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Indirect Taxation proposals made in Union Budget 2018

February 3, 2018 22272 Views

A. Retrospective Exemptions have been proposed to the following services:

1. Exemption to services provided by Naval Group Insurance Fuds

It is proposed to exempt services provided by Naval Group Insurance Funds by way of life insurance to personnel coast guard under the group insurance schemes of central government. The exemption has been granted with retrospective effective

commencing from 10th September 2004 to 30th June 2017 (both days inclusive).

2. Exemption to services provided by Goods and Services Tax Network (GSTN) to central Government or state government or union territory.

It is proposed to exempt services provided by GSTN to central government or state

government or union territory during the period 28th March 2013 to 30th June 2017. Thus, exemption has been granted with retrospective effective commencing from 28th June 2013 to 30th June 2017 (both days inclusive).

3. Exemption to service provided by government by way of license or lease to explore or mine petroleum or natural gas or both to the extent of share of profit petroleum.

It is proposed to exempt services provided by government by way of license or lease to explore or mine petroleum or natural gas or both where consideration is paid in the

form of Governments share of profit petroleum during the period 1st April 2016 to 30th June 2017. Thus, exemption has been granted with retrospective effective commencing from 1st April 2016 to 30th June 2017 (both days inclusive).

4. Provisions for refund in respect of above retrospective exemptions.

  (i) In case, service tax has been collected and paid to the government, application for refund shall be filed within 6 months from the date on which Finance Bill 2018 receive the assent of the President. Refund claim shall be filed as per provisions of Finance Act, 1994.

  (ii) In case service tax has not been collect and paid the government during the relevant period, no tax would be payable as retrospective exemption has been granted.

B. Changes in Central Excise.

The Levy of Additional Duty of Excise has been replaced by Road and Infrastructure cess, without any change in the total quantum of duty on motor spirit and Diesel.




A) Changes in Rate of Duty:

Sr. No. Chapter, Heading, Sub-Heading Commodity Rate of Duty
Rate upto 01.02.2018 Rate from 02.02.2018
1 0801 31 00 Cashew nuts in shell 5% 2.5%
2 3303 Perfumes and toilet waters 10.00% 20.00%
  3919 90 90, 3920 99 99,3926 90 91,4016 99 90, 7318 15 00, 7326 90 99, 8504 (except 85044021), 8506 (except 85069000),      
3 85071000 to 85075000, 85078000, 85181000, 85182900, 85183000, 85184000, 854419, 854442, 854449 Specified parts and accessories of cellular mobile phones 7.5%/10% 15.00%
4 6401, 6402, 6403, 6404, 6405 Footwear 10.00% 20.00%
5 6406 Parts of footwear 10.00% 15.00%
6 7117 Imitation Jewellery 15.00% 20.00%
7 85076000 Lithium Ion battery 10.00% 15.00%
8 8517 12 Cellular mobile phones 15.00% 20.00%
9 8517 62 90 Smart watches/ wearable devices 10.00% 20.00%
10 8529 LCD/LED/OLED panels and other parts of LCD/LED/OLED TVs Nil 10.00%
11 9020, 9021 & 9022 Breathing appliance, Orthopaedic appliance, apparatus based on the use of X-Rays 2.50% 7.50%
12 9404 Mattresses supports; articles of bedding and similar furnishing 10.00% 20.00%
13 9503 (except 95030090) Tricycles, scooters, pedal cars and similar wheeled toys; dolls' carriages; dolls; other toys; puzzles of all kinds 10.00% 20.00%
14 9508 Roundabouts, swings, shooting galleries and other fairground amusements; travelling circuses, traveling menageries and travelling theatres 10.00% 20.00%

B) Changes in duty structure effective from February 2, 2018:

  a) Education Cess and Secondary Higher Education Cess has been exempted on import of goods.

  b) New Social Welfare surcharge is levied on the aggregate of custom duties. However, Notification No. 13/2018-Cus dated 02-02-2018 provides for exemption from levy of Social Welfare surcharge on Integrated Tax and Goods and Service Tax Compensation Cess levied under section 3 (7) and 3 (9) of Customs Tariff Act.

  c) Computation of Duties on Import of Goods (except Petrol and High-Speed Diesel Oil)

  Sr. No. Particulars Applicable till 01- 02-2018 Applicable from 02- 02-2018
      Rate Amount Rate Amount
  A Assessable Value   1,00,000   1,00,000
  B Basic Customs Duty (on A) 10% 10,000 10% 10,000
  C Sub-Total (A+B)   1,10,000   1,10,000
  D Customs Educ. Cess (On B) 2% 200   N.A.
  E Customs SHE Cess (On B) 1% 100   N.A.
  F Sub-Total (C+D+E)   1,10,300   1,10,000
  G Additional Duty (IGST) (on F) 18% 19,854 18% 19,800
  H Compensation Cess (on F) 5% 5,515 5% 5,500
  I Sub-Total (H+I)   1,35,669   1,35,300
  J Social Welfare Surcharge (on B) N.A. N.A. 10% 1,000
  K Sub-Total (I+J)   1,35,669   1,36,300

  d) Levy of Social Welfare Surcharge on transit imports:

The customs duty is leviable under section 12. As per this section the duty is leviable on import of goods. The term import has been defined to mean bringing into India from a place outside India. Hence, the taxable event for levy of duty is import of goods. This ratio has been upheld by Hon'ble Supreme Court in the case of GARDEN SILK MILLS LTD. Versus UNION OF INDIA 1999 (113) E.L.T. 358 (S.C.).

Therefore, the duty of customs prevailing at the time of import will be leviable for clearance of goods for home consumption. The Social Welfare Surcharge was not leviable on goods which have already been imported but the bill of entry has not been filed for home consumption. Hence, this surcharge will not be applicable for goods imported till 1/1/2018. It will be applicable for goods for which import has taken place on or after 2/2/2018.

C) Changes made from the date of Assent of Finance Bill, 2018 in Customs Act:

1. Amendment in Customs Act:

 (a) The territorial jurisdiction of the Customs Act will now also apply to any offense or contravention committed by any person outside India.

 (b) The definition of assessment as defined under section 2(2) has been proposed to be amended to mean determination of any factor will affects duty, tax or any other sum payable under the Act. Hence, the determination of factors like place or origin, manufacturer which determine the value of goods will be covered under the preview of assessment by department.

 (c) The limits of 'Indian Customs Waters' has been extended to include Exclusive Economic

Zone. It increases the limit of customs water from 24 miles to 200 miles from the baseline.

 (d) The section 11 has been proposed to be amended to provide that any prohibition, restriction relating to import/export of any article under any other law will be applicable to Customs only if such provision has been notified under Customs. Thus, any prohibition in other acts will not be lead to violation of customs unless the said prohibition is notified in the customs law.

 (e) The section 17 provides for self-assessment of duty. As per this section officer could verify the self- assessment. It has been proposed to amend this section, to include all bill of entry submitted for import/export of goods. Hence, the bill of entry submitted for warehouse of goods, provisional assessment in which the duty has not been determined can also be verified by the officer.

  (f) The Government had introduced the process of mandatory pre-consultation prior to issuance of showcause notice in Customs.

 (g) Time limit for adjudication:

   i. The time limit to adjudicate the showcause notice has been proposed to made stringent. The current time limit is six months for showcause notice issued in normal period and one year for notice issued by invocation of extended period of limitation. It has been proposed that the Senior officer can grant extension of another six months/one year under certain circumstances. However, in case the notice is not adjudicated within such time period then it will be considered that the case has concluded as if no notice was issued.

   ii. The time period will be computed from the date the reason ceases to exist in following cases:

  •  Appeal of similar matter is pending in Tribunal/High Court/Supreme Court.

  •  Any of above mentioned forum has granted interim stay on case.

  •  The Board has issued specific directions or order to keep matter pending.

  •  The case has been admitted in Settlement Commission.

This provision will apply to notices issued on or after the date the Finance Bill has received assent of President.

 (h) Advance Ruling:

The provisions of Advance Ruling have been proposed to be revamped as follows:

    i. The term advance ruling has been proposed to be defined to mean a decision on any question referred by the applicant.

   ii. The scope of persons who can apply for advance ruling has been expanded to include any person holding IEC code, exporter of goods or having justifiable cause to the satisfaction of authority.

   iii. The Principal Commissioner of Customs shall be appointed as Advance Ruling Authority.

   iv. An Appellant Authority shall be established to appeal against the Advance Ruling.

  (i) There was penalty on delay in filing of import manifest but not for export manifest. These provisions have been aligned and penalty for delay in filing of export manifest has been proposed.

  (j) Redemption fine:

    i. The option to pay redemption fine shall be valid for a period of one hundred and twenty days from the date of option given under the provisions. Thereafter, it shall become void.

    ii. This time limit is not applicable in case appeal is pending against the order.

   iii. The time limit shall be applicable for order passed before the date of assent but no appeal is pending against such order.

 (k) Manner of communication of any order, summon and notice: - The provisions of communication has been aligned with GST Act. Hence, the following manner of communication will be valid in law:

    i. By giving the communication to broker, authorised representative or any adult family member. Hence, all persons dealing with customs department should be informed that such communication should be given to taxation team as soon as they receive it.

   ii. By sending it on email address available in any official correspondence. Hence, it is imperative that the email address which is active and checked on regular basis is only given to Customs authority.

  iii. By publishing in newspaper or affixing it on some conspicuous place at the last known place of business, residence etc.

2. Introduction of new provisions in Customs Act:

 (a) The Government will prescribe time limit for submission of documents for finalisation of provisional assessment and for finalisation of assessment.

 (b) The section 25A and section 25B has been inserted to provide exemption for goods re-imported/re-exported for repair, further processing or manufacture as per the manner prescribed by the Government.

 (c) It has been proposed to create a Customs Automatic Systems for filing of documents of import/export.

 (d) It has been proposed that an Electronic Cash Ledger shall be created to enable the importers to make advance payment of customs duties.

 (e) The provisions for audit under Customs Act has been proposed.

D) Proposed Amendment in Valuation Provisions:

The Customs Tariff Act has been proposed to be amended to provide for value of warehoused goods when they are sold to any person before clearance for home consumption or export under the Act for purpose of computation of IGST and compensation cess. The value shall be as follows:

  (i) Whole of the value of goods are sold: The value of goods computed for levy of IGST under normal circumstances or transaction value of goods i.e. amount paid/payable for sale of goods whichever is higher.

 (ii) In case the goods are sold in proportion then the proportionate of the value as determined above.

(iii) In case the goods are sold more than once, the transaction value of last such transaction shall be considered.

It should be noted that this provision has been provided to compute IGST and compensation cess only. The basic customs duty will be computed as per the provisions prescribed in section 14 of Customs Act i.e. on the value paid/payable to the foreign supplier.

E) Export Duty:

The Export duty has been provided in Second Schedule of the Tariff Act. The schedule contains list of goods on which duty is leviable on export of same. It has been proposed that the rate of duty for all goods which are not covered under Second Schedule will be NIL. Hence, it will be necessary to declare export duty as NIL on shipping bill to export the goods which are not covered in schedule.

F) Refund of IGST:

It has been proposed that the notification 65/2017-Cus., dated 8-7-2017 which granted exemption to specified goods classified under 88 or any other chapter will be considered to have come in force on 1/7/2018. The refund of IGST will be granted for all applications made within a period of six months from the date of assent of Finance Bill.



S.S. Gupta

Chartered Accountant

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