Customs laws in India provide for a refund of duty on imports
November, 28th 2008
We are a firm of consultants advising numerous Indian and international companies on infrastructure projects. We are currently paying service tax under the taxable service category of management or business consultants service. Recently, we have imported computers for use in provision of such services, on payment of applicable customs duty. Kindly advise on the availability of cenvat credit in respect of such duty.
Customs duty applicable on import of goods into India consists of four components, basic customs duty (BCD), additional customs duty (ACD) in lieu of excise duty levied on similar products manufactured in India, education cess of customs, and special additional duty (SAD) in lieu of value added tax (VAT) levied on similar products sold in India. Cenvat credit of BCD and education cess of customs is not available under any circumstances. In case of manufacturers of excisable products, cenvat credit of ACD and SAD paid on imports can be availed and adjusted against the output excise duty liability. However, in the case of service providers, credit of SAD paid at the time of import of goods cannot be availed. In your case, cenvat credit of only the ACD (inclusive of education cess) paid on imports would be available, subject to fulfillment of the conditions prescribed under the cenvat credit rules. Such cenvat credit could be utilised to pay the output service tax liability.
We are a company engaged in the manufacture of plastic products. Seven months ago, we had imported certain equipment from China in order to manufacture a specific product, and had paid customs duty. However, the equipment is not required now and we are exploring the possibility of re-exporting it. We have been informed that it is possible to claim a refund of the customs duty paid on imported goods, in case they are re-exported within a specified period. Kindly explain.
The customs laws in India provide for a refund of customs duty paid on imported goods under the duty drawback scheme. Under this scheme, a specified percentage of the customs duty paid can be claimed as drawback at the time of re-export of the goods. The percentage of drawback that can be claimed ranges between 95% and 60%, and is determined on the basis of whether the goods have been used in India and the duration of use. In your case, since the equipment has been used in India for about seven months, you would be eligible...