxes are levied at all the stages and input tax credit is available to the extent of the tax Paid during
the purchase. The end consumer will not pay taxes directly to GST authorities; the retailer pays the taxes on
behalf of the end consumer. The overall idea of having GST in India is to increase the tax base over a period,
and this will result in lower tax rates over a period. Various scholars estimate that the GDP is expected to go
any number between 0.5% to 2%. And it is also anticipated that it will promote the ease of doing business in
India.
Another significant shift in the taxes under GST is the introduction of destination-based consumption Taxation
in place of origin-based taxation. That means GST will be the tax revenue for the state where ultimately the
goods or services are consumed. GST moves with the movement of goods and services and there is seamless
movement of input tax credit also along with goods and services in the entire Value chain, except the cases
where the credit chain breaks.
CERTAIN KEY TERMS ARE AS UNDER:
SUPPLY:
Tax incidence in case of GST is „supply‟. Supply includes all forms of supply of goods or services or both such
as sale, exchange, transfer, license, barter, rental, lease or disposal made or agreed to be made for consideration
by a person in the course or furtherance of business.
The above definition is an inclusive definition means that any other form or transaction can also be built in the
definition of supply.

TIME OF SUPPLY:
Time of supply refers to the tax point, at which the tax liability has to be accounted,
And tax invoice has to be issued. Under GST there are two tax points one for the supply of goods and another
for the supply of services. The significant change as per time of supply is that taxes have to be levied even on
receipt of advance From customers for the supply Of goods or service or both, unlike the earlier taxation
system where it was Applicable only for services.

UNIT – 5
GST Acts: - CGST Act SGST Act (Karnataka State) IGST Act
Syllabus:
Salient feature of CGST Act, SGST Act (Karnataka State), IGST Act- Meaning and Definition: Aggregate
turnover, Adjudicating authority, agent, business, capital goods, casual taxable person, composite supply,
mixed supply, exempt supply, outward supply, principal supply, place of supply, supplier, goods, input service
distributor, job work, manufacture, input tax, input tax credit, person, place of business, reverse charge, works
contract, casual taxable person, non-resident, export of goods/services, import of goods/services, intermediary,
location of supplier of service, location of recipient of service.
Prepared By:
Kalavathi T
Madhukrishna B
Mahalakshmi H R
Ramanuja B H
Sudha N
Bhuvaneshwari
CGST ACT: - central Goods and Services tax Act of 2017 has been notified by the government of India,
relating to provision for levy and collection of tax on inter-state supply of goods and service by the central
government.
SALIENT FEATURE OF CGST ACT, 2017:
1. A state-wise single registration for a taxpayer for filing returns, paying taxes, and to fulfill other
compliance requirements.
2. Most of the compliance requirement would be fulfilled online.
3. A taxpayer has to file one single return state-wise to report all his supplies, whether made within or
outside the state or exported out of the country and pay the applicable taxes on them.
4. A business entity with an annual turnover of up to Rs.20 lakh would not be required to the take
registration in the GST regime.
5. A business entity with turnover up to Rs.50 lakh can avail the benefit of a composition scheme under
which it has to pay a much lower rate of tax.
6. The Composition Scheme is available for all traders, select manufacturing sectors and for restaurants in
the service sector.
7. An agricultural list to the Extent of supply of produce out of cultivation land would not be liable to take
registration in CGST.
8. Detailed transitional provisions have been provided to ensure migration of existing tax payer and
seamless transfer of unutilized UFC ITC (Input tax credit).
SGST ACT (Karnataka State):-The Karnataka legislative assembly passed the GST bill on June 2017, and
adoption the state GST bill and it came into existence from July 1st.
SALIENT FEATURE OF SGST ACT, 2017:
1. Levied by the states for all the transaction of goods and service made for a consideration.
2. State GST would be paid to the accounts of the respective State.
3. Exceptions would be exempted goods and services, goods kept out of GST and transactions below
prescribed threshold limits.
4. Basic features of lawn such as chargeability, taxable event, measure, valuation, classification would be
uniform across the state.
IGST ACT: - Integrated GST acts 2017 as be notified by the Government of India, relating to provision by
for levy and collection of tax on Interstate Supply of goods and services by the Central Government.
SALENT FEATURE OF IGST ACT, 2017:
1. IGST equals to CGST+SGST. IGST model that the center will levy tax at a rate approximately equal to
CGST+SGST on Inter State supply of goods and services.
2. It is a destination based tax and will accrue to importing state.
3. It will lower tax burden by taxing Inter-State transaction only once.
4. B2B transaction – tax will flow to the State where Purchaser claims Input Tax Credit.
5. B2C transactions – tax will flow to the State of Consumer, otherwise tax will remain in the State of
Seller.
MEANINGS AND DEFINITIONS :-
1. Aggregate Turn over :

According to GST law aggregate turnover means “ The aggregate value of all taxable supply, excluding
the value of Inward supply on which tax is payable by a person, exempt supply, export of goods and or

services and interstate supply of persons having a same permanent account number to be computed on
all India basis”.
2. Adjudicating Authority :
Adjudicating is the legal process by which a Judge reviews Evidence and Argumentation, including
legal reasoning set forth by opposing parties or litigation to come to a decision which determine rights
and obligations between the parties involved.
3. Agent :
As per Section 2(5) the term “agent” means persons, including a factor, broker, commission agent, an
auctioneer or any other mercantile agent, by whatever name called, who carries on the business of
supply or4 receipt of goods or services or both on behalf of another.
4. Business :
 Any Trade, Commerce, Manufacture, Profession, Vocation, Adventure, Wager or any other similar
activity.
 Supply or Acquisition of goods including capital goods and services in connection with commencement
or closure of business;
 Provision by a club, association, society, or any such body of the facilities or benefits to its members;
5. Capital good :
As per Section 2(19) the term “ capital goods “ means goods, the value of which is capitalized in the
books of account of the person claiming the input tax credit and which are used or intended to be used in
the course business.
6. Casual Taxable person :

As per section 2(20) the term “ Casual Taxable Person” means a person who occasionally
undertakes transactions involving supply of goods or services or both in the course or furtherance of
business, whether as principal, agent or in any other capacity, in a State or a union territory where he has
no fixed place of business.
7. Composite Supply :
As per Section 2(30) of the central Goods and Services Tax (CGST) Act, 2017, the term “
composite supply “ means a supply made by a taxable person, consisting of two or more taxable

supplies of goods and services, which are naturally bundled and supplied in conjunction with each other
in the ordinary course of business.
8. Mixed Supply :
Section 2(66) defines this term as “ mixed supply “ means two or more individual supplies of
goods or service, or any combination thereof, made in conjunction with each other by a taxable person
for a single price where such supply does not constitute supply.
A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits and
fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied
separately and is not dependent on any other.
9. Outward Supply :
“ outward supply “ in relation to a taxable person, means supply of goods services or both, whether by
sale, transfer, exchange, license, rental, lease or disposal or any other mode or agreed to be made by
such person in the course or furtherance of business;
10. Principal Supply :

Principal Supply means the supply of goods or services which constitution the predominant element of a
composite supply and to which any other supply forming part of that composite supply is ancillary;
11. Supplier :
In relation to any goods or services or both, shall mean the person supplying the said goods or services
or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or
services or both supplied.
12. Input service distributor :

Means an office of the supplier of goods or services or both which receives tax invoices and issued
under Section 31 towards the receipt of input services and issues a prescribed documents for the purpose
of distributing the creditor central tax, state tax, integrated tax or union territory tax paid on the said
services to a supplier of taxable goods or services or both having the same Permanent Account Number
as that of the said office.

13. Goods input manufacturer :

Manufacture means processing of raw material or inputs in any manner that results in emergency
of a new product having a distinct name, character and use and the term “ manufacturer “ shall
be construed accordingly.
Input tax:
Input tax in relation to a registered person, means the central tax, state tax, integrated tax or union
territory tax charged on any supply of goods or services or both made to him and includes –
 The integrated goods and services tax charged on import of goods;
 The tax payable under the provision of sub – section.
14. Input tax credit :

Input tax credit is the credit manufacture‟s received for paying input taxes towards input used in the
manufacturer of products. Similarly, a dealer is entitled to input tax credit if he has purchased goods for
resale.
15. Person :
According to Income Tax Act 1961, Section 2(31)
 An Individual;
 A Hindu Undivided Family;
 A Company;
 A Firm;
 A limited liability Partnership;
 An Association of person or body of Individual;
 Every Artificial Juridical Person.
16. Place of Business :

 A place from where the business is ordinarily carried on, and include a warehouse, a
godown or any other place where a taxable person stores his goods, supply or receives
goods or services or both.
 A place where a taxable person maintains his books of account.
 A place where a taxable person is engaged in business through an agent, by whatever
name called.

17. Reverse Charge :

Means the liability to pay tax by the recipient of supply of goods or services or both instead of the
supplier of such goods or services or both under Sub – Section (3).
18. Works Contact :

Means a contract for building, construction, compilation, installation, fitting out, improvement,
modification, repair, maintenance, Renovation, alteration or commissioning of any immovable property
wherein transfer of property in goods.
19. Casual taxable Person :

Means a person who occasionally under takes transactions involving supply of goods or
services or both in the course or furtherance of business, whether as principal, agent or in any other
capacity, in a state or a union territory where he has no fixed place of business.
20. Non-resident person :

As per Section 2(77) of the Central Goods and Service tax (CGST) Act 2017, unless the context
otherwise requires, the term “Non-resident taxable person” means any person who occasionally
undertakes transaction involving supply of goods or services or both, whether as principal or agent or in
any other capacity, but who has no fixed place of business or residence in India.
21. Place of supply :

Place of supply is nothing but the place of delivery of goods and consumption of service. In
other words, it is the registered location of recipient of a goods or service. Under GST, place of supply
is divided into following Categories:
 Place of supply of Goods.
 Place of supply of Service.
22. Import of Goods and Service :

Import of Goods and services comprise all transaction between residents of a country and the rest of the
world involving a change of ownership from non-residents to residents of general merchandise, non-
monetary gold‟s and services.

23. Export of Goods and Services :

As per IGST Act section 2(5) export of goods with its grammatical variations and cognate expressions,
means taking goods out of India to a place outside India. Export means trading or supplying of goods and
services outside the domestic territory of a country.
25. Intermediary:
Firm or person (such as a Broker or Consultant) who acts as a mediator on a link between parties to a
business deal, investment decision, negotiation, etc. In money market, for example, banks act as
Intermediaries between depositors seeking interest income and barrowers seeking debt capital.
Intermediaries usually specialized in specific areas, and serve as a conduit for market and other types of
information. Also called a middle man.
24. Location of supplier of service :

The term location of supplier of service determines the place from where the service has been supplied.
These determinations of place from where the service has been supplied in turn determine the place or
the state in which a person involved in supplying the service as to be registered under the law.
25. Location of Recipient of Service :

Goods and Service tax is a destination based taxation and the revenue accrues to the Jurisdiction where
the service have been consumed or have been supply. Therefore the location of the recipient of service
determine the location where the service has been consumed or received by the recipient.

Problems on customs duty
Prepared By
Navya H Y
Bibi Ayesha
Arpitha K
Varsha G J
Mahalakshmi T
Bharath Kumar K

Computation Of Assessable Value
Computation of Assessable Value of Goods
Particular Amount Amount
Purchase price of goods xxx
Add: commission and brokerage (except buying commission) xxx
Cost of packing xxx
Material and service provided by the importer xxx
Royalty and Licence fee xxx
FOB value of goods xxx
Add:
Transportation cost ( up to 20% of FOB value) xxx
Insurance premium (up to 1.125% of FOB value) xxx xxx
CIF value of goods/ assessable value xxx

Computation Of Custom Duty
Particulars Amount
1. Assessable Value Xxx (A)
2. Basic Custom Duty @ 10% Of (A) Xxx (B)
3. Additional Custom Duty @12% Of ( A+B) Xxx (C)
4. Social Welfare Surcharge @10% Of (B+C) Xxx (D)
5. Integrated Goods And Service Tax @18% Of Xxx (E)

(A+B+C+D)
6. Compensation Cess @10% Of (A+B+C+D+E) Xxx (F)
7. Total Duty ( A+B+C+D+E+F) Xxx(G)
8. Effective rate of duty %%%

Computation of Assessable Value of Goods (before GST)
Purchase price of goods xxx
Add: commission and brokerage (except buying commission) xxx
Cost of packing xxx
Material and service provided by the importer xxx
Royalty and Licence fee xxx
FOB value of goods xxx
Add:
Transportation cost ( up to 20% of FOB value) xxx
Insurance premium (up to 1.125% of FOB value) xxx xxx
CIF value of goods xxx
Add: Loading unloading and handling charges @ 1% of the CIF value xxx xxx
Assessable value Xxx

Computation of Customs Duty
1.Basic customs duty

a. Assessable valve of goods xxx(a)
b. Rates of duty say 10% u/s 3(1) of C.T.A xxx(b) xxx(c)
2.Additional customs duty:

Assessable value
Add: Basic customs duty xxx
Value of add, customs (a+b) rate of A.C.D xxx
xxx(d)
Add: education cess @ 3% on total of xxx(e)
Basic customs duty and additional customs duty
xxx(f)
3. special additional customs duty:

Assessable value of goods xxx
+basic customs duty xxx
+additional customs duty xxx
+education cess xxx
Special additional customs duty u/s 3(5) of C.T.A up to 4% on total
4.safeguard duty / product specific safeguard duty on imports from xxx
china ,if any
+xxx
5. countervailing duty on subsidized articles
+xxx
6. anti- Duming duty on dumped articles
+xxx
7. additional duty on dumped articles
+xxx
8. national calamity contingent duty
+xxx
xxx
Total customs duty

Note:
a. Buyer who is manufacture ,is eligible to avail CENVAT credit of additional

customs duty and above
b. A buyer , who is service provider , is eligible to CENVAT credit of additional
customs duty above
c. A trader who sells imported goods in India after charging
d. VAT/sales tax can get refund of special CVD of 4% I.e. „f‟ above
e. Basic customs duty is levied under section 14(1). The rates vary for different items,
but general rate on non – agriculture goods at present is 10% w.e.f 01-03-2007.
f. to protect Indian agriculture and Indian automobile sector , duties on some articles
is higher
g. duty on liquor (including wine ) is also high i.e. 150% CVD and education cess on
liquor and wine has been exempted w.e.f.03-07-2007 as per WTO agreement
h. Total duty payable generally comes to 29.44% w.e.f. 01-03-2015 total customs duty
payable w.e.f.01-03-2015 is 29.44% as excise duty rat is 12.50%.

1) An Indian dealer Praveen imported 30 machines from America @ 200 Dollars per
machine. However, the following expenses are not included in it:[Q.P.2017]
a) Packing charges10 dollars per machine

b) Transportation charges to Indian port 100 dollars
c) Transit insurance premium30 dollars
d) Brokerage (excluding buying commission) 60 dollars
The dealer incurred the following expenses after delivery at the port
a. Transportation charges from port to his godown Rs.3000.

b. Insurance premium Rs.500
c. Octroi Rs.2000.
Compute assessable value to determine customs duty. Exchange rate is 1 dollar =Rs.60.
2) An Indian dealer Arun imported goods worth 10000 dollars. However, the following
expenses are not included in it:
a) Buying commission paid to an agent of Indian dealer 200 dollars,
b) Packing charges- containers 500 dollars: other packing materials 100 dollars:
Labour charges 300 dollars.
c) Transportation charges to India port.
d) Transit insurance premium.
Compute assessable value to determine customs duty
Exchange rate:
a) Declared by the R.B.I.Rs.65.20per dollar;
b) Notified by the board Rs.65 per dollar.

3) An Indian Mr Ravikiran imported a machine from London. From the following

information determine the assessable value of the machine for Customs Duty:
a) Cost of machine 10,000

b) Packing charges 500
c) Transportation charges by air 3000
d) Commission paid to the broker of exporter who arranged the deal 100
e) Amount paid to an employee of exporter for assembling the machine in India
3000
f) Insurance premium 500
g) Transportation charges from airport to factory and insurance premium Rs.10.000
h) Rate of exchange 1=Rs.80.
4) A Arun company imported a machine from Europe .from the following information
determine the assessable value for Customs Duty:
1. Cost of machine ,but it does not include 25,000Euro

2. The importer sent the goods to the exporter for the machine ,
It was used in manufacturing the machineRs.1.00.000
3. Design and development expenses incurred outside India5000Euro
4. Technical fees paid to exporter after import of machine 4,000Euro
5. Installation charges of machine in the factory Rs.50.000
6. Packing charges500Euro
7. Transportation charges 1,000Euro
8. Insurance premium paid in India500Euro
9. Transportation and insurance charges from port of factory Rs.10.000
10. Exchanges rate declared by the board Rs.70 per Euro
11. Exchange rate declared by the R.B.I. Rs.71 per Euro.

5) From the following date, you are required to compute the customs duty payable by
Bharath and company.
a) FOB value of textile machinery - 1,00,000 Euro

b) airfreight - 26,000 Euro
c) expenses incurred by seller for improving the design, at buyer – importer‟s request
– 4,000 Euro
d) transit insurance – 2,000 Euro
e) exchange rate 1Euro =Rs.60
f) basic duty 25% rate of CVD 12% rate of SAD 3%
g) the price offered to the importer is the special discounted price the buyer –
importer has been specifically directed not to disclose this price to any buyer in
India sellers normal selling prices is 1,20,000 Euro.
6) An importer Madhu has imported a machine at invoice price of 16,000 dollars. from the
following information determine the assessable value of the machine for customs duty :
a) Transport charges by air 4,800 dollars

b) Packaging charges 800 dollars
c) Insurance premium 1050 dollars
d) Transportation charges from Indian Airport to godown Rs.8,000
e) Commission paid to the broker of exporter who arranged the deal 190 – dollars
Exchange rate notified by the board 1 Dollar = Rs. 65.
7) From the following particular calculate the customs duty payable:

a) Assessable value of imported goods Rs. 5, 00,000.
b) Basic customs duty payable @10%
c) The imported goods are also produced in India. On such goods excise duty is
leviable @12%.
d) IGST @ 18% ,SWS 10%

8) From the following particulars calculate the customs duty payable:
(a) Assessable value of imported goods Rs.200, 000.
(b) Basic customs duty payable @ 10 %.
(C) The imported goods are also produced in India. On such goods
Excise duty is leviable@10%
(c) IGST 10%

(d) SWS @10%
(e) Compensation cess 10%
9) Assessable value of an imported produce is Rs, 40.000. Basic customs duty is 10%. Such
product is not manufactured in India and hence is not included in the central excise
tariff Act. However, the central excise tariff rates applicable for similar type of goods are
8%, 10%. IGST @ 18% and C C 10% Find the total customs duty payable.
10) From the following information determine the Customs Duty payable:
(a) CIF value of goods imported Rs.5, 00,000
(b) Rate of basic customs duty 10%
(c) Rate of excise duty on such goods produced in India 10%
(d) IGST @ 18% and C S cess @ 10% also leviable.
11) From the following particulars Relates to Mr Dayashankar calculate the customs duty
payable
(a) Assessable value of imported goods Rs.1, 50, 000.
(b) Basic customs duty payable @ 10%
(c) The imported goods are also produced in India. But it is exempt from excise duty.
(d) The exporting country has subsidized the seller Rs.30, 000.
(e) IGST @ 18% and C S and SWS @ 10% each is charged.

12) As Indian dealer Shivakumar imported 100 machines from America @ 200 dollars per
machine. However, the following expenses are not included in it: [Q.P.2011]
a. Packing charges 10 dollars per machine
b. Transportation charges to Indian port 100 dollars
c. Transit insurance premium 40 dollars
d. Brokerage (excluding buying commission) 60 dollars.
The dealer incurred the following expenses after delivery at the port:
a. Transportation charges from port to his godown Rs.3000.
b. Insurance premium Rs.500
c. Octroi Rs.5.000.
Computer assessable value to determine customs duty. Exchange rate is 1 dollar=Rs.65.
13) Sachin Co. imported goods from America. From the following information determine
the customs duty payable:
(a) Cost of goods 15,000 Dollars

(b) Packing charges 3,000 Dollars
(c) Paid commission in India to the broker who arranged the deal abroad Rs.10,000
(d) Freight from America to Indian port 2,000 Dollars
(e) Insurance premium 1,000 Dollars
(f) Exchange rate:
(a) Declared by the board. 1 Dollar=Rs.65.00
(b) Declared by the R.B.I. 1 Dollar=Rs.64.50
Compute duty payable amount.

14) An importer Nandish imported has imported raw material from America at a cost of
50,000 dollars. Other details are as follows:
1. Goods were packed for which packing charges were charged 5,000
dollars
2. Goods were stuffed in returnable contained. Price of container is 2,000 dollars
3. Insurance charges 250
dollars
4. Sea freight charges 4,000
dollars
5. Importer had paid commission to broker in America who
Arranged the transaction 500
dollars
6. Rate of exchange 1
dollar=Rs.65
Compute custom duty.
15) An Indian importer Navya imported raw material for 5,000 dollars. Following
information‟s are available:
a) Packing charges of good 120 dollars.

b) Goods were stuffed in contained (returnable) price of the contained is 400 dollars
c) Insurance premium 50 dollars.
d) Sea freight 160 dollars.
e) Imported had paid commission of 100 dollars to a broker who arranged the
transaction.
f) Dollar rate is Rs. 65 = 1 dollar.
g) Basic Customs Duty is 10%.
h) 10% Excise Duty is payable for such goods in India.
i) IGST @15% and Compensation Cess @ 10% are also charged.
Find out the Assessable Value of imported goods and customs duty payable.

16) Reliable Industries Ltd. (India) imports some machines from USA and the supplier
charges 2,700 dollars. These machines have been sent by service and air freight has been
paid 760 dollars. Transit insurance premium was paid 104 dollars. Packing charges were
50 dollars which included in aforesaid price.
Find out Assessable Value if the exchange rate is 1 Dollar = Rs. 65. Calculate
Customs Duty payable, if:
a) Basic Customs Duty 10%.
b) Additional Customs Duty 12%.
c) S W S @ 10
d) Compensation @ 10 %
e) IGST @18%
A foresaid machines are not manufactured in India.
17) An importer has imported a machine from U.S.A of invoice of 15000 Dollars. Other
details are as follows:
i) Freight from USA to Indian port was 800 Dollars.
ii) Insurance was paid to insurance in India Rs 12000.
iii) Design and development charges at 2500 Dollars were paid to a consultancy firm
in USA.
iv) The importer also spent an amount of Rs 60000 in India for development work
connected with the machinery.
v) Rs 17500 were spent in transporting the machine from Indian port to the factory of
importer.
vi) Rate of exchange as announced by RBI was Rs. 64.70=one dollar.
Vii) Rate of exchange as announced by central Government by notification Rs.65=one

dollar.
vii) Rate charged by bank who recovered the amount from importer Rs.65.10=one
dollar.

18) An importer has imported a machine from U.K of Invoice of 100000 UK pounds. Other
details are as fallows.
xii) Freight from USA to Indian port was 700 pounds.
xiii) Insurance was paid to insurance in India RS. 6000
xiv) Design and development charges at 2000 UK pounds were paid to a consultancy firm
in UK.
xv) The importer also spent an amount of Rs.50000 in India for development work
connected with the
Machinery.
xvi) Rs. 1000 was spent in transporting the machine from Indian port to the factory of
importer.
xvii) Rate of exchange as announced by RBI was Rs. 78.82=UK pound.
xviii) Rate of exchange as announced by CBE and c (Board) by notification U/S 14 (3)
(a)(i) Rs 78.70=one
UK pounds.
xix) Rate charged by bank who recovered the amount from importer Rs.78.35=one dollar.
xx) Foreign exporter has an agent in India. Commission is payable to the agent in Indian
Rupees @5% of FOB price.

c) S W S @ 10
e) IGST @18%

19) Kamal sales corporation has imported a machine from America of invoice price of 50000
dollars other details are as follows:
viii) Freight from America to India port 500 dollars.
ix) Insurance 100 dollars.
x) Design and development charges paid to consultancy firm in America 1000
dollars.
xi) The importer also spent an amount of Rs.5000 in India for installation of the
machinery.
xii) Rate of exchange announced by central govt. under notification Rs. 65=one dollar.
xiii) Rate of exchange announced by RBI Rs.65.50=one dollar.
xiv) Custom duty payable @10%.
xv) If similar goods were produced in India excise duty payable as per tariff@10%.
xvi) SWS 10%.
Find custom duty payable if.
(1) Importer is manufacture using the goods himself.
(2) Imported is a trade who has imported goods for subsequent sale in India.
20) Chenkey enterprises limited a company of Bangalore imports a machine from England
following information is available:
xvii) Value of machine 8025 pound
xviii) Design Exp. Charged separately 600 pound
xix) Freight of machine 150 pound
xx) Importer sent raw material to foreign manufacturer from India Rs 41250
xxi) Transportation charges from port to factory Rs 9000
xxii) Technical fees paid to manufacturer separately after import in India 700 pound
xxiii) Packing charges and insurance premium 75pound
viii) Installation charges of machine in factory Rs.58000
Find out Assessable value of machine for determination of total custom duty payable if:
i) Exchange rate declared by reserve bank 1 pound = Rs.58.60

ii) Notification rate by cent. Govt. under sec. 14(3)by customs act 1 pound=Rs 55.70

iii) Bank of importer charged 1 pound =Rs 54.50
Calculate total customs duty if basic rate is 25% and excise duty is not levied for such
machine.
21) BSA and Company Ltd imported a machine from U.K. From the following particulars
furnished by them, arrive at the assessable value for the purpose of customs duty payable.
a) F.O.B cost of the machine 10,000 U.K. pounds
b) Freight (Air)3,000 U.K. pounds
c) Engineering and design charges paid to a firm in U.K. pounds
d) License fee relating to imported goods payable by the buyer as a conditions of sale
20% of F.O.B cost
e) Materials and components supplied by the buyer free of cost valued Rs.20,000.
Other particulars:
a) Inter Bank Exchange rate as arrived by the authorized dealer Rs. 72.50 per U.K.
pound.
b) CBEC had notified for purpose of section 14 of the Customs Act, 1944, exchange
rate of Rs. 70.25 per U.K. pound.
c) Importer paid Rs. 5,000 towards demurrage charges for delay in clearing the
machine from the Airport.
22) M/S Rehman industries pvt.ltd has imported a machine from japan at an F.O.B.cost of
1,00,000 yen
a. Freight from japan to Indian port 10,000 yen
b. insurance paid to insurer in India Rs. 5,000
c. Designing charges paid to consultancy firm in japan 15,000 yen
d. M/S Rehman industries spent Rs.50,000 in India for development work connected with the
machine.

e. Transportation cost from India port to Factory Rs.15000.
f. Central govt. has announced exchange rate of 1 yen =Rs.0.40 by notification under section
14 (3). However, the exchange rate prevailing in the market was 1 yen = Rs.0.4052.
g. M/S Rehman industries ltd. Made payment to the bank based on exchange rate of 1 yen
=RS. 0.4150.
h. The commission payable to the agent in India was 5% of the F.O.B. price in Indian rupees.
The rate of custom duty is 30%. Similar goods are subject to 15% excise duty in India. Find
the custom duty and other duties payable.
1. If the importer M/S Rehman industries ltd. Is importing goods for captive consumption
2. If the importer M/S Rehman industries ltd. Is a trader and importer goods for the
purpose of trading.
23) XYZ Industries pvt. Ltd. Has imported certain equipment from japan at an F.O.B. cost of
2, 00,000 yen (Japanese). The other expenses incurred by M/S. XYZ industries in this
connection are as follows.(Q.P.2016)
a. Freight from japan to Indian port 20,000 yen
b. Insurance paid to insurer in India Rs. 10,000
c. Designing charges paid to consultancy firm in japan 30,000yen.
d. M/S XYZ industries had incurred road transport cost from Mumbai port to their factory
in Karnataka Rs.30, 000
e. M/S. XYZ industries had expanded RS. 1, 00,000 in India for certain development
activities with inter
f. The central Board of excise and custom had notified for purpose of section 14(3) of
custom Act, 1962 exchange rate of 1 yen =Rs.0.3948. the interbank rate was 1 yen =Rs.0.40.

g. The commission payable to the agent in India was 5% of FOB cost of the equipment in
Indian Rupees. Calculate at the assessable value for purposes of custom duty under the
custom Act, 1962 providing brief notes wherever required.
24) A Manufacture imported machinery from Japan at an FOB value of 7, 00,000 yen.
Packing charges of 50,000 yen were charged extra. Exporter deposited 25,000 yen for
returnable container; it was used for transporting he machinery. Insurance charges of
50,000 yen were paid. Sea freight were 20,000, it was used for transporting the
machinery.
a. RBI rate is 1 yen = 0.245.
b. Rate notified by the CBE and C is 1 yen =0.250.
Compute duty (Q.P. 2007)
25) An importer has imported machinery for 10,000 US Dollars. The other particulars are as
under :( Q.P.2005)
a. Packing charges 200 Dollars.
b. Returnable container 1000 Dollars.
c. Air freight 300 Dollars.
d. Insurance Charges not available.
e. Commission to pay to exporter‟s agent in Indian RS. 25,000.
f. Exchange rate of dollar=Rs.65.60

c) S W S @ 10

e) IGST @18%
Compute Custom Duty payable.
26) From the following information, compute the Custom duty Payable by AB and
Co.Ltd.(Q.P.2013)
a. FOB value of machine RS.28, 00,0000
b. Air Freight RS. 1, 00,000
c. Design Charges Paid by buyers Separately RS.2, 00,000.
d. Insurance RS. 10,000.

c) S W S @ 10
e) IGST @18%
Compute custom duty payable
27) E Ltd. Import certain manufactured goods. The particulars are as under. [Q.P 2014]
a. FOB of goods – 50000 pounds
b. Freight – 2000 pounds.
c. Insurance – 5000 pounds.
d. Design and development (paid separately) 3800 ponds.
e. Buying commission paid (paid separately) 500 pounds.

f. Exchange rate
a. RBI Notified – 1 pounds =Rs 89
b. Board Notified – 1 pounds = Rs 90. Find out the customs value and custom duty, applying
BCD @ 10% and all duty.
28) An importer has imported a machine from Japan at FOB cost of Rs 9, 00,000 yens. Other
details as follows:[Q.P 2009]
a. Freight from Japan to India port was 18,000 yens.
b. Transit Insurance charges were 1% of FOB value.
c. Design and Development charges of 90,000 yens were paid to a consultancy fire in japan
for design of machinery.
d. Packing charges of 22,000 yens were charged extra.
e. Rs. 20,000 were spent in design cost on machine in India`
f. An amount of 98,500 yen was payable to Japanese manufacture towards charges for
installation and commissioning the machine in India.
g. Rate of exchange as announced by RBI was 1 yen = Rs 0.409.
h. Rate of exchange as announced by CBE and C by notification under section 14 (3) (a) (I) 1
yen = Rs 0.402.
i. Customs duty was 20% and SWS on duty is 8%. Excise duty on similar machinery in India
would be 16%.
Find the custom duty payable. How much CENVAT can be available by importer, if he is
manufacturer?
29) Following particulars are available in respect of consignment of goods imported.

a. cost at the factory of the exporter: Dollar 20,000
b. carriage/Freight/insurance up to the port of shipment in the exporter‟s country : US Dollar

400.
c. Charges for loading on the ship at the shipping port: 400 Dollar.
d. Charges for loading on the ship at the shipping port: 100 Dollar.
e. Freight charges of the ship for transport up to the Indian port: 1,200.
f. Bill of entry submitted by the importer as on 18-07-2016
Compute the assessable value for the purpose of levy/payment of customs duty.
Rate of Exchange as by As on 18-07-2016 As on 07-08-2016
CBEC 1 US Dollar = Rs 65 1US Dollar = Rs.65.80
RBI 1 US Dollar = Rs 65.10 1US Dollar = Rs.65.10
30) An importer imported some goods for subsequent sale in India. The customs office
assessed value of goods for Rs. 10, 19,090.
The above value includes the following:
Air Freight 25% on Free On Board (FOB)
Insurance @ 1.125%
Unloading charges @ 1% on cost, insurance and Freight (CIF)
Importer approached you to find correct assessable value for this import.
31) Compute (keeping in mind the provisions of the customs Act, 1962 and customs tariff
Act, 1975) the total custom duty payable by an importer on goods „X‟ imported by sea

into India. From the Following details. You may, wherever appropriate, make suitable
assumption. FOB value 1,000 (Dollars), weight of goods 1,000 kg. Freight charges $ 100
Dollars, Insurance charges $ 20 Dollars, handling charges Rs. 200, exchange rate $ 4
(Dollars) = Rs 100
Date of presentation of bill of entry – 04-05-2019
Date of entry Inwards of vessel – 01-05-2019.
Rates of Custom Duty on 01-05-2019.
Basic 100% A.V
IGST – 18%
Additional (CVD) 15%
Rate of Custom Duty on 04-05-2019.
Basic 110 % A. V
IGST 18%
Additional (CVD) 15%
Note: No other Particulars are relevant

Problems on Baggage
32) Mr Srinivas, an Indian resident, had gone to UK for business purpose. He brought
following goods while returning to India.
a. His personal effect like cloth etc. value at Rs.73000
b. Two liter of liquor of Rs.4200
c. New Camera of Rs. 48,500
d. One Laptop of Rs. 58,000
What is the customer duty payable?
33) Mr and Mrs.Banu visited Germany as tourist and bought a personal computer for Rs.
62,000 and a laptop computer of Rs. 78,000 while returning to India. Besides their
personal effect value at Rs. 1, 33,000. What is the customer duty payable, if duty on
baggage is 35% plus education cesses as applicable?
34) After visiting USA, Mrs. and Mr.Chandu brought to India a laptop computer valued at Rs.
80,000 personal effects valuable at Rs. 90,000 and a personal computer for Rs.52, 000.
What is the custom duty payable?
35) Mrs. and Mrs.Ananda visited Germany and brought following goods while returning to
India after 6 days stay abroad on 08th April 2016.
a. Their personal effects like clothes, etc., valued at Rs.35, 000.
b. A personal computer bought for Rs. 36,000.
c. A laptop computer bought for Rs.95, 000.
d. Two liters of liquor bought for Rs.1,600.
e. A new camera bought for Rs. 37,400.

What is the amount of customs duty payable?
36) Mr. Anil an Indian resident, aged 45 years, returned to India after visiting USA on
10/05/2016. He had gone to USA on 01/05/2016. On his way back to India he bought
following goods with him.
a.His personal effects like clothes etc. valued at Rs. 90,000.
b. 2 liters of Wine worth Rs. 1,000.
c. A video camera worth Rs. 23,000.
d. A watch worth Rs. 23,000.
Find the customer duty payable by Mr. Anil.
37) Mr. Amaranth, an IT professional and a person of Indian origin, is residing in Denmark
for the last 14 months. He wishes to bring a used microwave oven (costing approximately
Rs. 4,200 and weighting 15 kg) with him during his visit to India. He purchased the oven
in Denmark 6 months back and he been using that oven for his personal use in his
kitchen. He is not aware of Indian Customs rules. Could you please provide him some
advice in this regard?
38) Mr. Reddy is a Chartered Accountant, Indian resident worked in USA for 4 months,
brought with him the following items on his return to India.
Personal Effects like clothes etc. of Rs.5, 50,000.
Jewellery of Rs. 25,000.
A Camera for Rs. 50,000.
Household articles of Rs. 30,000.
Professional equipment like electronic diary, calculator and other items worth Rs. 40,000.
A laptop worth for Rs. 3, 00,000.

Compute the duty payable by Mr. Reddy.
39) Mr. Amar is a Cost Accountant (aged 40 years) an Indian resident goes to Nepal on Tour.
He purchased one compute for Rs. 50,000. One computer for Rs. 1, 50,000 and hair dryer
of Rs.2, 000 in a duty free shop in Nepal and brings the same to India. What is the duty
payable?
a. If he returns on 3rd day by air
b. If he returns on 3rd day by land route
c. If he return on 15th day by air
d. If he returns on 15th day by land route.
40) An Indian resident goes to Nepal on Tour. He purchase Colour TV of Rs. 28,000 a laptop
computer of Rs. 91,000 and Hair Dryer of Rs. 5,400 in a duty free shop in Nepal and
brings the same to India. What is the duty payable?
a. If he returns on 3rd day by air.
b. If he returns on 3rd day by land route.
c. If he returns on 11th day by air.
d. If he returns on 11th day by land route.
41) Mr.Arjun a person holding Indian passport, brings One Kg. Gold out of which
Rs.3,60,000 are in form of gold biscuits (i.e., tola bars 800 gms) and balance of Rs.
40,000 in the form of gold coins ( other than tola bars 200 gms) which he was using
abroad. What is the duty payable?
a. If the person is returning after 3 months stay abroad
b. If the person is returning after 9 months stay abroad and duty paid in convertible foreign
currency.
c. If the person is returning after 9 months stay abroad and the Gold belongs to his friend,
who has given it only for carrying to Indian and duty paid in convertible foreign currency.

d. If is returning after 18 months stay abroad and duty paid convertible foreign currency.
42) A Person holding Indian passport, brings 1kg gold. Out of which Rs. 3, 60,000 are in the
form of biscuits and balance of Rs. 40,000 in the form of gold jewellery which he was
using abroad. What is the duty payable? [Q.P. 2016]
a. A person returning after 3 months stay.
b. The person is returning after 9 months stay abroad and the gold belongs to him.
c. The person is returning after 8 months stays abroad and the gold belongs to his friend. Who
has given it only for carrying to India?
d. He is returning after 18 months stay abroad.
---------The End--------


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Customs Duty & GST - 1 IV Sem. M.com.

GOVERNMENT FIRST GRADE COLLEGE

CUSTOMS DUTY & GST-1

4th semester M.Com

Rakesha H K, Dept. of Commerce, Government First Grade College, Gubbi Page 1

Rakesha H K, Dept. of Commerce, Government First Grade College, Gubbi Page 2

Definition of Indirect Tax:

Basic difference: direct and indirect taxes:

Indirect tax in India:

Rakesha H K, Dept. of Commerce, Government First Grade College, Gubbi Page 3

Features of indirect taxes:

Tax burden on the consumer:

When demand is inelastic the burden is mainly on the consumers.

Rakesha H K, Dept. of Commerce, Government First Grade College, Gubbi Page 4

Tax burden on producer

When demand is elastic, the tax burden is mainly on the producers.

Tax burden evenly split

Rakesha H K, Dept. of Commerce, Government First Grade College, Gubbi Page 5

Examples -the incidence of a tax on cigarettes

Various indirect taxes in India:

1. Goods and Services Tax:

On the state level:

 State excise duty

 Additional excise duty

 Special additional custom duties

Rakesha H K, Dept. of Commerce, Government First Grade College, Gubbi Page 6

At the central level, it covers:

 Levies on products outside GST purview:

Taxes on products that use alcohol and petroleum products.

Rakesha H K, Dept. of Commerce, Government First Grade College, Gubbi Page 7

Value Added Tax:

Custom Duty and Octroi Tax:

Newly Implemented Indirect Tax (GST)

Features of Indirect Taxes

Rakesha H K, Dept. of Commerce, Government First Grade College, Gubbi Page 8

Advantages of indirect tax:

The following are the merits of indirect taxes:

Rakesha H K, Dept. of Commerce, Government First Grade College, Gubbi Page 9

 Influence on pattern of production:

 May not affect motivation to work and save:

 Flexibility and buoyancy:

Disadvantages of indirect taxes:

Rakesha H K, Dept. of Commerce, Government First Grade College, Gubbi Page 10

 High cost of collection:

 Increase income inequalities:

 Lack of social consciousness:

 Possibility of tax evasion:

Direct and indirect tax revenues of central and state government:

Rakesha H K, Dept. of Commerce, Government First Grade College, Gubbi Page 12

Nature and types of customs duty

Rakesha H K, Dept. of Commerce, Government First Grade College, Gubbi Page 13

History of Indian customs:

 Sea customs Act was passed by government in 1878

 Vessels, aircrafts and vehicles

Rakesha H K, Dept. of Commerce, Government First Grade College, Gubbi Page 14

Objectives of custom duties

 Restricting imports for conserving foreign exchange

Mode of levy of customs duty

Basically there are three modes of imposing customs duty:

Decline in customs duty