Import of free issue materials for export of assembled goods

[MohanLal tiwari]

Dear sir/s,

One of my client is having order for export wherein the customer is supplying few items as free issue and want to include the value of free issue materials for charging Duty (amending the order for rate to include free issue mtls value) but do not want to show in invoice & ARE-1 etc. Kindly advise if it can be done, if yes, how the outstanding will get settled as the customer will be pay after deducting the value of free issue mtls.

[YAGAY andSUN]

You may prepare an Invoice showing the chargable value and FOC value. On both the value you can pay the duty and for free value you can get the GR Waiver/NOC from your A.D. (i.e. your Banker). mention it on shipping bill as total value, give discount for FOC value and give the reference of GR Waiver on the Shipping Bill.

[MohanLal tiwari]

As per CHA, Customs Deptt. will raise objection and may ask for various clarification regarding Import of free issue materials. Just for information, my client has paid applicable custom duty at the time of Import of free issue. Please advise whether it was correct in paying full custom duty & CVD for import of free issue mtls which are to be exported after assembly with other items.

[YAGAY andSUN]

Taxes and Duties are payable on removal/movement/importation of free of cost material. Materials are free in commercial terms but not in the eye of law. Hence, even if there is no commercial value of imported goods but appropriate customs duties are payable until unless subject goods are exempted through any notification etc.

[MohanLal tiwari]

Thanks for prompt advise.

Could you please suggest for exemption if any applicable for Duty & Taxes including Entry tax on import of free issue materials which will have to be exported after assembly with equipment.

[YAGAY andSUN]

Entry Tax is levied on specified goods mentioned in the Notification. If certain goods are not mentioned in such notification then there would not be any entry tax would be levied. Please check your items in such notification for levy of Entry Tax.

[MohanLal tiwari]

The main issue is to suggest Custom Duty Exemption Notification if any for import of free issue materials which will be sent back to customer after assembly with equipment.

The above issue is still in-replied.

Other panel members may please suggest.

[YAGAY andSUN]

You can get duty drawback at the time of export on the duty portion which was paid at the time of import. This way it will be revenue neutral.

AI Summary

Customs duty on free issue materials remains payable on import; duty drawback can neutralise paid import duties on export. Importation of buyer-supplied free issue materials remains subject to customs duties and related levies unless a specific exemption applies; commercial free-of-cost status does not negate legal taxability. Practically, parties can show both chargeable and free values on invoices and shipping bills, obtain a GR waiver/NOC from the authorised dealer, and where duties were paid on import pursue Duty Drawback or other export relief at export to neutralise the import duty burden. Entry tax liability depends on whether the goods are listed in the relevant notification.