2021 (8) TMI 317 - AAR - Customs

Customs duty rates for Tello, AGRAS T16, and Mavic 2 drones clarified by recent ruling

In Re: M/s. Ingram Micro India Private Limited

The ruling classified Tello drones under heading 9503, subject to a 60% basic customs duty, 18% IGST, and 6% Social Welfare Surcharge. AGRAS T16 drones ... Classification of imported goods - Drones - classifiable under the heading 88.02 of the first schedule to the Customs Tariff Act, 1975 or otherwise? - rate of duty applicable on the import of the drones - HELD THAT:- Classification, in terms of Rule l, is to be decided on the basis of the terms of the headings and any relative section or chapter notes. In this ease, the heading 8802 includes within its ambit helicopters, and according to the explanatory notes to the HSN such helicopters are used for aerial photography amongst other uses. It is settled law that the explanatory notes have considerable persuasive value. Under such circumstances, the need for resorting to the Rule 3(b) doesn’t seem to arise at all. Therefore, notwithstanding the WCO classification advice to the contrary, it is my considered opinion that Mavie 2 drones merit classification under sub-heading 88021 100 of the first schedule to the Customs Tariff Act, 1975. This conclusion is consistent with the new chapter note I, which would come into force w.e.f. as it states that the expression “unmanned aircraft” means any aircraft, other than those of heading 8801, designed to be flown without a pilot on board. Tello drones with or without camera would merit classification under heading 9503 of the first schedule to the Customs Tariff Act, 1975 and would attract basic customs duty @ 60% adv“ IGST @ 18%, Social Welfare Surcharge @ 6% - Both AGRAS T 16 and Mavic 2 drones would merit classification under heading 8802 of the first schedule to the Customs Tariff Act, 1975 and would attract basic customs duty @ 10%, IGST @ 5%, and Social Welfare Cess @ 1%. However, if any import is made for personal use, the rate of IGST would be 28% and it would also attract a GST compensation cess. Application disposed off. Issues Involved:1. Classification of Tello drones.2. Classification of AGRAS T16 drones.3. Classification of Mavic 2 drones.4. Applicability of duty rates on the import of drones.5. Legality of specifying multiple ports of entry for import.Detailed Analysis:1. Classification of Tello Drones:The applicant proposed that Tello drones, with or without camera, should be classified under tariff entry 88.02. However, the ruling determined that Tello drones are lightweight machines intended for amusement and educational purposes, thus falling under heading 9503 of the Customs Tariff Act, 1975. This classification is supported by the explanatory notes to the Harmonized Commodity Description and Coding System, which exclude toys or models for recreational purposes from heading 88.02 and include them under heading 9503. Consequently, Tello drones are subject to a basic customs duty of 60%, IGST of 18%, and Social Welfare Surcharge of 6%.2. Classification of AGRAS T16 Drones:The AGRAS T16 drones, used for agricultural spraying and equipped with radar and 3D mapping systems, were proposed to be classified under tariff entry 88.02. The ruling confirmed this classification, noting that heading 88.02 covers heavier-than-air aircraft, including helicopters used for various purposes such as agricultural work. Therefore, AGRAS T16 drones are classified under sub-heading 88021100 and attract a basic customs duty of 10%, IGST of 5%, and Social Welfare Cess of 1%.3. Classification of Mavic 2 Drones:Mavic 2 drones, equipped with powerful cameras for aerial photography and video recording, were proposed to be classified under tariff entry 88.02. The ruling considered the explanatory notes to heading 88.02, which include helicopters used for aerial photography. Despite a WCO classification advice suggesting classification under heading 8525 as cameras, the ruling determined that the essential character of Mavic 2 drones is their aerial capability, thus classifying them under sub-heading 88021100. This classification aligns with the new chapter note effective from 01.01.2022, which includes unmanned aircraft equipped with integrated digital cameras. Mavic 2 drones attract a basic customs duty of 10%, IGST of 5%, and Social Welfare Cess of 1%.4. Applicability of Duty Rates on the Import of Drones:The ruling specified the applicable duty rates for each type of drone:- Tello drones: Basic customs duty @ 60%, IGST @ 18%, Social Welfare Surcharge @ 6%.- AGRAS T16 and Mavic 2 drones: Basic customs duty @ 10%, IGST @ 5%, Social Welfare Cess @ 1%. If imported for personal use, IGST would be 28% with an additional GST compensation cess.5. Legality of Specifying Multiple Ports of Entry for Import:The applicant mentioned multiple entry ports for the import of drones, which was objected to by the Secretary to the CAAR. The ruling clarified that the scheme of advance rulings in customs envisages indicating only one port/point of entry, as per the legal provisions cited. However, considering the application was transferred, the ruling did not pursue this issue further.Conclusion:The advance ruling application was disposed of with the classification and duty rates specified for each type of drone, and the request to consider future tariff changes effective from 01.01.2022 was rejected. The ruling emphasized that advance rulings can only be issued based on the law in force at the time of the ruling.