In order to reduce the impact of customs duties on our imports, can we ask our supplier in China to split the value partly into cost of goods and balance into services, assuming that we do not have to pay any taxes on services?
Firstly, you may take note that unless covered under the negative list or specifically exempted, service tax is leviable on taxable services provided from abroad and received in India and, as per Rule 2(1)(d)(G) of Service Tax Rules, 1994, the recipient of such service received in India is liable to pay the service tax. Secondly, as per Rule 10(1)( e) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, in determining the transaction value, there shall be added to the price actually paid or payable for the imported goods, all other payments actually made or to be made as a condition of sale of the imported goods, by the buyer to the seller, or by the buyer to a third party to satisfy an obligation of the seller to the extent that such payments are not included in the price actually paid or payable.
For sending back the money received from a foreign buyer who has rejected the goods exported by us, do we have to surrender the drawback availed by us at the time of exports? Where can we find the precise instructions?
As per Para C27 of RBI Master Circular no. 14/2014-15 dated July 1, 2014, AD Category-I banks, through whom the export proceeds were originally realised may consider requests for refund of export proceeds of goods exported from India and being re-imported into India on account of poor quality. While permitting such transactions, AD Category-I banks are required to (i) Exercise due diligence regarding the track record of the exporter; (ii) verify the bona-fides of the transactions; (iii) obtain from the exporter a certificate issued by DGFT / Custom authorities that no incentives have been availed by the exporter against the relevant export or the proportionate incentives availed, if any, or the relevant export have been surrendered; (iv) obtain an undertaking from the exporter that the goods will be re-imported within three months from the date of remittance; and (v) ensure that all procedures as applicable to normal imports are adhered to.
Also, as per second proviso to Section 75(1) of the Customs Act, 1962, where any drawback has been allowed on any goods under this sub-section and the sale proceeds in respect of such goods are not received by or on behalf of the exporter in India within the time allowed under the Foreign Exchange Management Act, 1999 (42 of 1999), such drawback shall except under such circumstances or such conditions as the Central Government may, by rules, specify, be deemed never to have been allowed and the Central Government may, by rules made under sub-section (2), specify the procedure for the recovery or adjustment of the amount of such drawback.
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