Indirect Tax Updates: January-February 2022

Customs

No Social Welfare Surcharge payable on goods exempted from basic and other customs duties

The Department of Revenue (Tax Research Unit) has issued a clarification on the applicability of Social Welfare Surcharge (SWS) on goods exempted from basic customs duty or other customs duties/ cesses.

The SWS is collected by the Central Government on imported goods under Section 110 of the Finance Act, 2018. It is levied and collected as a duty of customs and is calculated at the rate of 10% on the aggregate of the customs duties, taxes and cesses.

As the SWS is calculated on the aggregate of customs duty payable on the import of goods and not on the value of the imported goods, it has been clarified that the SWS would be ‘Nil’ in cases where the aggregate of customs duty is zero even though SWS has not been specifically exempted.

This clarification helps to settle the uncertainty on applicability of SWS where customs duty had been exempted. Certain field formations had been taking a view that even where the customs duty was exempted, SWS was payable on notional customs duty determined at the tariff rate.

Country of Origin Certificates cannot be undone without following due process laid down under the Treaty

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad has set aside the confirmation of differential duty demand by the Customs department on the ground of Country of Origin (COO) Certificate being invalid.

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