JULY 04, 2009

Simplify customs duty structure

By M Ram Kumar

ALL and sundry are keeping their fingers crossed as to how the Budget is going to be in the recession hit era of uncertainty. People in the know of taxation laws are more anxious and various suggestions are forthcoming from experts in the respective field. In this Article an attempt has been made to highlight the urgent need for simplifying Customs duty structure, which is an irritant for any importer or exporter.

Indian Customs Act and Tariff Act and other allied Acts and Rules are most complicated in the World. One has to travel through various duty structures before finalizing the duty liability on imports. Apart from the duty structure, an importer has to under go lot procedural hurdles for complying with numerous conditions of plethora of notifications to get a particular type of duty concession. Now let us see how the duty structure can be simplified.

It has been proclaimed on various occasions that incidence of Customs duty will be brought down to Asian level of 8%. But still now that has not happened and the present total CUSTOMS DUTY PAYABLE WOKS OUT TO 34.13% As on today there is no possibility of calculating straight way of customs duty. The entire gamut of the so called basic customs duty is not at all basic alone. Final calculation will include CVD, Education Cess, Secondary and Higher Education Cess- there is sub total of Cess on customs duty –finally add on SPL CVD. To put it in a simple manner for a Value of Rs.10,000/- the total duty payable will work out to Rs.3413/- where in Basic Customs duty is 10% and CVD 16%. Apart from this various transactions cost will make imports costlier than said.

The different duties which are in built are Basic Customs duty, Additional Customs Duty (UNDER Sec 3(1 ) calculation of this requires Phd in Maths) ; Special Additional duty, Safe Guard duty, Antidumping duty etc. Is it worth to have so many built in constituents before one has to clear the goods from Customs? If one analysis the impact it may come out that such a complicated duty structure is simply unwanted. It is better to scale down the duty incidence in toto. Reducing Basic Customs duty rate alone will not have impact. It is better to abolish all and sundry duties and rationalize to a single duty of 10% only. Simultaneously to protect domestic industry reduce CE and Service Tax to a rate below ten percent. All exemptions can be with drawn. This will free both Customs department and the trade from wasting time on calculations, valuations, etc. Recession is a time to retrospect.

(The above views are personal)