Import of Machinery on Lease basis

[MALAYANUR PADMANABHARAO]

Our company intends to enter into an agreement with New Zealand company for an import of certain machinery on the following terms:

1) Import on Lease for a period of three years on payment of monthly rentals

2) If the machinery is found suitable for our business we will buy the machinery either at the end of 3 years or earlier at the price to be agreed between the parties.

3) The party may ask for a bank guarantee in USD for certain value of the machinery as security for the machinery kept with us.

4) New Zealand party does not have any office in India and does not have PAN also.

In this connection we wish to know on the following

a) Whether any duty is payable on import of the machinery, if so what value will be adopted.

b)If machinery is to be retained by us at any point of time during or at the end of the lease period, what would be the custom duty implications.

c) Whether any approval is required from RBI for issue of a bank guarantee in forex in favour of non resident and foreign company.

d) What is the tax implications on payment of monthly lease rentals. Whether New Zealand party can claim credit of the tax deducted by us.

e) If the equipment is to be returned for business reasons whether duty paid, if any, shall be claimed back by us on reexport basis.

AI Summary

Guidance Sought on Customs Duties, Tax Implications, and Regulatory Approvals for Leasing Machinery with Purchase Option A company plans to lease machinery from a New Zealand company for three years, with an option to purchase. They seek guidance on customs duties, tax implications, and regulatory approvals related to the lease, including potential duty on import, customs duty if retaining the machinery, RBI approval for a bank guarantee, tax on lease payments, and duty refund on re-export. A response suggests consulting a specific customs notification for detailed procedures and conditions regarding the import of leased equipment.