Disclosing end-use of goods must while claiming concessional import duties

Move aimed at enabling tracking of goods to ensure they don't end up in replacement market

Those importing goods at concessional rates will have to submit information on end use of these products on a portal developed by the Customs Department on monthly as well as annually bases.

This has been done to enable the tracking of these goods by the authorities to ensure that the goods are used in specified manufacturing and not in the replacement market. 

If these goods are used for the replacement market, normal tariffs will apply, said Abhishek Jain, partner indirect tax at KPMG.

The lower rates under The Customs (Import of Goods at Concessional Rate of Duty for Specified End Use) Rules apply for sectors such as telecom, electronics, and electric vehicles. 

The information will have to be provided on the Indian Customs and Central Excise Electronic Commerce/Electronic Data Interchange (EC/EDI) Gateway (ICEGATE), an online portal. 

While ICEGATE has existed for many years now, this has been specified in the Customs (Import of Goods at Concessional Rate of Duty for Specified End Use) Rules, 2022, now.

There were, however, complaints earlier that the ICEGATE did not function properly. “Proper functioning of the common portal would need to be seen and challenges in the current portal needs to be addressed by the government for the success of the new rules,” said Saurabh Agarwal, tax partner at EY.

Disposal of capital goods

Claiming depreciation Customs duty on disposal of capital goods has also been provided under these rules.

This means that if an entity imports capital goods worth Rs 100 crore and sells it after three years, it will be charged duty on only Rs 40 crore and not Rs 100 crore, given the rate of depreciation of 20 per cent a year.

The rules also allowed re-crediting of bonds, which have to be furnished to the authorities for importing goods under concessional duties. These bonds can now be re-credited even before filing monthly returns. In simple terms, this means that if you file a bond of, say, Rs 2 crore, and paid a concessional duty of Rs 1 crore that the government has debited from your bonds electronically, the value of your bond would reduce to Rs 1 crore. Now, lenders will say that the value of your bond is less and may not give you the required credit. For this purpose, even if you tell the Customs department about the end use of the goods, your bond would be re-credited to Rs 2 crore without waiting for monthly returns.

“The new rules provide for immediate recredit of bonds without waiting for monthly returns. This is a welcome step for trade facilitation as well as towards ease of doing business,” Agarwal said.