01 CUSTOMS LAW
Proposed legislative changes in the Customs Act
Proof of origin
Section 28DA of the Customs Act is amended to include various types of proof of origin as may be provided in accordance with trade agreements, such as certificate of origin, declaration and self-certification.
Comments: Section 28DA of the Customs Act requires an importer making claim for preferential duty to submit certificate of origin and furnish information as may be required by the customs. New trade agreements entered by India such as one with Mauritius and with Member States of the European Free Trade Association, i.e., Iceland, Liechtenstein, Norway, and Switzerland that provides for 'Origin Declaration'1 instead of a 'Certificate of Origin'. Hence, provisions have been aligned with such trade agreements.
[Clause 100 of the Finance Bill]
Manufacture in bonded warehouse
A proviso has been inserted in Section 65(1) of the Customs Act, to empower the Central Government to specify certain manufacturing processes and other operations in relation to a class of goods that would not be permitted in a warehouse.
Comments: CBIC vide Instruction No. 13/2022- Customs dated 9 July 2022 have debarred solar power generation under Section 65 read with the Manufacture and Other Operations in Warehouse Regulations, 2019. In ACME Heergarh Powertech Pvt. Ltd. [(2024) 19 Centax 196 (Del.)], Delhi High Court quashed aforesaid instruction. The proposed amendment will overcome the difficulty posed by the said judgment.
[Clause 101 of the Finance Bill]
Rule-making powers of CBIC
Section 143AA and Section 157(2)(m) of the Customs Act is amended to include 'any other persons'.
Comments: Exiting provisions allowed the Government to frame rules only for the importer or exporter. The amended provisions will allow framing of specific rules for supplier or any other person to facilitate trade.
[Clause 102 & 103 of the Finance Bill]
Retrospective exemption on Compensation Cess on imports by SEZ units / developers:
Notification 27/2024-Customs dated 12 July 2024 has been made effective retrospectively from 1 July 2017.
Comments: The amendment does not specify as to whether Compensation Cess paid on goods imported by SEZ units / developers for authorised operations till 14 July 2024 would be refunded or not.
[Clause 104 of the Finance Bill]
New shipper review for Countervailing duty:
The Customs Tariff (Identification, Assessment and Collection of Countervailing Duty on Subsidized Articles and for Determination of Injury) Rules, 1995 have been amended to insert a provision for 'New Shipper Review'.
Comments: This brings the provisions in line with India's WTO obligations under the Agreement on Subsidies and Countervailing Measures, which under Article 19.3 prescribes that WTO members must provide 'new shippers' the right to an expedited review so that individual margins can be established. Similar mechanism exists for anti-dumping rules to new exporters or producers who were not originally investigated.
[Notification No. 51/2024-Customs (NT) dated 23 July 2024]
Proposed legislative changes in the Customs Tariff Act
Protective duty leviable under Section 6 of the Customs Tariff Act, 1975 has been abolished.
[Clause 106 of the Finance Bill]
BCD rate changes
Budget proposals for customs duties are intended to support domestic manufacturing, deepen local value addition, promote export competitiveness, and simplify taxation, while keeping the interest of the general public and consumers surmount.
Reduction of rates and continuation of concessional rates/exemptions
Rates have been reduced or concessional rates or exemptions have been extended/retained to give impetus to specific sectors such as agricultural goods; aquafarming and marine sector; critical minerals and rate earth elements for nuclear energy, renewable energy, space, defence, telecommunications, and high-tech electronics; cancer causing drugs; electronic goods and equipment manufacturing; precious and other metals; solar and petroleum exploration. This will provide major fillip to targeted sectors and secure availability of strategic raw materials.
Export Duty rationalisation
Export duties on raw hides, skins and leathers have been rationalised.
Changes for tax revenue augmentation/policy objective
- Continuing with the review of existing concessions/ exemptions, several of them have been phased out. For instance, Government has withdrawn exemption on import of raw materials required for identified businesses such as radio operations; operated electricity generators; manufacture of electrical steel, smart card, solar thermal collectors or heaters, blood pressure monitors and blood glucose monitoring system; battery for electrically operated vehicles; solar tempered glass or solar tempered glass for manufacture of solar cells/panels/modules.
- BCD on certain chemical and petrochemical products have been increased to disincentivise imports. Rates for laboratory chemicals have been massively increased.
Sector specific rate movements
Sector specific duty impact and rate movements can be accessed from the below mentioned links
- Customs Duty Movement
- Exemption Extension
- Exemption Withdrawn
- Modification to First Schedule of Customs Tariff (with effect from 1 October 2024)
- Other Exemption Notification
[Clause 107 of the Finance Bill]
Trade Facilitation Measures
The Finance Minister in her budget speech has committed to undertake a comprehensive review of the rate structure, over the next six months to rationalise to ensure ease of trade, removal of duty inversion and reduction of disputes.
To encourage MRO industry, time period to re-export aircraft and vessels imported for maintenance, repair and overhauling has been extended from 6 (six) months to 1 (one) year, further extendable to 1 (one) more year.
[Notification No. 38/2024 dated 23 July 2024]
The time period for duty-free re-import of goods (other than those under export promotion schemes) which were exported out of India have been extended from 3 (three) years to 5 (five) years.
[Notification No. 39/2024 dated 23 July 2024]
The annual cap on the exemption allowed to commercial samples has been enhanced from INR 100,000/- to INR 300,000/-.
[Notification No. 29/2024 dated 23 July 2024]
Scope of accessories and embellishment used for manufacture of textile, leather products or synthetic footwear for export is enlarged in List 39 and 40 of Notification No. 50/2017
[Notification No. 30/2024 dated 23 July 2024]
Scope of goods used for petroleum exploration and extraction operations has been enlarged under List 33 of Notification No. 50/2017
[Notification No. 30/2024 dated 23 July 2024]
Footnote
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