Here are some queries on taxation and foreign trade regulations, addressed by Ernst & Young. Readers may mail their queries to firstname.lastname@example.org
We import products and sell them to automobile manufacturers. We have been informed by the customs department that we need to pay additional customs duty based on the MRP of products at the time of import. Please confirm what value we need to pay as additional customs duty.
Additional customs duty, equivalent to the excise duty leviable on a like article manufactured/produced in India, is to be levied on any goods imported to India. For import of specified products, there is a different basis for calculation of additional duty. These products should: (i) be notified by the government; and (ii) display the MRP on their package as required under the Standards of Weights & Measures Act, 1976 (SWMA).
In your case, we assume that your products are notified as goods, which attract an excise duty (or additional customs duty) based on their MRP. That could be the reason why the customs authorities are seeking to levy additional customs duty based on the MRP.
However, for levy of duty based on the MRP, the second condition that there should be a requirement to declare the MRP of the goods on the package should also be satisfied. Therefore, you should first ascertain whether there is a requirement to disclose the MRP on import of your products. Under the SWMA, read with the Standards of Weights & Measures (Packaged Commodities) Rules, 1977, the requirement to declare the MRP on the goods is required only in cases where the goods are for retail sale. Moreover, there is an exception in the Packaged Commodities Rules for ‘institutional sales’ that stipulates that ‘any products specially packed for exclusive use of any industry as raw material shall or for the purpose of servicing any industry’ shall not be considered as product intended for retail sale.
Hence, if the products imported by you are not for retail sales and are for institutional sales, there should not be any requirement to declare the MRP on import of such products. In such a case, the additional customs duty on import of the products should not be based on the MRP.
Ours is a trading company that imports readymade garments. We understand that recently, the government has granted exemption from special additional duty of customs on import of