2011
Customs and Trade Ezine September 2011
We are delighted to partner with Deloitte for a series of Customs and Trade E-Zines and Seminars.
The first Seminar on Customs and Trade with Deloitte will be held on the 25th October in Dublin – mark it in your diary, details to follow.
In the September E-Zine we are focusing on India this month;
1. India Import Regulations and Customs duties
2. India and EU commence discussions on AEO
3. India and OECD commence discussions on tax harmonisation, including transfer pricing rules.
4. Transfer pricing and new study released by EU
5. VAT refund within EU – e-learning module to do it yourself.
6. India Update - Deloitte
Introduction
The phenomenal economic advances India has made in recent years and its growing integration into the global economy have exposed its tax and customs duty policies to the same challenges faced by the industrialised countries, notably how to integrate its domestic tax system with tax policies prevalent globally.
1. India Import regulations and customs duties
As per WTO stipulations, India has removed all quantitative restrictions (QRs) on imports in phased manner. The imports regime has been liberalised every year and import restrictions have been lifted. Now almost all non-agricultural items are freely importable. The ITC (HS) [Import Trade Classification (Harmonised System)] provides item-wise policy for import of various articles. The list is broadly based on HSN system of classification. Policy in respect of each item is provided in the following categories:
a) Free – No restriction on imports. However, in some cases, prescribed conditions have to be fulfilled.
b) Restricted through authorisation
c) Import through State Trading Enterprise (STE). However, these goods can be imported by anyone on obtaining authorisations
d) Prohibited goods
There are still some prohibitions / restrictions on import of certain goods from specified countries such as import of arms and related material from Iraq etc.
General Regulations
Ministry of Commerce formulates Foreign Trade Policy (FTP) which specifies the regulations which govern the import and export of goods. This policy is announced once in every five years with annual supplements coming out every year. The last FTP was issued in August 2009 which is valid for the period up to March 2014. Director General of Foreign Trade (DGFT) is the authority which administers the effective functioning of FTP. For undertaking the activity of import, the importer in India is required to register itself with DGFT.
Custom duties
Custom duty is levied by the Central Government on import of goods into India and is payable by the importer in India. Generally, the aggregate custom duty comprises the following components:
i. Basic customs duty (BCD)
ii. Additional customs duty in lieu of excise duty on manufactured goods (ACD)
iii. Special Additional Duty in lieu of VAT/ sales tax on sale of goods (SACD)
Besides, certain goods are also levied to safeguard duties and anti-dumping duties. The peak rate of basic customs duty is 10%. The aggregate customs duty rate is ~ 27%. The duties levied in (ii) and (iii) are recoverable (i.e. can be claimed as set-off) by the importer - manufacturer against excise duty liability on manufacture of finished goods. Further, duty levied in (ii) is recoverable by a service provider - importer against the service tax liability on the provision of output service.
There are various general and/or conditional duty exemptions/ concessions granted under the customs law in India.
2. India and EU commence discussions on AEO
At the invitation of Chairman S. Dutt Majumder of the Indian Central Board of Customs and Excise, WCO Secretary General Kunio Mikuriya visited New Delhi on 25-26 July 2011 to discuss progress within Indian Customs, including the Authorized Economic Operator (AEO) program.
Indian Customs has been in consultations with the private sector in preparation for the AEO program and a pilot project has been scheduled to launch later this year. This development follows the recent opening of a National Operation Centre established to support the information system and therefore enable better data and risk management. Additionally, "Indian Customs has stressed its commitment to promoting Globally Networked Customs (GNC) to facilitate AEO-related information among other Utility Block areas and this latest development will pave the way for Mutual Recognition of AEO with other countries, the ultimate benefit of the AEO program", said Secretary General Mikuriya.
3. India and OECD commence discussions on tax harmonisation, including transfer pricing rules.
The OECD and India have announced plans to strengthen on-going co-operation on tax-related issues through the development of a three-year partnership.
The partnership, announced in New Delhi on 13 June 2011 by OECD Secretary-General Angel Gurría and Indian Finance Minister Pranab Mukherjee, will build on existing engagements and further enhance Indian participation in the OECD’s global initiatives.
The three-year programme will cover a range of issues over the coming three years, including improving tax administration, adapting transfer pricing and tax treaty rules to the new international environment and better understanding the links between illicit flows and tax evasion. It will also enable India to contribute to OECD work on Tax and Inequality, on the application of VAT/GST to cross border services and on aggressive tax planning and harmful tax practices.
The conference explored some of the most complex challenges posed by the taxation of multinational enterprises in a global economy. Topping the agenda were transfer pricing questions that arise in relation to cross-border transfers of intangibles and the provision of services between members of multinational enterprises.
4. Transfer Pricing, New Study by EU released 27th July 2011
Transfer pricing is high on the agenda because globalisation has lifted the level of cross-border trade between related businesses to new heights. It is estimated that worldwide, about 2/3 of all business transactions take place within multinational corporations.
This is particularly relevant for developing countries as their economies have recently opened up or are in the process of opening up, attracting large amounts of foreign direct investment (FDI) for MNE’s. In the absence of Transfer Pricing legislation, both tax administrations and MNE’s have only limited guidance they can refer to when determining Transfer Pricing in related – party transactions.
5. VAT Refund Electronic Procedure – How to Do It Yourself
Since 1st January 2010, the procedure for reimbursement of VAT incurred by EU taxable persons in Member States where they are not established has been replaced by a fully electronic procedure, thereby ensuring a quicker refund to claimants. The new procedure makes life easier for taxable persons and improves the functioning of the internal market.
6 India Update - Deloitte
Recently, the Indian Government has amended the provisions of the Customs Act to provide for the self-assessment of duty on the import of goods. The importer has now been made liable to declare (i) Classification of imported goods, (ii) Applicable rate of duty, (iii) Value of the goods and (iv) Benefit of exemption notification availed, if any.
Furthermore, the Government has also issued the On-Site Post Clearance Audit at the Premises of Importers & Exporters Regulations, 2011 (“OSPCA”) for the comments of the trade and industry. These changes signal a new era in Customs clearances in India because, going forward, the primary responsibility for the interpretation and implementation of customs laws and procedures shifts to the importer.
The importer will have to be certain that the assessment position adopted at the time of self-assessment is correct, as they will be held accountable for the declarations made at the time of importation of goods.
In addition to the above, there are recent amendments to the rules concerning the inclusion of royalties in the valuation of software and also on the valuation method to be adopted for the levy of ACD in respect of pharmaceutical and certain other products that are required to affix Retail Sales Price for sale in India.
Deloitte have a strong national presence in India with 13 offices. Its indirect tax team comprises professionals with industry knowledge and expertise. They cover most areas of Indirect taxes such as Customs duty, Excise duty, Service tax, Sales tax, Octroi etc.
Deloitte can help Irish businesses on Customs duty in a number of ways as follows:
a) Assistance in classification of goods for determining the applicable customs duty on import of goods.
b) Valuation of goods is crucial from the levy of customs duty as it is payable ‘ad valorem’ i.e. on the transaction value of imported goods. In this regard, Deloitte provides services to determine the value of the goods including in the case of related party transactions.
c) Assistance in determining applicability of any exemptions to reduce the incidence of customs duty. The law provides for exemptions from payment of duty to certain goods by issuing various notifications.
d) Advice on eligibility to claim input credits to optimise the availability of tax credit on any import transactions. Customs duty consists of BCD, ACD and SACD, Anti-dumping Duty etc. The set-off of ACD and SACD is governed by CENVAT credit Rules, 2004 which prescribes conditions for eligibility and restrictions on utilisation.
e) Assistance on procedural aspects of customs and foreign trade laws. Imported goods are subjected to certain legal and procedural formalities before being permitted for clearance by Customs authorities. These requirements include the submission of prescribed documents and adherence to laid down procedures.
f) Advice on alignment of customs and transfer pricing policies and representation before Special Valuation Branch (SVB) for assessment of related party transactions.
g) Assistance in obtaining duty credit scrips provided under FTP. FTP provides for export promotion measures (in the form of duty credit scrips) for which various scheme have been devised to procure inputs and capital goods duty free.
h) Other assistance such as obtaining registrations and import licenses, obtaining drawbacks from customs authorities etc.
About Deloitte
As one of Ireland’s leading business advisory firms, we provide expert solutions across Audit and Accounting, Tax, Pensions, Corporate Finance, Management Consulting and Enterprise Risk Services. We’ll help you achieve a winning performance every time.
For further information please contact:
Vincent McCullagh 01 417 2826 or
Dublin +353 1 417 2200
Cork +353 21 490 700
Limerick +353 61 435500
www.deloitte.com/ie
We are delighted to partner with Deloitte for a series of Customs and Trade E-Zines and Seminars.
The first Seminar on Customs and Trade with Deloitte will be held on the 25th October in Dublin – mark it in your diary, details to follow.
In the September E-Zine we are focusing on India this month;
1. India Import Regulations and Customs duties
2. India and EU commence discussions on AEO
3. India and OECD commence discussions on tax harmonisation, including transfer pricing rules.
4. Transfer pricing and new study released by EU
5. VAT refund within EU – e-learning module to do it yourself.
6. India Update - Deloitte
Introduction
The phenomenal economic advances India has made in recent years and its growing integration into the global economy have exposed its tax and customs duty policies to the same challenges faced by the industrialised countries, notably how to integrate its domestic tax system with tax policies prevalent globally.
1. India Import regulations and customs duties
As per WTO stipulations, India has removed all quantitative restrictions (QRs) on imports in phased manner. The imports regime has been liberalised every year and import restrictions have been lifted. Now almost all non-agricultural items are freely importable. The ITC (HS) [Import Trade Classification (Harmonised System)] provides item-wise policy for import of various articles. The list is broadly based on HSN system of classification. Policy in respect of each item is provided in the following categories:
a) Free – No restriction on imports. However, in some cases, prescribed conditions have to be fulfilled.
b) Restricted through authorisation
c) Import through State Trading Enterprise (STE). However, these goods can be imported by anyone on obtaining authorisations
d) Prohibited goods
There are still some prohibitions / restrictions on import of certain goods from specified countries such as import of arms and related material from Iraq etc.
General Regulations
Ministry of Commerce formulates Foreign Trade Policy (FTP) which specifies the regulations which govern the import and export of goods. This policy is announced once in every five years with annual supplements coming out every year. The last FTP was issued in August 2009 which is valid for the period up to March 2014. Director General of Foreign Trade (DGFT) is the authority which administers the effective functioning of FTP. For undertaking the activity of import, the importer in India is required to register itself with DGFT.
Custom duties
Custom duty is levied by the Central Government on import of goods into India and is payable by the importer in India. Generally, the aggregate custom duty comprises the following components:
i. Basic customs duty (BCD)
ii. Additional customs duty in lieu of excise duty on manufactured goods (ACD)
iii. Special Additional Duty in lieu of VAT/ sales tax on sale of goods (SACD)
Besides, certain goods are also levied to safeguard duties and anti-dumping duties. The peak rate of basic customs duty is 10%. The aggregate customs duty rate is ~ 27%. The duties levied in (ii) and (iii) are recoverable (i.e. can be claimed as set-off) by the importer - manufacturer against excise duty liability on manufacture of finished goods. Further, duty levied in (ii) is recoverable by a service provider - importer against the service tax liability on the provision of output service.
There are various general and/or conditional duty exemptions/ concessions granted under the customs law in India.
2. India and EU commence discussions on AEO
At the invitation of Chairman S. Dutt Majumder of the Indian Central Board of Customs and Excise, WCO Secretary General Kunio Mikuriya visited New Delhi on 25-26 July 2011 to discuss progress within Indian Customs, including the Authorized Economic Operator (AEO) program.
Indian Customs has been in consultations with the private sector in preparation for the AEO program and a pilot project has been scheduled to launch later this year. This development follows the recent opening of a National Operation Centre established to support the information system and therefore enable better data and risk management. Additionally, "Indian Customs has stressed its commitment to promoting Globally Networked Customs (GNC) to facilitate AEO-related information among other Utility Block areas and this latest development will pave the way for Mutual Recognition of AEO with other countries, the ultimate benefit of the AEO program", said Secretary General Mikuriya.
3. India and OECD commence discussions on tax harmonisation, including transfer pricing rules.
The OECD and India have announced plans to strengthen on-going co-operation on tax-related issues through the development of a three-year partnership.
The partnership, announced in New Delhi on 13 June 2011 by OECD Secretary-General Angel Gurría and Indian Finance Minister Pranab Mukherjee, will build on existing engagements and further enhance Indian participation in the OECD’s global initiatives.
The three-year programme will cover a range of issues over the coming three years, including improving tax administration, adapting transfer pricing and tax treaty rules to the new international environment and better understanding the links between illicit flows and tax evasion. It will also enable India to contribute to OECD work on Tax and Inequality, on the application of VAT/GST to cross border services and on aggressive tax planning and harmful tax practices.
The conference explored some of the most complex challenges posed by the taxation of multinational enterprises in a global economy. Topping the agenda were transfer pricing questions that arise in relation to cross-border transfers of intangibles and the provision of services between members of multinational enterprises.
4. Transfer Pricing, New Study by EU released 27th July 2011
Transfer pricing is high on the agenda because globalisation has lifted the level of cross-border trade between related businesses to new heights. It is estimated that worldwide, about 2/3 of all business transactions take place within multinational corporations.
This is particularly relevant for developing countries as their economies have recently opened up or are in the process of opening up, attracting large amounts of foreign direct investment (FDI) for MNE’s. In the absence of Transfer Pricing legislation, both tax administrations and MNE’s have only limited guidance they can refer to when determining Transfer Pricing in related – party transactions.
5. VAT Refund Electronic Procedure – How to Do It Yourself
Since 1st January 2010, the procedure for reimbursement of VAT incurred by EU taxable persons in Member States where they are not established has been replaced by a fully electronic procedure, thereby ensuring a quicker refund to claimants. The new procedure makes life easier for taxable persons and improves the functioning of the internal market.
6 India Update - Deloitte
Recently, the Indian Government has amended the provisions of the Customs Act to provide for the self-assessment of duty on the import of goods. The importer has now been made liable to declare (i) Classification of imported goods, (ii) Applicable rate of duty, (iii) Value of the goods and (iv) Benefit of exemption notification availed, if any.
Furthermore, the Government has also issued the On-Site Post Clearance Audit at the Premises of Importers & Exporters Regulations, 2011 (“OSPCA”) for the comments of the trade and industry. These changes signal a new era in Customs clearances in India because, going forward, the primary responsibility for the interpretation and implementation of customs laws and procedures shifts to the importer.
The importer will have to be certain that the assessment position adopted at the time of self-assessment is correct, as they will be held accountable for the declarations made at the time of importation of goods.
In addition to the above, there are recent amendments to the rules concerning the inclusion of royalties in the valuation of software and also on the valuation method to be adopted for the levy of ACD in respect of pharmaceutical and certain other products that are required to affix Retail Sales Price for sale in India.
Deloitte have a strong national presence in India with 13 offices. Its indirect tax team comprises professionals with industry knowledge and expertise. They cover most areas of Indirect taxes such as Customs duty, Excise duty, Service tax, Sales tax, Octroi etc.
Deloitte can help Irish businesses on Customs duty in a number of ways as follows:
a) Assistance in classification of goods for determining the applicable customs duty on import of goods.
b) Valuation of goods is crucial from the levy of customs duty as it is payable ‘ad valorem’ i.e. on the transaction value of imported goods. In this regard, Deloitte provides services to determine the value of the goods including in the case of related party transactions.
c) Assistance in determining applicability of any exemptions to reduce the incidence of customs duty. The law provides for exemptions from payment of duty to certain goods by issuing various notifications.
d) Advice on eligibility to claim input credits to optimise the availability of tax credit on any import transactions. Customs duty consists of BCD, ACD and SACD, Anti-dumping Duty etc. The set-off of ACD and SACD is governed by CENVAT credit Rules, 2004 which prescribes conditions for eligibility and restrictions on utilisation.
e) Assistance on procedural aspects of customs and foreign trade laws. Imported goods are subjected to certain legal and procedural formalities before being permitted for clearance by Customs authorities. These requirements include the submission of prescribed documents and adherence to laid down procedures.
f) Advice on alignment of customs and transfer pricing policies and representation before Special Valuation Branch (SVB) for assessment of related party transactions.
g) Assistance in obtaining duty credit scrips provided under FTP. FTP provides for export promotion measures (in the form of duty credit scrips) for which various scheme have been devised to procure inputs and capital goods duty free.
h) Other assistance such as obtaining registrations and import licenses, obtaining drawbacks from customs authorities etc.
About Deloitte
As one of Ireland’s leading business advisory firms, we provide expert solutions across Audit and Accounting, Tax, Pensions, Corporate Finance, Management Consulting and Enterprise Risk Services. We’ll help you achieve a winning performance every time.
For further information please contact:
Vincent McCullagh 01 417 2826 or
Dublin +353 1 417 2200
Cork +353 21 490 700
Limerick +353 61 435500
www.deloitte.com/ie
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