Here are Budget expectation for customs by Deloitte

By R. Muralidharan

Customs Special Valuation Branch (SVB) process – Levy of extra duty deposit (EDD)

Background

In line with Customs Circular No. 5/2016-Customs dated 09/02/2016, the practice of levying EDD will be discontinued. Further, in case the importer does not submit the required documents within 60 days of the requisition, SVB can levy EDD at a rate of 5 percent only up to three months.

Issue

In many cases, EDD continues to be levied after three months even if the importer submits information.

SVB applications are not disposed off on time that results in the levy of EDD until these applications are disposed off. Additional time is spent due to ‘provisional assessments under bond’.

Recommendation

A suitable instruction/amendment needs to be made to provide that once an importer submits the requisite information, the discontinuation of EDD should be strictly followed and an alternate remedy should be provided where the EDD continues to be levied.

AEO – Allowing the pasting of MRP stickers on applicants’ premises

Background

In line with AEO Circular No. 33/2016-Customs dated 22/07/2017, the AEO-T2 and AEO-T3 certificate holders will be allowed to paste MRP stickers on importers’ premises.

Issue

Although the said benefit is specified for the AEO-T2 and T3 status holders, the Custom authorities do not allow pasting MRP stickers on importers’ premises. This is only allowed in the Custom Bonded Warehouse.

Recommendation

Suitable instructions should be issued to allow the AEO-T2 and AEO-T3 certificate holders, to paste MRP stickers on importers’ premises.

Customs Advance Ruling

Background

Chapter VB of the Customs Act, 1962, was amended in 2018 to provide the formation of new ‘Customs Authority of Advance Rulings’ to ensure faster decision making and reduce the overall time period within which the applicant can obtain Advance Ruling.

Issue

As on date, the aforesaid ‘Customs Authority of Advance Rulings’ has not been framed and the applications are still being filed with the existing Authority of Advance Rulings constituted under Section 245-O of the Income Tax Act, 1961.

Recommendation

The existing Authority of Advance Rulings constituted under Section 245-O of the Income Tax Act, 1961 is common for both Customs and Income Tax applications. As a result, the average time period for obtaining Advance Ruling is 12−18 months. As a trade facilitation measure under which the applicant can obtain Advance Ruling within a shorter timeframe, the separate ‘Customs Authority of Advance Rulings’ needs to be constituted and made operational without any further delay.

Customs-bonded warehouse

Background

Circular no. 38/2018 dated 18 October 2018 revamped the whole process related to manufacturing under a bonded warehouse. The government has also issued Circular 34/2019 dated 01 October 2019 and Notification 69/2019 dated 01 October 2019 to lay down the detailed procedure and documentation to be followed for units operating in the bonded warehouse. The Central Board of Indirect Taxes and Customs (CBIC), in collaboration with Invest India, has issued FAQs to bring clarity on certain practical aspects.

Issue

Despite the issuing of circulars and FAQs, the industry may need clarification on more doubts/ambiguities to gain confidence in the scheme (before moving operations into a bonded warehouse). A few issues include the following:

Would depreciation benefit be given on the clearance of capital goods from the bonded warehouse?

Who would certify input-output norms for the goods manufactured in the bonded premises for domestic supplies? Further, there could be situations where the input-output norms are not fixed as the engineering part number may change periodically (such as every month). Would such changes require submitting information with the authorities?

As no specific commitments or obligations exist for the importer to operate under this scheme for a defined timeframe, is it correct to assume that there are no penal consequences upon exit from the scheme?

What are procedural and documentation requirements for the re-entry of manufactured goods returned by customers for repair to premises?

Recommendation

To bring out clarity on various issues the industry faces at large, the government should issue suitable/necessary timely clarifications to make the scheme practically feasible.

Pre-notice consultation letter (PNCL)

Background

As a measure to reduce litigation instances and address matters on time, the concept of ‘pre-notice consultation’ has been introduced in Finance Act 2018. Under the said measure, a simple letter specifying the intention and grounds to issue a show cause notice (SCN), is to be shared with the assesse in cases not involving fraud, misrepresentation, collusion, etc.

Issue

Despite the strict guidelines and timelines mentioned for the said process, the reality is somewhat different as ground-level officers do not adhere to guidelines. The following are some of such guidelines and related issues that the industry faces:

The consultation process should be completed within 60 days of issuing the letter communicating the grounds of the proposed SCN. However, in reality, matters are not being concluded even after more than a year.

No opportunity of being heard is given in some cases.

PNCL shall be issued only one time for a particular issue. However, authorities are resorting to PNCL each time.

Recommendation

The government should strictly implement this process to ensure minimum duplication of efforts and unbiased proceedings.

Use of duty credit scrip for social welfare surcharge (SWS)

Background

In line with current provisions, duty credit scrips (i.e., MEIS and SEIS) can be used for the payment of basic customs duty (BCD).

Issue

In legal terms, SWS should not be levied per se as SWS is levied as a percentage of BCD. This is because the BCD itself has become zero on payment by duty credit scrip. However, due to challenges in the Customs EDI portal, SWS is reflected on the Bill of Entry and required to be paid even in such cases.

Recommendation

The government should issue appropriate clarification in this regard as this is an industry issue.

(The author is Senior Director, Deloitte India )