15 February 2018

Indian Budget 2018 – Changes proposed in Customs law

In the Budget 2018 present before the Indian Parliament today (1-2-2018), the Finance Minister has proposed many changes both in the provisions of Customs Act, 1962 and Customs Tariff Act, 1985. According to the Finance Bill, 2018, while many amendments in the Customs Act will be effective only when the Bill receives the assent of the President of India, provisions relating to introduction of Surcharge will be effective from 2-2-2018. Some of the important changes are,


Surcharge of 10% on imports

Finance Bill, 2018 has proposed a Social Welfare Surcharge as duty of Customs on goods specified in the First Schedule to Customs Tariff Act. This new levy which replaces Education Cess and Secondary and Higher Education Cess, will be levied on imports @ 10% on aggregate of Customs duties.

While certain goods are exempted, Cess at a reduced rate would be levied on petrol, HSD and certain silver and gold. Further, while clause 108 proposing the Surcharge has come into effect immediately, exemption, till the Bill receives the Presidential assent, has been provided from Education Cesses.


IGST and Compensation Cess on warehoused goods sold before clearance

Customs Tariff Act is being proposed to be amended by the Finance Bill 2018 to provide for method of computation of Integrated Tax and GST Compensation Cess where goods are warehoused before clearance.

The provisions would be applicable where the warehoused goods are sold before clearance for home consumption or export. According to proposed sub-sections 3(8A) and (9A), the value would be the transaction value or the value determined under sub-sections (8) and (9), respectively, whichever is higher.


Customs exemption to inward and outward processing of goods

Two sections in the Customs Act, 1962 to empower the government to exempt inward and outward processing of goods, have been proposed to be inserted. While new Section 25A seeks to exempt goods imported for the purposes of repair, further processing or manufacture, Section 25B will provide exemption to goods re-imported after being exported for repair, further processing or manufacture.

Re-exports or re-imports would have to be done within a period of one year from order of clearance of imports and exports, respectively.


Scope of Customs Act to be expanded

Scope of Customs Act, 1962 is sought to be expanded to make it applicable to a person who commits any offence or makes any contravention thereunder outside India. Section 1 of the Customs Act is proposed to be amended in this regard by the Finance Bill 2018.
According to Notes on Clauses of the Finance Bill, Section 17 is proposed to be amended to broaden the scope of verification by the proper officer. Scope of re-assessment is also proposed to be broadened beyond valuation, classification and exemption or concession of duty.


Customs redemption fine to be paid within 120 days

Section 125 of the Customs Act, 1962 has been proposed to be amended to provide for payment of redemption fine within 120 days from the date when such option is provided. According to the new proposed sub-section (3) such option otherwise will become void unless an appeal against order providing such option is pending.
It may be noted that in cases where order providing option of redemption fine is passed before Finance Bill 2018 receives the Presidential assent, this option can be exercised within 120 days from the date of assent.


Pre-consultation before SCN and time limit for adjudication under Customs

Finance Bill seeks to amend S. 28 of Customs Act to provide for pre-notice consultation before issue of SCN in cases not involving collusion, willful mis-statement and suppression.

Further, adjudication of SCN – both under normal and extended period, will have to be mandatorily done within 6 months and 1 year respectively. As per the proposals, this period can be extended once, after which notice will be deemed as not issued, subject to certain conditions. Notices issued after 14-5-2015 but before assent of Finance Bill, 2018, will however continue to be governed by existing provisions.


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