SSGURU CA SURAJ SATIJA

CUSTOMS

Illustration 5

A material was imported by air at CIF price of 5,000 US$. Freight paid was 1,500 US$ and
insurance cost was 500 US$. The banker realized the payment from importer at the
exchange rate of 71 per dollar. Central Board of Indirect taxes and Customs notified the
exchange rate as 70 per US$. Find the value of the material for the purpose of levying duty.

Answer:

Computation of assessable value

Particulars Amount
CIF value 5000 US $
Less: Freight 1500 US $
Less: Insurance 500 US $
Therefore, FOB value 3000 US $
Assessable value for Customs purpose
FOB value 3000 US $
Add: Freight (20% of FOB value) [Note 1] 600 US $
Add: Insurance (actual) 500 US $
CIF for customs purpose 4100 US $
Exchange rate as per CBIC [Note 2] 70 per US $
Assessable value (` 70 x 4100 US $) 2,87,000

Notes:

(1) If the goods are imported by air, the freight cannot exceed 20% of FOB price [Fifth
proviso to rule 10(2) of the Customs (Determination of Value of Imported Goods)
Rules, 2007].

(2) Rate of exchange determined by CBIC is considered [clause (a) of the explanation to
section 14 of the Customs Act, 1962]
SSGURU CA SURAJ SATIJA

Illustration 6

From the particulars given below, find out the assessable value of the imported goods under
the Customs Act, 1962:

Rs.
(i) Cost of the machine at the factory of the exporter 10,000

(ii) Transport charges from the factory of exporter to the port for shipment 500

(iii) Handling charges paid for loading the machine in the ship 50

(iv) Buying commission paid by the importer 50

(v) Freight charges from exporting country to India 1,000

(vi) Exchange rate to be considered: 1$ = Rs. 70

(vii) Actual insurance charges paid are not ascertainable

Answer:

Computation of assessable value of the imported goods

Particulars Rs

(i) Cost of the machine at the factory 10,000.00

(ii) Transport charges up to port 500.00
(iii) Handling charges at the port 50.00
FOB 10,550.00
(iv) Freight charges up to India 1,000.00
(v) Insurance charges @ 1.125% of FOB 118.69
[Note 1]
CIF 11,668.69

CIF in Indian rupees @ 70/ per $ 8,16,808.30

Assessable Value 8,16,808.30
Assessable Value (rounded off) 8,16,808
SSGURU CA SURAJ SATIJA

Notes:
(1) Insurance charges have been included @ 1.125% of FOB value of goods [Third proviso to
rule 10(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules,
2007].
(2) Buying commission is not included in the assessable value [Rule 10(1)(a)(i) of the
Customs Valuation (Determination of Value of Imported Goods) Rules, 2007]

Illustration 7

Compute export duty from the following data:

1. FOB price of goods: US $ 1,00,000.

2. Shipping bill presented electronically on 26th April.

3. Proper officer passed order permitting clearance and loading of goods for
export (Let Export Order) on 4th May.

4. Rate of exchange and rate of export duty are as under:

Rate of Exchange Rate of Export Duty

On 26th April 1 US $ = 70 10%
On 4th May 1 US $ = 72 8%

5. Rate of exchange is notified for export by Central Board of Indirect taxes and
Customs.

(Make suitable assumptions wherever required and show the workings.)

Answer

Computation of export duty

Particulars Amount

FOB price of goods [Note 1] 1,00,000

SSGURU CA SURAJ SATIJA

Amount (Rs)
Value in Indian currency (US $ 1,00,000 x 70,00,000
70) [Note 2]
Export duty @ 8% [Note 3] 5,60,000

Notes:

1. As per section 14(1) of the Customs Act, 1962, assessable value of the export goods is
the transaction value of such goods which is the price actually paid or payable for the
goods when sold for export from India for delivery at the time and place of
exportation.

2. As per third proviso to section 14(1) of the Customs Act, 1962, assessable value has to
be calculated with reference to the rate of exchange notified by the CBIC on the date of
presentation of shipping bill of export.

3. As per section 16(1)(a) of the Customs Act, 1962, in case of goods entered for export,
the rate of duty prevalent on the date on which the proper officer makes an order
permitting clearance and loading of the goods for exportation, is considered.

Illustration 9

Foreign Trade International Ltd. has imported one machine from England. It has
given the following particulars
(i) Price of machine 8,000 UK Pounds
(ii) Freight paid (air) 2,500 UK Pounds
(iii) Design and development charges paid 500 UK Pounds
in UK
(iv) Commission payable to local agent of
exporter @ 2% of price of machine, in
Indian Rupees
(v) Date of bill of entry 24th October
(Rate BCD 10%;
Exchange rate as
notified by CBIC
100 per UK
SSGURU CA SURAJ SATIJA

Pound)

(vi) Date of arrival of aircraft 20th October

(Rate of BCD 20%;
Exchange rate as
notified by CBIC
98 per UK Pound)
(vii) Integrated tax is 12%
(viii) Insurance charges have been actually paid but details are
not available.

Compute the total customs duty and integrated tax payable by Foreign Trade International Ltd.
Note: Ignore GST Compensation Cess.

Answer
Computation of total duty and integrated tax payable

Particular Amount
Price of machine 8,000 UK pounds
Add: Design and development charges [Note 1 500 UK pounds
Total 8,500 UK pounds

Total in rupees @ 100 per pound [Note 2] 8,50,000.00

Add: Local agency commission [Note 1] 16,000.00
(2% of 8000 UK pounds) = 160 UK pounds × 100
FOB value as per Customs 8,66,000.00
Add: Air freight (8,66,000 x 20%) [Note 3] 1,73,200.00
Add: Insurance @ 1.125% of customs FOB [Note 4] 9,742.50
CIF Value 10,48,942.50
Assessable value (rounded off) 10,48,942.00
Add: Basic custom duty @ 10% [Note 5] 1,04,894.20
Add: Social Welfare Surcharge @ 10% on ` 1,04,894.20 10,489.42
SSGURU CA SURAJ SATIJA

Total 11,64,325.62
Add: Integrated tax @ 12% [Note 7] 1,39,719.07
Total duty and integrated tax payable (Rounded off) 2,55,102
(` 1,04,894.20+ ` 10,489.42+ ` 1,39,719.07)
Note:

1. Design and development charges paid in UK and commission paid to local agent (since it is
not buying commission) are includible in the assessable value [Rule 10 of the Customs
(Determination of Value of Imported Goods) Rules, 2007]

2. The rate of exchange notified by the CBIC on the date of presentation of bill of entry has
been considered [Section 14 of the Customs Act, 1962].

3. If the goods are imported by air, the freight cannot exceed 20% of FOB price [Fifth proviso
to rule 10(2) of the Customs (Determination of Value of Imported Goods) Rules, 2007].

4. Where the insurance charges are not ascertainable, such cost is taken as 1.125% of FOB
value of the goods [Third proviso to Rule 10(2) of the Customs (Determination of value of
Imported Goods) Rules, 2007

5. Section 15 of the Customs Act, 1962 provides that rate of duty shall be the rate in force on
the date of presentation of bill of entry or the rate in force on the date of arrival of aircraft,
whichever is later

6. Integrated tax is levied on the sum total of the assessable value of the imported goods,
customs duties and applicable social welfare surcharge.

Illustration 10

Compute the total duty and integrated tax payable under the Customs Law on an
imported equipment based on the following information:

(i) Assessable value of the imported equipment US $ 10,100

(ii) Date of bill of entry is 25 th April. Basic customs duty on this date is 10% and
exchange rate notified by the Central Board of Indirect taxes and Customs is US $ 1 =
Rs.65.
(iii) Date of entry inwards is 21 st April. Basic customs duty on this date is 20% and
exchange rate notified by the Central Board of Indirect taxes and Customs is US $ 1 =
SSGURU CA SURAJ SATIJA

Rs.70.

(iv) Integrated tax: 12%

(v) Social Welfare surcharge 10%

Make suitable assumptions where required and show the relevant workings and round off
your answer to the nearest rupee.

Note: Ignore GST Compensation Cess.

Answer

Computation of total customs duty and integrated tax payable

Particulars Rs.
Assessable value ($ 10,100 x 65) [Note-1] 6,56,500.00
Add: Basic custom duty @ 10% [Note-2] 65,650.00
Add: Social Welfare Surcharge @ 10% on ` 65,650 6,565.00
Total 7,28,715.00
Add: Integrated tax @ 12% [Note-3] 87,445.80
Total Customs duty and integrated tax payable 1,59,660
(rounded off to nearest rupee)

Notes:

1. Rate of exchange notified by CBIC as prevalent on the date of filing of bill of entry
would be the applicable rate [Proviso to section 14(1) of Customs Act,1962].

2. Rate of duty would be the rate as prevalent on the date of filing of bill of entry
or entry inwards whichever is later. [Proviso to section 15 of the Customs Act,
1962].

3. Integrated tax is levied on the sum total of the assessable value of the imported
goods, customs duties and applicable social welfare surcharge.
SSGURU CA SURAJ SATIJA

Illustration 11

Assessable value of an item imported is 1,00,000. Basic customs duty is 10% integrated
tax is 12%, and social welfare surcharge is 10% on duty. Compute the amount of total
customs duty and integrated tax payable.

Note: Ignore GST Compensation Cess.

Answer

Computation of total customs duty and integrated tax payable

Particulars Amount
1. Assessable Value 1,00,000
2. Basic customs duty @ 10% 10,000
3. Add: Social Welfare surcharge* @ 10% on 10,000 1000
4. Sub-total 1,11,000
5. Integrated tax @ 12% of ` 1,11,000 13,320
6. Total customs duty and integrated tax payable 24,320
[(2) + (3) + (5)]

*Social Welfare surcharge is presently exempt on IGST and GST compensation cess

Illustration 12

From the following particulars, calculate total customs duty and integrated tax payable:

(i) Date of presentation of bill of entry: 20th June [Rate of BCD 20%; Inter-bank
exchange rate:
61.60 and rate notified by CBIC 70].

(ii) Date of arrival of aircraft in India: 30th June [Rate of BCD 10%; Inter-bank
exchange rate:
61.80 and rate notified by CBIC 73.00].

(iii) Rate of Integrated tax: 12%. Ignore GST Compensation Cess.

SSGURU CA SURAJ SATIJA

(iv) CIF value 2,000 US Dollars; Air freight 500 US Dollars, Insurance cost 100 US Dollars.

(v) Social Welfare Surcharge 10%

Answer
Computation of total customs duty and integrated tax payable
Particulars Amount
CIF value 2000 US Dollars

Less: Freight 500

Insurance 100 600 US Dollars

FOB Value 1400 US Dollars

Add: Air Freight [Note1] 280

Insurance (actual amount) 100 380 US Dollars

1780 US Dollars
Rs.

Value @ 70.00 [Note 2] 1,24,600.00

Assessable Value 1,24,600.00

Basic Custom Duty @ 10% (a) [Note 3] 12,460.00

Add: Social Welfare Surcharge @ 10% on 12,460 1,246.00

(b)
Sub-total 1,38,306.00

Integrated tax (12% on 1,38,306) (c) [Note 4] 16,596.72

Total duty and integrated tax (a +b + c) (rounded 30,303

off)

Notes:

1. If the goods are imported by air, the freight cannot exceed 20% of FOB price [Fifth
proviso to Rule 10(2) of the Customs (Determination of Value of Imported
Goods)Rules, 2007].

2. Rate of exchange notified by CBIC on the date of presentation of bill of entry would
be the applicate rate. [Proviso to Section 14(1) of the Customs Act, 1962].
SSGURU CA SURAJ SATIJA

3. Rate of duty would be the rate as prevalent on the date of filing of bill of entry or
arrival of aircraft, whichever is later [proviso to section 15 of the Customs Act,
1962].

4. Integrated tax is levied on the sum total of the assessable value of the imported
goods, customs duties and applicable social welfare surcharge.

Illustration 13

15,000 chalices were imported for charitable distribution in India by XY Charitable Trust.
The Trust did not pay either for the cost of goods or for the design and development
charges, which was borne by the supplier. Customs officer computed its FOB value at USD
20,000 (including design and development charges), which was accepted by the Trust.
Other details obtained were as follows:

Sl. No. Particulars Amount

1. Freight paid (air) (in USD) 4,500
2. Design & development charges paid in USA (in USD) 2,500
3. Design & development charges paid in USA (in USD) 2,500
4. Commission payable to an agent in India (in) 12,500
Exchange rate notified by CBIC and rate of basic duty as
follows:

Date of Bill of Entry BCD Exchange Rate

in 8 th September 20% Rs. 70

Date of arrival of aircraft BCD Exchange Rate

in 30 th September 10% Rs.72
5. Integrated tax 12%
6. Social Welfare surcharge as applicable
Compute the amount of total customs duty and integrated tax payable on importation of
chalices. Make suitable assumptions where required. Working notes should form part of
SSGURU CA SURAJ SATIJA

your answer.
Note: Ignore GST Compensation Cess.

Answer

Computation of total customs duty and integrated tax payable

Particulars Amount

FOB value computed by Customs Officer (including 20,000 US $

design and development charges)
Exchange rate [Note 1 70 per $

FOB value computed by Customs Officer (in rupees) 14,00,000.00

Add: Commission payable to agent in India 12,500.00

FOB value as per Customs 14,12,500.00

Add: Air freight (14,12,500 × 20%) [Note 2] 2,82,500.00

Add: Insurance (1.125% of 14,12,500) [Note 3] 15,890.63

CIF value for customs purposes 17,10,890.63

Assessable value 17,10,890.63

Add: Basic custom duty @ 10% (`17,10,890.63× 10%) 1,71,089

– rounded off [Note 4]
Add: Social Welfare surcharge @ 10% on 1,71,089 17,109
rounded off
Total 18,99,089

Integrated tax @ 12% (18,99,089× 12%) [Rounded off] 2,27,890

[Note 5]
Total customs duty and integrated tax payable( 4,16,088
1,71,089 + 17,109 + 2,27,890)

Note:

1. Rate of exchange notified by CBIC on the date of filing of bill of entry has to be
considered [Third proviso to section 14 of the Customs Act, 1962].
2. In case of goods imported by air, freight cannot exceed 20% of FOB value [fifth
SSGURU CA SURAJ SATIJA

proviso to rule 10(2) of the Customs (Determination of Value of Imported Goods)

Rules, 2007].
3. Insurance charges, when not ascertainable, have to be included @ 1.125% of FOB
value of goods [Third proviso to rule 10(2) of the Customs Valuation
(Determination of Value of Imported Goods) Rules, 2007]
4. Rate of duty will be the rate in force on the date of presentation of bill of entry or
on the date of arrival of the aircraft, whichever is later [Proviso to section 15 of the
Customs Act, 1962].

5. Integrated tax is levied on the sum total of the assessable value of the imported
goods, customs duties and applicable social welfare surcharge.

Illustration 15

F. Ltd. imported a machine from UK in May . The details in this regard are as under:

(i) FOB value of the machine: 10,000 UK Pound

(ii) Freight (Air): 3,000 UK Pound

(iii) Licence fee, the buyer was required to pay in UK: 400 UK Pound

(iv) Buying commission paid in India 20,000

(v) Date of bill of entry was 20 th May and the rate of exchange notified by CBIC on this date
was
99.00 per one pound. Rate of BCD was 7.5%.

(vi) Date of arrival of aircraft was 25 th May and the rate of exchange notified by CBIC on
this date was 98.50 per pound and rate of BCD was 10%.

(vii) Integrated tax was 12% and ignore GST Compensation Cess.

(viii) Insurance premium details were not available.

You are required to compute the total customs duty and integrated tax payable on the
importation of machine. You may make suitable assumptions wherever required.
SSGURU CA SURAJ SATIJA

Answer
Computation of assessable value and total customs duty and integrated tax payable
by F Ltd.

Particular Amount
FOB value 10,000
Add: License fee required to be paid in UK [Note – 1] 400
Customs FOB value 10,400
Exchange rate is 99 per £ [Note – 2]
Rs.
Value in rupees 10,29,600.00
Add: Air freight [Restricted to 20% of ` 10,29,600 2,05,920.00
(customs FOB value)] [Note – 3]
Insurance @ 1.125% of ` 10,29,600 [Note – 4] 11,583.00
Buying commission is not includible in the assessable
value [Note – 5]
CIF Value 12,47,103.00
Assessable value 12,47,103.00
Rate of duty is 10% [Note – 6]
Add: Basic custom duty @ 10% (` 12,47,103 × 10%) – 1,24,710
rounded off (A
Add: Social Welfare Surcharge (10% of ` 1,24,710) 12,471
[rounded off] (B)
Value for integrated tax 13,84,284
Add: Integrated tax @ 12% -rounded off (C) [Note – 7] 1,66,114
Total customs duty and integrated tax payable [(A) 3,03,295
+ (B) + (C)]

Note:

1. Licence fee relating to imported goods payable by the buyer as a condition of sale
is includible in the assessable value - Rule 10(1)(c) of the Customs Valuation
(Determination of Value of Imported Goods) Rules, 2007 [hereinafter referred to
as Customs Valuation Rules].

2. Rate of exchange notified by CBIC on the date of filing of bill of entry has to be
SSGURU CA SURAJ SATIJA

considered [Third proviso to section 14 of the Customs Act, 1962].

3. In case of goods imported by air, freight cannot exceed 20% of FOB value [Fifth
proviso to rule 10(2) of the Customs Valuation Rules].

4. Insurance charges, when not ascertainable, have to be included @ 1.125% of FOB

value of goods [Third proviso to rule 10(2) of the Customs Valuation Rules].

5. Buying commission is not included in the assessable value [Clause (a)(i) of sub-
rule (1) of rule 10 of the Customs Valuation Rules].

6. Rate of duty will be the rate in force on the date of presentation of bill of entry or
on the date of arrival of the aircraft, whichever is later [Proviso to section 15 of the
Customs Act, 1962].

7. Integrated tax is levied on the sum total of the assessable value of the imported
goods, customs duties and applicable social welfare surcharge.
SSGURU CA SURAJ SATIJA