APRIL 25, 2017

By Ashwani Kumar, Consultant

PRIOR to the Finance Act, 2017 all bonafide gift parcels and goods for personal use imported through courier mode were being classified as per the description under applicable tariff headings. However, due to the amendment of Note 4(c) of Chapter 98, bonafide gifts and other goods for personal use imported through Courier mode will now be classified under Heading 9804.

The duty rates before the notification of the Finance Act 2017 stood as under:

(i) For bonafide gifts upto twenty thousand rupees (Rs. 20,000/- )(FOB) - Nil duty vide Notification 171/93-Cus dated 16.09.1993, as amended.

(ii) For bonafide gifts of value beyond Rs. 20,000 at rates as applicable under the respective Chapter heading. [Customs duty is charged on the full value of such goods if the value exceeds Rs. 20,000 even if they are declared as gifts].

(iii) For goods imported of personal use (including online purchase) at rates as applicable under the respective Chapter heading.

1. Bonafide gifts:

(i) Bonafide gifts upto value Rs. 20,000 /- (FOB) – will be exempted from duty under Notification 171/93-Cus dated 16.09.1993 as amended by Not. No. 13/2016- Cus. dated 01.03.2016.

(ii) Bonafide gifts beyond Rs. 20,000 classified under CTH 9804, will attract duty at 35% BCD + 3% cess + 4% SAD (41.492%) plus it will be cleared after adjudication for Policy violation.

The above point (ii) is contrary to the provisions of the FTP. It may be mentioned that there is no upper limit for goods which can be imported as bonafide gifts where such goods are freely importable under ITC (HS) on account of the provisions under Para 2.25 of the Foreign Trade Policy 2015 -2020 which reads as under:

2.25 Import of Gifts

Import of gifts shall be ‘free' where such goods are otherwise freely importable under ITC (HS). In other cases, such imports shall be permitted against an authorisation issued by DGFT.

2. Import of goods for personal use consequent to amendment:

(iii) Goods intended for personal use or imported for personal use (including online purchase) upto a value of two thousand rupees (Rs. 2000 /-)[CIF], may be cleared without a licence on payment of duty at 10% BCD + 3% Cess + 4% SAD (14.712%) [Refer to S. No. 517 of Notification 12/2012- Cus. dated 17.03.2012]

(iv) Goods imported for personal use above Rs. 2000/- (CIF) not prohibited and exempted from any prohibition in respect of the imports thereof under FTO, 1993 may be cleared after adjudication for policy violation under CTH 9804 and on payment of merit rate of duty as applicable under 9804 at 35% BCD + 3% cess + 4% SAD (41.492%).

The above position is again in contradiction to the provisions of Foreign Trade (Exemption from application of Rules in certain cases) Order 1993 (FTO, 1993 in short). It is noteworthy that there is no value limit on goods imported for personal use except consumer electronic goods as seen from the DGFT Notification No. 22/2015 -2020 dated 12.08.2016, where such goods are freely importable under ITC (HS).

In terms of DGFT Notification No. 22/ 2015-2020 dated 12th August, 2016, the value of consumer electronic items [mentioned at Clause 3(1)(i)(h) of the FTO, 1993] has been enhanced from Rs.2000(CIF) to Rs.50000 (CIF). The explanation given at the end of the notification reads as:

Effect of Notification: C.I.F. value of import of consumer electronic items at any one time by any person through post or otherwise for personal use is enhanced to Rs. 50,000.

Thus, it is abundantly clear that as far as restriction on goods is concerned, it is applicable only for goods mentioned at Clause 3(1)(i)(a to h) of the FTO, 1993 and does not apply to goods imported by any person for his personal use and that there is no value limit on goods imported for personal use except Consumer electronic goods as per the DGFT notification 22/2015-2020 referred to.

The CBEC and DGFT websites still indicate the Policy and condition/value limits for import under Heading 9804 as under:

In view of the above discrepancies and ambiguities pointed out, CBEC and DGFT need to make necessary amendments in CHP 98 w.r.t. the Policy, conditions and value limits and issue Circular for the benefit of trade and field formations so as to have uniformity at all the stations where Courier and postal packages are cleared. Clarification should also be given as to whether printed books gifted or imported for personal use (including online purchase) would require IEC for claiming duty exemption under Sr. No 272 of Notification 12/2012 Cus dated 17/03/2012 as amended.

(The views expressed are strictly personal.)