DUTY CALCULATION FOR CLEARANCE OF SCRAP MATL IN DTA BY EOU

[CHANDRU RAMACHANDRAN]

An EOU organization wanted to clear their scrap material in DTA on payment of applicable GST plus reversal of duties & taxes over the inputs of imports for which exemption was availed. I wish to know as to how to calculate the duty while clearing the scrap in DTA. Request any one who has sound knowledge on this may please reply.

[Rajagopalan Ranganathan]

Sir,

EOU units clearing scrap material in DTA are required to pay IGST/CGST/SGST/UTGST as applicable depending on the nature of supply, namely, intra-state or inter-state supply.

In addition, they have to reverse proportionate customs duty on the basis of SION published by DGFT or norms approved by Norms Committee of DGFT when no SION is fixed.

[CHANDRU RAMACHANDRAN]

Sir, Thanks for your reply. Moving forward, I would like to know whether the computation of duty is to be done based on the transaction value of the scrap to be sold out in DTA. Also, whether the percentage of customs duty/social welfare sucharge/IGST (to be reversed) is to be taken as per prevailing rate or the one at the time of filing of Bill of Entry for the inputs received.

[Shilpi Jain]

In case of waste and scrap generated while manufacture or processing goods which are exported, and such waste is as per the SION norms, no payment of customs duty is required on the initial Imports made.

[Shilpi Jain]

However if the waste or scrap is generated in respect of goods which are cleared domestically, then the customs duty exemption claimed initially at the time of import will have to be paid proportionately. This will not be on transaction value of the scrap sold.

[Shilpi Jain]

The notification 52/2003 states that in respect of scrap waste arising out of goods processed at job workers premises and exported, the waste when cleared will be liable to duty on the value of the scrap cleared.

[KASTURI SETHI]

In addition to above replies of experts, also peruse para 6.06(e) of HBP 2015-20.

[CHANDRU RAMACHANDRAN]

Thanks for the inputs/opinion given by Mr Kasturi Sethi & Ms Shilpi Jain. By the way, I am still not clear over the commutation/reversal of customs duty payable for the scrap to be cleared in DTA. Initially, I understood that it has to be worked out based on the value for which scrap is to be disposed in DTA. Now, per given inputs, it has to be paid proportionately based on the duty exempted at the time of original import. In such case, how it has to be calculated The case here is EOU has to clear the scrap qty (as approved by SION norms committee) in DTA by floating a competitive scrap vendor in market.

I would be thankful if a detailed input is given by the experts as how to arrive the base value for duty calculation for clearance of SION approved scrap in DTA.

[CHANDRU RAMACHANDRAN]

I would request the experts to clarify elaborately on how to calculate the reversal of duty for clearing scrap material in DTA by EOU. Whether it has to be worked out on reverse basis as against the transaction value for which the scrap is to be disposed.

[Shilpi Jain]

In case it is a scrap generated from manufacture of goods which are not exported the amount of BCD to be paid will have to be calculated on proportionate basis. The rate of tax will be that which is applicable for the input which is imported and the value will also be of the imported input

[Shilpi Jain]

However if if the scrap is generated from the manufacture of goods which are exported the rate of tax will be that which is applicable to the scrap which is being sold

AI Summary

Reverse proportionate customs duty required when EOU clears scrap into DTA, alongside applicable GST obligations.
EOU clearances of scrap into DTA require payment of applicable GST and reverse proportionate customs duty based on SION or DGFT norms. If scrap arises from exported goods complying with SION norms, initial import duty need not be repaid; if scrap arises from goods cleared domestically, the customs duty exemption claimed at import must be proportionately repaid, calculated with reference to the imported input's value and the duty rate applicable to that input rather than the scrap's transaction value.