Customs duty on Electricity cleared from SEZ to DTA - Small units will perish
FEBRUARY 25, 2016
By A Netizen
'ELECTRICITY' finds place in the Central Excise Tariff Act, 1985, classified under chapter heading No. 27160000 (Electrical energy) but the rate of duty column is Nil, because electricity is exempted from excise duty. Similarly, Electricity or Electrical energy is falling under chapter heading No. 27160000 of Customs Tariff Act, 1975, but when imported into India is exempted from the whole of the duty of customs leviable thereon vide Notification No. 25/2010-Customs dated 27.02.2010.
Unfortunately, in terms of the said Notification, Customs duty was made payable on Electrical energy removed from a Special Economic Zone to Domestic Tariff Area or non-processing areas of Special Economic Zones. It was further categorically widened the scope of levy in the year 2012, vide Notification No.12/2012-Customs dated 17.03.2012, thereby Customs duty was imposed on Electrical energy removed from power projects of 1000 MW and above and Electrical energy removed from power projects of less than 1000 MW, using imported coal but no Customs duty was payable on Electrical energy manufactured using domestic coal.
Withdrawal of Customs duty on Electrical energy:-
It is pertinent to mention that Customs duty on Electrical energy was collected for a limited period cleared from power projects of less than 1000 MW for using imported coal, the same has been withdrawn by the Government vide Notification No.26/2012-Customs dated 18.04.2012 but Customs duty was continued in case of removed from power projects of 1000 MW and above for imported coal with additionally duty imposed on Electrical energy manufactured using domestic coal. The relevant portion of Notification No. 26/2012-Customs dated 18.04.2012 and Tariff details is reproduced as under:
"( i) in the Table, for S. No. 145 and the entries relating thereto, the following shall be substituted, namely:-
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"145.
|
27160000
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Electrical energy removed from a Special Economic Zone into Domestic Tariff Area or non-processing areas of Special Economic Zone-
(a) if removed from power projects of 1000 MW and above,-
(i) using imported coal as fuel;
(ii) using domestic coal as fuel;
(iii) using domestic gas as fuel;
(b) if removed from power projects of less than 1000 MW,-
(i) using imported coal as fuel;
(ii) using domestic coal as fuel;
(iii) using domestic gas as fuel;
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Rs. 30 per 1000 kwh
Rs. 30 per 1000 kwh
Rs. 120 per 1000 kwh
Nil
Nil
Rs. 60 per 1000 kwh
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-
-
-
-
-
-
|
-
-
-
-
-
-"
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The above cited Tariff details vide Notification 26/2012-Customs stated that in case of Electrical energy removed from SEZ to DTA by power projects of less than 1000 MW using both imported coal and domestic coal as fuel , Customs duty was NIL and not payable. But in case of power projects 1000 MW and above wherein Electrical energy removed from SEZ to DTA Customs duty was payable by using both coals as fuel.
Re-imposed of Customs Duty on Electrical energy:-
The Government recently has levied Customs duty on Electrical energy / Electricity on import from abroad except from Nepal and Bhutan as well as on clearances from SEZ to DTA vide Notification No.9/2016-Cus, dated 16.02.2016 issued by the Government of India, Ministry of Finance (Department of Revenue) by amending Notification No. 12/2012-Customs , dated 17.03.2012. The relevant portion of Notification No. 9/2016 -Cus is reproduced as under:
"In the said notification,-
(a) in the Table, for S. Nos. 145 and 146 and the entries relating thereto, the following S. Nos. and entries shall be substituted, namely:-
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S. No.
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Chapter or Heading or Sub-Heading or tariff Item
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Description of goods
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Standard rate(paisa per KWh)
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Additional duty
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Condition no.
|
|
(1)
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(2)
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(3)
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(4)
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(5)
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(6)
|
|
"145A.
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27160000
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All goods except those falling under S. Nos. 145B, 146A, 146B, 146C(i) and 146C(ii).
|
100
|
-
|
-
|
|
145B.
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27160000
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Electrical energy originating from Nepal and Bhutan
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Nil
|
-
|
-
|
|
146A.
|
27160000
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Electrical energy - supplied from Processing Area of SEZ to Domestic Tariff Area (DTA), generated using-
|
|
|
|
| |
|
(a) imported coal as fuel
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40
|
-
|
-
|
| |
|
(b) domestic coal as fuel
|
65
|
-
|
-
|
| |
|
(c) mix of domestic gas/RLNG (Regasified Liquefied Natural Gas) as fuel
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59
|
-
|
-
|
| |
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(d) RLNG as fuel
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89
|
-
|
-
|
|
146B.
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27160000
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Electrical energy - supplied from Non-Processing Area of SEZ to Domestic Tariff Area, generated using-
|
|
|
|
| |
|
(a) imported coal as fuel
|
24
|
-
|
-
|
| |
|
(b) domestic coal as fuel
|
24
|
-
|
-
|
| |
|
(c) mix of domestic gas/RLNG as fuel
|
18
|
-
|
-
|
| |
|
(d) RLNG as fuel
|
21
|
-
|
-
|
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146C (i)
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27160000
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Electrical energy supplied to DTA by power plants of 1000MW or above, and granted formal approval for setting up in SEZ prior to 27th February, 2009.
|
Nil
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-
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103
|
|
146C
(ii)
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27160000
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Electrical energy supplied to DTA from power plants of less than 1000MW, and granted formal approval for setting up in SEZ prior to 27th February, 2009-
|
|
|
|
| |
|
(b) domestic coal as fuel
|
24
|
-
|
103
|
| |
|
(c) mix of domestic gas/RLNG as fuel
|
18
|
-
|
103
|
| |
|
(d) RLNG as fuel
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21
|
-
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103";
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(b) in the Annexure, after condition No. 102 and the entries relating thereto, following shall be inserted, namely: -
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Condition No.
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Conditions
|
|
"103
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The power producer shall produce a certificate from the jurisdictional Development Commissioner in the Department of Commerce, Ministry of Commerce and Industry, that no benefit of customs duty and excise duty, as well as fuel-transportation related service tax has been availed by the said power producer towards raw materials and consumables used in operation and maintenance of the power plant.".
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2. This notification shall come into effect on 16th February, 2016."
The above cited Tariff details vide Notification 9/2016 -Cus. has clearly bifurcated the levy of Customs duty on Electrical energy on six various categories at sr. 145, 145A.146A, 146B, 146C (i) and 146C (ii) with conditions No.103 in respect last two categories for compliance by the power producer.
Comments and observations on imposition of Customs duty on Electrical energy:-
1. The decision of the Government to impose Customs duty on Electrical energy before few days of presentation of Union Budget-2016-17 is really incurring loss to small producers of power in SEZ.
2. In comparison of Customs duty withdrawal Notifications No.26/2012-Customs and present Customs duty imposition Notifications No.9/2016, there is something miracle of changes made by the Government.
3. In the earlier Notification there was no Customs duty payable on removal from SEZ to DTA by the power producer having power projects less than 1000 MW, whereas Custom duty was only applicable to the power producer having power projects 1000 MW and above.
4. In the recent Notification Customs duty is imposed on small producers of power in SEZ whereas the power producer having mega power projects are exempted from Customs duty. This decision of the Government is just reverse one to levy of Customs duty on Electricity in comparison to earlier notification.
5. The decision of the Government is certainly favourable for the mega power projects in SEZ and harassment to small producers of power in SEZ.
6. It is to be noted that when the small producers of power would be deprived of operation and maintenance benefits along with service tax benefits as SEZ unit for producing power from coal as fuel then there is no justification to imposed Customs duty on Electricity removed from SEZ to DTA.
7. The imposition of Customs duty on Electricity is an additional cost to their production of electricity and would enhance their transaction cost.
8. This imposition of Customs duty on small producers not only curtails their business but also indirectly affects to their PPA having with counterpart customers.
9. The logic behind the decision of the Government to generate revenue by imposing Customs duty on Electrical energy on removal from SEZ to DTA by small producers of power is not justifiable and leaving free hands to the mega power projects to compete in the market.
Suggestions: The Government should take immediately reconsider its decision on imposition of Customs duty on Electrical energy removed from SEZ to DTA to restore facilities as was made available earlier to small producers of power in SEZ, so that power projects of less than 1000 MW will survive otherwise close their business. This article is an attempt to make hear the voice of small producers of power reach the North Block.
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