CBEC has made tax refund on imported goods easier

The Central Board of Excise and Customs (CBEC) has simplified the procedure for claiming refund of the 4 per cent additional duty of customs (4 per cent countervailing duty, or CVD) paid on imported goods for importers having recognition under Accredited Clients Programme of the Customs (ACP clients).

The 4 per cent CVD is levied on imported goods under sub-section (5) of Section 3 of the Customs Tariff Act, 1975 to countervail the incidence of sales tax (ST)/value added tax (VAT) and other local taxes. Importers who resell the imported goods had represented that they pay ST/VAT upon resale and so, there should be a mechanism to avoid payment of both ST/VAT and 4 per cent CVD on the same goods. So, the finance ministry had issued Customs exemption notification number 102/2007 dated September 14, 2007 allowing refund of the 4 per cent CVD where the importers submit evidence that they have resold the imported goods on payment of ST/VAT.

The documentation requirements, however, are so onerous that many importers are not getting the refund. Recently, the CBEC found that despite its circulars on April 28, 2008 and October 13, 2008 simplifying the procedures for grant of 4 per cent CVD refund, over 80 per cent of all pending refund cases relate to refund of 4 per cent CVD. That is the provocation for CBEC’s latest instructions through its circular number 18/2010-Cus dated July 8, 2010.

The circular says that the amount of 4 per cent CVD refund shall be sanctioned in full, on preliminary scrutiny of specified documents. This facility will be available only for ACP clients registered with Customs in terms of Circular number 42/2005-Customs dated November 24, 2005. The procedure for pre-audit for ACP clients has been done away with and detailed scrutiny would be done only at the stage of post-audit. The refund claims shall be sanctioned within the maximum time period of 30 days in all such cases, says CBEC.

According to the circular, submission of sale invoices shall be required only in electronic form (CD or other media) and submission of paper documents is dispensed with. In order to enable timely payment of refund in case of 4 per cent CVD, optional facility of directly crediting the applicant’s bank account, through RTGS (Real Time Gross Settlement) or NEFT (National Electronics Funds Transfer) system has been made available.

CBEC says that a certificate from a chartered accountant and a self declaration of importer should suffice for satisfying the condition that the burden of 4 per cent CVD has not been passed on by the importer to any other person and that there is no need to submit audited balance sheet and profit and loss account in these cases. CBEC has also notified the list of documents required to be filed along with the refund claim.

The CBEC circular will help the trade only in a very limited way. There are only 232 ACP clients (according to the list on the CBEC website) and most of them are manufacturers or service providers. Only a few traders might benefit from the relaxations for ACP clients.

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