Govt allows duty refund on electronics

In a step that is expected to make imported goods like electronic items cheaper, the finance ministry has notified a scheme to refund the 4 per cent additional Customs duty paid on such imports.

Traders who import goods for sale have to pay both sales tax and the additional duty, a sort of double taxation. Prior to this, the effective tax liability, including basic Customs duty on imported goods, was around 34 per cent.

The finance ministry has now said that traders will get a refund for the 4 per cent duty paid with effect from September 14. Traders will have to provide the proof of payment of sales tax or value-added tax for the refund. Importers will also have to submit documentary evidence like invoices of the sale of the imported goods.

"Traders were not getting any setoff for the tax paid on imported goods. The new measure will have a positive impact on traders as the effective cost of goods will come down by at least 4 per cent," said Pratik Jain, director, KPMG.

However, Jain said procedural issues like filing of refund claims only in specified jurisdictions of the Customs department needed to be sorted out to allow traders to file claims in any jurisdiction.

Meanwhile, the Manufacturers Association of Information Technology (MAIT) has welcomed a finance ministry clarification that items like flat-panel monitors and digital cameras will attract nil Customs duty. Before the September 10 announcements, 10 per cent Customs duty was levied on both these product ranges, the association said.

Vinnie Mehta, executive director, MAIT, said, "The two clarifications issued by the Ministry of Finance will have far-reaching consequence as several developed countries, including the European Union, and Asian countries such as China have been unable to resolve the classification issue and continue to classify these items as non-IT products. India has been very proactive and set forth an example for the rest of the world. The clarification puts to rest several disputes on interpretation of the applicable Customs duty on flat-panel monitors and digital cameras."