NMBA FM 03: TAX PLANNING AND MANAGEMENT

Unit I
Nature and Scope of Tax Planning: Nature, Objectives of Tax Management, Tax Planning, Tax
Avoidance & Tax Evasion, Assessment Year, Previous Year, Assessee – types, Residential status,
Non-resident Indians.

Unit II
Tax on Individual Income – Computation of tax under the heads of Salaries, Income from House
Property, Profits & Gains of Business, Capital Gains & Income from Other Sources. Tax deductible
at source

Unit III
Corporate Income Tax: Tax concessions and incentives for corporate decisions. Tax planning for
depreciation; Treatment of losses & unabsorbed items; Carry forward and set off losses. Tax and
business reorganizations: merger and amalgamation, Tax planning regarding Employees
Remuneration, Tax appeals, Revision & Review.

Unit IV
Wealth tax on closely held companies; Valuation of assets; Filing of returns; Assessment; Appeals;
Review; Revision and Rectification.

Unit V
Central Excise Act 1994 and Excise planning; Customs Act and Customs Duties Planning

SUGGESTED READINGS:
1) Bhatia H L - Public Finance (Vikas)
2) Lakhotia R N - How to Save Wealth Tax (Vision Book 2001, 9th Ed.)
3) Prasad Bhagwati - Income Tax Law & Practice (Vishwa Prakashan)
4) Santaram R - Tax Planning by Reports (Taxmann, 1978).
5) Singhania V K - Direct Taxes, Law & Practice (Taxmann, 40th Ed.)
6) Datey V.S. - Indirect Taxes – Law & Practice (Taxmann, 20th Ed.)

1
 Unit I
Nature and Scope of Tax Planning: Nature, Objectives of Tax Management, Tax Planning, Tax
Avoidance & Tax Evasion, Assessment Year, Previous Year, Assessee – types, Residential status,
Non-resident Indians.

Meaning of Tax:
Tax is the financial charge or the fee imposed by the Government on Income, Commodity or
activity.

Types of Tax:
Taxes are broadly divided into two parts i.e. direct taxes and indirect taxes.

Direct tax- The tax that is levied directly on the income or wealth of a person is called direct tax.
Under direct taxes person who pays the tax bears the burden of it. e.g.- Income Tax, Wealth Tax

Indirect tax- In Indirect taxes the person who pays the tax , shifts the burden on the person who
consumes the goods or services e.g. service tax, VAT, Excise duty etc.

Income Tax Act:

The first Income Tax act was introduced in 1860. The present Law of Income tax contained in the
income tax act, 1961. It provides for levy, administration, collection and recovery of income tax.
The income tax law comprises the Income Tax Act 1961, Income Tax Rules 1962, Notifications
and circulars issued by CBDT, Annual Finance Acts and Judicial pronouncements by Supreme
courts and High courts.
The Income Tax is governed by Central Board of Direct Taxes and it is the part of the
Department of Revenue under the Ministry of Finance, Government of India.

Meaning of Income Tax:

Income tax is such a direct tax which is imposed upon the income of a person.

Nature of Income Tax

 Income tax is a direct Tax
 Income tax is a central tax
 Income tax is computed upon Income of Previous Year
 Exempted Limit of Income
 Income Tax is payable by every Assessee
 Income Tax is computed on the basis of rates of income tax applicable in current
assessment year.

Objects of Charging Income Tax:

 The government has to perform several functions for the welfare of the country, for this
purpose government needs money.
 Removing Disparities
 Encouragement to Saving and investment
 Capital Formation

What is Tax Planning?

Tax planning is the analysis of one’s financial situation from a tax efficiency point of view so as to
plan one’s finances in the most optimized manner. Tax planning allows a taxpayer to make the
best use of the various tax exemptions, deductions and benefits to minimize their tax liability over a

2
 financial year. Tax planning is a legal way of reducing income tax liabilities, however caution has to
be maintained to ensure that the taxpayer isn’t knowingly indulging in tax evasion or tax avoidance.

Tax Planning in India:

In India, there are a number of tax saving options for all taxpayers. These options allow for a wide
range of exemptions and deductions that help in limiting the overall tax liability. The deductions are
available from Sections 80C through to 80U and can be claimed by eligible taxpayers. These
deductions are made against the quantum of tax liabilities. There are various other sections under
the Income Tax Act, 1961 that can reduce your tax liabilities such as exemptions and tax credits.
When tax planning is done inside the frameworks defined by the respective authorities, it is fully
legal and in fact a smart decision. However, using shady techniques to avoid tax payments is
illegal and you may get into trouble for doing so. Tax saving practices include tax avoidance, tax
evasion and tax planning. Out of these tax planning is the only legal manner of reducing your tax
liabilities. The government offers the different opportunities to save on taxes with the intention of
reducing tax burden on a taxpayer through legal income tax planning methods.

Corporate Tax Planning:

Corporate tax planning is a means of reducing tax liabilities on a registered company. The common
ways to do this includes taking deductions on business transport, health insurance of employees,
office expenses, retirement planning, child care, charitable contributions etc. Through the various
tax deductions and exemptions provided under the Income Tax Act, a company can substantially
reduce its tax burden in a legal way. Once again, tax planning should not be confused with tax
avoidance and all the planning should be done within the framework of law.
Increasing profits for a company results in higher tax liabilities. As such, it becomes imperative for
them to devote enough time on tax planning to reduce the liabilities. With proper tax planning,
the direct tax and indirect tax burden is reduced at times of inflation. It also assists in proper
planning of expenses, capital budget and sales and marketing costs, among others. A good tax
planning results out of:
 Disclosing correct information to relevant IT departments.
 Not being ignorant of applicable tax laws as well as court judgements regarding the same.
 Legal tax planning should be done which is under the purview of law.
 Planning must be done with business objectives in mind and should be flexible enough to
incorporate possible changes in the future.

Types of Tax Planning:

 Purposive tax planning: Planning taxes with a particular objective in mind
 Permissive tax planning: Tax planning that is under the framework of law
 Long range and Short range tax planning: Planning done at the start and end of a fiscal year
respectively.

Tax Saving Objectives:

The primary objectives of your tax planning should be the following:
 Reduction in overall tax liability
 Economic stability
 Growth of economy
 Litigation minimization
 Productive investment.

3
Basic Concepts of Income Tax
1. Assessee and Deemed Assessee
2. Person
3. Assessment Year
4. Previous Year
5. Income
6. Gross Total Income
7. Total Income
8. Casual Income
9. Agriculture Income
10. Tax Evasion
11. Tax Avoidance
12. Tax Planning

1. Assessee
Income Tax Act 1961 (Act no. 43) defines 'assessee' as a person by whom any tax or any other
sum of money is payable under this Act, and includes -
 Every person in respect of whom any proceeding under this Act has been taken for the
assessment of his income or of the income of any other person in respect of which he is
assessable, or of the loss sustained by him or by such other person, or the amount of refund
due to him or to such other person;
 Every person who is deemed to be an assessee under any provision of this Act;
 Every person who is deemed to be an assessee in default under any provision of this Act;

1.1 (Deemed assessee)

Deemed assessee are those persons who are treated as assessees although they are not- it
includes
1. Legal representative of a deceased person
2. Trustee of a trust
3. Agent of any non-resident
So the income becomes taxable in the hands of these deemed assessees.

2. Person
The income tax is charged in respect of the total income of the previous year of every 'person'.
Here the person means--

 an individual : a natural human being i.e. male, female minor or a person of sound or
unsound mind
 a Hindu undivided family (HUF)
 a company :
 a firm i.e. a partnership firm
 an association of persons or a body of individuals whether incorporated or not
 A local authority-- means a municipal committee, district board, body of port commissioners,
or other authority legally entitled to or entrusted by the government with the control and
management of a municipal or local fund.
 Every artificial, juridical person, not falling within any of the above categories.

3. Assessment Year
Assessment year means the period of twelve months commencing on 1st April every year and
ending on 31st March of the next year. Income of previous year of an assessee is taxed during the
following assessment year at the rates prescribed by the relevant Finance Act.

4
4. PreviousYear
the Financial Year in which the income is earned is known as the previous year. Any financial year
begins from 1st of April and ends on subsequent 31st March. The financial year beginning on 1st of
April 2012 and ending on 31st March 2013 is the previous year for the assessment year 2013-
2014.
Understanding concept of previous year is very simple, it’s basically a period of upto 12 months just
preceding the assessment year. Since financial year is always a period of 12 months and income / source of
income may be smaller than of 12 months, so the concept / term of previous year is used under Income Tax
to cover income or source of income coming into existence after the commencement of financial year and to
cover income or source of income coming to an end before completion of the financial year. Either way any
income or source of income is not required to be spread to the whole of financial year, it may be part of the
same and the same may be called a previous year.
Accordingly Previous Year in the case of a continuing business shall be the Financial Year immediately preceding the
relevant Assessment Year, whereas Previous Year in the cases of newly set up business or for new source of income
shall be the period commencing from the date of new business set up or source of income coming into existence to the
forthcoming 31st March of that Financial Year immediately preceding the relevant Assessment Year.

5. Income
Income tax is levied on the income of an assessee. No definition of income has been given in
Income Tax Act. Section 2(24) of Act only indicates about inclusion of certain items out of which
important are given below:
 Profits and gains
 The value of any perquisite or profit in lieu of salary taxable
 Any special allowances or benefit specially granted to the assessee to meet expenses for
performing his duties
 City Compensatory Allowances/Dearness Allowances
 Capital Gain
 Insurance Profit
 Banking Income
 Winning from Lottery
 Profits generated from any Business or Profession

The above definition of income is not complete. Besides the above item, other receipts and
benefits are also treated incomes which are covered under Income Tax Act.

6. Gross Total Income

As per the Income Tax Act Income is Chargeable to tax under five heads, those being:
 Salaries
 Income from House Property
 Profits and Gains from Business or Profession
 Capital Gains.
 Income from Other Sources
The aggregate income under these heads is termed as ‘Gross Total Income’. It is always
calculated before providing exemptions under Chapter VIA, i.e., deductions from Section 80CCC to
80U.

5
7. Total Income
Total Income stated simply is the Gross Total Income as reduced by amount permissible as
deduction under Sections 80CCC to 80U.

8. Casual Income [Sec.56 (2) (ib)]

If an assessee, by chance or without any pre-expectation or accidently gets any income which is of
non-recurring nature it is regarded as casual income.
It includes-
 Winnings from Lotteries;
 Winnings from Horse Races, etc.;
 Winnings from Crossword puzzles;
 Winnings from Gambling and Betting;
 Winnings from Card games, etc.
 Winnings from game show or entertainment program on television or electronic mode
e.g., Who wants to be a millionaire?, Big Brother, etc.

9. Agriculture Income
As per Income Tax Act income earned from any of the under given three sources meant
Agricultural Income;
 Any rent received from land which is used for agricultural purpose.
 Any income derived from such land by agricultural operations including processing of
agricultural produce, raised or received as rent in kind so as to render it fit for the market, or
sale of such produce.
 Income attributable to a farm house subject to the condition that building is situated on or in
the immediate vicinity of the land and is used as a dwelling house, store house etc.
Now income earned from carrying nursery operations is also considered as agricultural income and
hence exempt from income tax.

In order to consider an income as agricultural income certain points have to be kept in mind:
 There must me a land.
 The land is being used for agricultural operations.
 Agricultural operation means that efforts have been induced for the crop to sprout out of the
land.
 If any rent is being received from the land then in order to assess that rental income as
agricultural income there must be agricultural activities on the land.
 In order to assess income of farm house as agricultural income the farm house building
must be situated on the land itself only and is used as a store house/dwelling house.

Certain income which is treated as Agriculture Income;

(a) Income from sale of replanted trees.
(b) Rent received for agricultural land.
(c) Income from growing flowers and creepers.
(d) Share of profit of a partner from a firm engaged in agricultural operations.
(e) Interest on capital received by a partner from a firm engaged in agricultural operations.
(f) Income derived from sale of seeds.

Certain income which is not treated as Agricultural Income;

(a) Income from poultry farming.
(b) Income from bee hiving.
(c) Income from sale of spontaneously grown trees.
(d) Income from dairy farming.

6
(e) Purchase of standing crop.
(f) Dividend paid by a company out of its agriculture income.
(g) Income of salt produced by flooding the land with sea water.
(h) Royalty income from mines.
(i) Income from butter and cheese making.
(j) Receipts from TV serial shooting in farm house is not agriculture income.

10. Tax Evasion

Tax Evasion term is usually used to mean 'illegal arrangements where liability to tax is hidden or
ignored i.e. the tax payer pays less than he is legally obligated to pay hiding income
or information from tax authority. Thus, here the tax liability is reduced by "illegal and
fraudulent" means.

11. Tax Avoidance

Tax Avoidance refers to the legal means so as to avoid or reduce tax liability, which would be
otherwise incurred, by taking advantage of some provision or lack of provision in the law. Thus, in
this case tax payer tries to reduce his tax liability but here the arrangement will be legal, but may
not be as per intent of the law. Thus, in this case, tax payer does not hide the key facts but is still
able to avoid or reduce tax liability on account of some loopholes or otherwise.
12. Tax-planning
It is a way to reduce tax liability by taking full advantages provided by the act through various
exemptions, deductions, rebates and relief.

Concept of Residential Status

1. Different taxable entities - All taxable entities are divided in the following categories for the
purpose of determining residential status:
a. An individual;
b. A Hindu undivided family;
c. A firm or an association of persons;
d. A joint stock company; and
e. Every other person.

2. Different residential status - An assessee is either: (a) resident in India, or (b) non-resident in
India. However, a resident individual or a Hindu undivided family has to be (a) resident and
ordinarily resident, or (b) resident but not ordinarily resident. Therefore, an individual and a Hindu
undivided family can either be:
a. resident and ordinarily resident in India; or
b. resident but not ordinarily resident in India; or
c. non-resident in India

All other assessees (viz., a firm, an association of persons, a joint stock company and every other
person) can either be:
a. resident in India; or
b. non-resident in India.

3. Residential status for each previous year - Residential status of an assessee is to be

determined in respect of each previous year as it may vary from previous year to previous year.

4. Different residential status for different assessment years - An assessee may enjoy different
residential status for different assessment years. For instance, an individual who has been

7
regularly assessed as resident and ordinarily resident has to be treated as non-resident in a
particular assessment year if he satisfies none of the conditions of section 6(1).

5. Resident in India and abroad - It is not necessary that a person, who is “resident” in India,
cannot become “resident” in any other country for the same assessment year. A person may be
resident in two (or more) countries at the same time. It is, therefore, not necessary that a person
who is resident in India will be non-resident in all other countries for the same assessment year.

Residential Status
As per section 6(1), in order to find out whether an individual is “resident and ordinarily resident” in
India, one has to proceed as follows—
Step 1 First find out whether such individual is “resident” in India.
Step 2 If such individual is “resident” in India, then find out whether he is “ordinarily resident” in
India.

Basic Conditions To Test As To When An Individual Is Resident In India - Under section 6(1)
an individual is said to be resident in India in any previous year, if he satisfies at least one of the
following basic conditions—
(a) He is in India in the previous year for a period of 182 days or more
(b) He is in India for a period of 60 days or more during the previous year and 365 days or
more during 4 years immediately preceding the previous year

Note: In the following two cases, an individual needs to be present in India for a minimum of 182
days or more in order to become resident in India:
 An Indian citizen who leaves India during the previous year for the purpose of taking
employment outside India or an Indian citizen leaving India during the previous year as a
member of the crew of an Indian ship.
 An Indian citizen or a person of Indian origin who comes on visit to India during the previous
year (a person is said to be of Indian origin if either he or any of his parents or any of his
grandparents was born in undivided India).

Resident and Ordinarily Resident

In brief it can be said that an individual becomes resident and ordinarily resident in India if he
satisfies at least one of the basic conditions and the two additional conditions

Resident but Not Ordinarily Resident

Case 1 if he satisfies at least one of the basic conditions but none of the additional conditions
Case 2 if he satisfies at least one of the basic conditions and one of the two additional conditions

Non-Residential Status
An individual is a non-resident in India if he satisfies none of the basic conditions. In the case of
non-resident, additional conditions are not relevant.

Exempted incomes for all Assessee

1. Agriculture Income
2. Sum received from Hindu Undivided Family
3. Share of a partner in firm's Income
4. Profits of Newly Established Undertakings in free Trade zone

8
 5. Profits of Newly Established Undertakings in Special Economic zone
6. Compensation received by victims of Bhopal Gas Leak Disaster
7. Sum received from LIC
8. Sum received from P.P.F.
9. Scholarships
10. Allowances of M.P.'s & M.L.A.
11. Awards or Reward
12. Family pension to family members of Armed Forces
13. Interest, Premium or Bonus on Specific Investment
14. Dividend from Domestic Company
15. Income of Infrastructure Debt Fund

Incidence of Tax for Different Taxpayers

9
10
 Unit II
Tax on Individual Income – Computation of tax under the heads of Salaries, Income from House
Property, Profits & Gains of Business, Capital Gains & Income from Other Sources. Tax deductible
at source

Unit III
Corporate Income Tax: Tax concessions and incentives for corporate decisions. Tax planning for
depreciation; Treatment of losses & unabsorbed items; Carry forward and set off losses. Tax and
business reorganizations: merger and amalgamation, Tax planning regarding Employees
Remuneration, Tax appeals, Revision & Review.

Unit IV
Wealth tax on closely held companies; Valuation of assets; Filing of returns; Assessment; Appeals;
Review; Revision and Rectification.

11
Unit V
Central Excise Act 1994 and Excise planning; Customs Act and Customs Duties Planning
The law of Central Excise duties is governed by the following:
 1.Central Excise Act 1994

 2.Central Excise tariff Act 1985

 3.Central Excise Rules ,1944

Central Excise Act 1994

This is the basic law related to the levy and collection of duties of central excise .However this Act
does not contain the rate at which duties are imposed.

Central Excise Tariff Act, 1985

This Act classifies various goods on which central excise duties are levied and prescribes the rates
at which the duty is payable.

Central Excise Rules, 1944

All manufacturers of excisable goods are required to register under these rules .The registration is
valid as long as production activity continues and no renewals are necessary

Types of Excise Duties

1. Basic duty of central excise

It imposed on all excisable goods other than salt produced or manufactured in India. This duty is
levied at the rates specified in the First schedule to Central Excise Tariff Act 1985. The rate of
basic excise duty is 16% w.e.f. 1st march 2000. Some products are either exempted or partially
exempted.

2. Specific duty of excise

The excise duty is levied with a special rate in addition to basic rate on some specific items. Some
commodities like Motor car, tyres, soft drinks, AC, etc are charged at 16% + 8% i.e. 24%. Tobacco
products are charged at 16% + 16% i.e. 32%.

3. Education cess on excise duty

Education cess is a duty of excise that has to be calculated on the aggregate of all duties of
excise, including special excise duty or any other duty of excise.

4. Excise duty on clearances by 100 % EOUs

12
100 per cent Export –oriented Units are expected to export all their production .However ,if they
clear their final product in the domestic tariff area, the rate of excise duty will be equal to that of the
customs duty on like article imported in India.

Taxable event for central excise duty

Taxable event for charge of duty of central excise is the manufacturer or production of goods in
India.

In this context, the Supreme Court has observed:

Excise duty is not directly on the goods, but manufactured thereof. Though both excise duty
and sales duty levied with reference to goods, the two are very different imposts. In one case, the
imposition is on the act of manufactured or production, while in the other it is on the act of sale.

Liability for central excise

For condition must be present for the charge of central excise duty:

1. The duty is on goods

2. The goods must be excisable

3 .The goods must be manufactured or produced

4. Such manufacture or production must be take place in India

1. Goods

For an item to be considered goods for the purpose of the levy of central excise duty ,it must
satisfy two requirements:

 Movability

Goods must be movable. Duty cannot be levied on immovable property .Central excise duty
cannot imposed on plant and machinery

 Marketability

Goods must be marketable .The goods must be known in the market and must be capable of being
bought or sold

2. Excisable goods

For the liability of duty of central excise to arise, the item in question should not only be goods it
should also be excisable goods .A goods become excisable if and only if it is mentioned in the
Central Excise Tariff Act 1985.

3. Goods must be manufactured or produced

The third condition that must be satisfied for becoming liable to pay duties of central excise is that
the goods must be manufactured or produced

13
4. Manufactured or production must in India

Finally, for the liability to pay central excise duty to arise the goods must be manufactured or
produced in India

Who is liable to pay central excise duties?

The central excise duty is a tax on manufacture or production of goods .Hence, the liability to pay
excise duty lies on manufacturer or the producer

Basis for valuation of goods

The duty of central excise is charged on four bases:

1. Specific duty

2. Tariff duty

3. Maximum retail price

4. ad -valorem basis

1. Specific duty

It is the duty payable on the basis of some physical feature of the product unit like weight, length,
volume, thickness, etc.

Some of the goods on which duty is charged on the basis are as follows

Item Basis

Cigarette Length

Matches Box of 100

Sugar Quintal

Cement Per tonne

2. Tariff value

The government has the power to declare a value on the basis of which duty of central excise will
be charged .When the government declare the value ,the duty is charged on the value and the
actual value of the goods is ignored

3. MRP –based valuation

Some manufactures had started the practice of central excise by resorting to some questionable
practices .In order to check these malpractices ,a new basis of valuation was introduced ,that is
,the maximum retail price(MRP)-based valuation

Eg: television sets, DVD players, Cosmetics, Toilet preparations and chocolates

14
4. Ad Valorem duty

The first three bases of valuation are applied for only a few goods. In a large majority of cases the
duty of central excise is payable on the basis of the value of the goods ,called the assessable
value.

Customs Act and Customs Duties Planning

Introduction

• The Customs Act was formulated in 1962 to prevent illegal imports and exports of goods.
Besides, all imports are sought to be subject to a duty with a view to affording protection to
indigenous industries as well as to keep the imports to the minimum in the interests of
securing the exchange rate of Indian currency.

• The levy and the rate of customs duty in India are governed by the Customs Act 1962 and
the Customs Tariff Act 1975. Imported goods in India attract basic customs duty, additional
customs duty and education cess.

Customs duty on Imports and Exports

• Customs duty is on imports into India and export out of India. Section 12 of Customs Act,
often called charging section, provides that duties of customs shall be levied at such rates
as may be specified under ‘The Customs Tariff Act, 1975', or any other law for the time
being in force, on goods imported into, or exported from, India.

Basic Customs Duty

• All goods imported into India are chargeable to a duty under Customs Act, 1962.

• The rates of this duty, popularly known as basic customs duty, are indicated in the First
Schedule of the Customs Tariff Act, 1975 as amended from time to time under Finance
Acts.

• The duty may be fixed on ad -valorem basis or specific rate basis.

• The duty may be a percentage of the value of the goods or at a specific rate.

• The Central Government has the power to reduce or exempt any good from these duties.

Additional (Countervailing) Duty of Customs

• This countervailing duty is livable as additional duty on goods imported into the country and
the rate structure of this duty is equal to the excise duty on like articles produced in India.

• The base of this additional duty is c.i.f. value of imports plus the duty levied earlier.

• If the rate of this duty is on ad-valorem basis, the value for this purpose will be the total of
the value of the imported article and the customs duty on it (both basic and auxiliary).

15
Export Duties

• Under Customs Act, 1962, goods exported from India are chargeable to export duty.

• The items on which export duty is chargeable and the rate at which the duty is levied are
given in the customs tariff act,1975 as amended from time to time under Finance Acts.

• However, the Government has emergency powers to change the duty rates and levy fresh
export duty depending on the circumstances.

Auxiliary Duty of Customs

• This duty is levied under the Finance Act and is leviable all goods imported into the country
at the rate of 50 per cent of their value.

• However this statutory rate has been reduced in the case of certain types of goods into
different slab rates based on the basic duty chargeable on them.

Cesses

• Cesses are leviable on some specified articles of exports like coffee, coir, lac, mica, tobacco
(unmanufactured), marine products cashew kernels, black pepper, cardamom, iron ore, oil
cakes and meals, animal feed and turmeric.

• These cesses are collected as parts of Customs Duties and are then passed on to the
agencies in charge of the administration of the concerned commodities.

Education cess on customs duty

• An education cess has been imposed on imported goods w.e.f. 9-7-2004.

• The cess will be 2% and wef 01.03.2007 2%+1% of the aggregate duty of customs
excluding safeguard duty, countervailing duty, Anti Dumping Duty.

Protective Duties

• Tariff Commission has been established under Tariff Commission Act, 1951.

• If the Tariff Commission recommends and Central Government is satisfied that immediate
action is necessary to protect interests of Indian industry, protective customs duty at the rate
recommended may be imposed under section 6 of Customs Tariff Act.

• The protective duty will be valid till the date prescribed in the notification.

Anti Dumping Duty on dumped articles

• Often, large manufacturer from abroad may export goods at very low prices compared to
prices in his domestic market.

• Such dumping may be with intention to cripple domestic industry or to dispose of their
excess stock. This is called 'dumping'.

16
 • In order to avoid such dumping, Central Government can impose, under section 9A of
Customs Tariff Act, anti-dumping duty up to margin of dumping on such articles, if the goods
are being sold at less than its normal value.

• Levy of such anti-dumping duty is permissible as per WTO agreement.

• Anti dumping action can be taken only when there is an Indian industry producing 'like
articles'.

Safeguard Duty

• Central Government is empowered to impose 'safeguard duty' on specified imported goods

if Central Government is satisfied that the goods are being imported in large quantities and
under such conditions that they are causing or threatening to cause serious injury to
domestic industry.

• Such duty is permissible under WTO agreement.

• Safeguard duty is a step in providing a need-based protection to domestic industry for a

limited period, with ultimate objective of restoring free and fair competition

National Calamity Contingent Duty

• A National Calamity Contingent Duty (NCCD) of customs has been imposed vide section
129 of Finance Act, 2001.

• This duty is imposed on pan masala, chewing tobacco and cigarettes. It varies from 10%
to 45%. - NCCD of customs of 1% was imposed on motor cars, multi utility vehicles and two
wheelers and NCCD of Rs 50 per ton was imposed on domestic crude oil -section 134 of
Finance Act.

• There are different rates of duty for different goods there are different rates of duty for goods
imported from certain countries in terms of bilateral or other agreement with such countries
which are called preferential rate of duties the duty may be percentage of the value of the
goods or at specified rate.

Export Procedures

Entry Outward

• Loading in conveyance can start after ‘Entry Outward’ is given by customs officer.

Export manifest/Export report

• Person in charge of conveyance is required to submit ‘Export Manifest’ or ‘Export Report’.

Registration with DGFT and EPC

• Exporter has to be obtaining IEC number from DGFT is advance. He should be registered
with Export Promotion Council if he intends to claim export benefits.

17
 Third party exports

• Export can be by manufacturer himself or third party (i.e. by exporter on behalf of

another). Merchant exporter means a person engaged in trading activity and exporting or
intending to export goods.

Registration of documents under Export Promotion Scheme

• Advance authorization, DEPB etc. should be registered if exports are under Export
Promotion Scheme.

Shipping Mill

• Export is required to submit Shipping Bill with required documents for obtaining permission
to export.

Import Procedures

E-filing of documents

• Goods should arrive at customs port/airport only. Most of customs procedures are
computerized. E-filing of documents is required.

Import manifest or Import Report

• ‘Person in charge of conveyance’ is required to submit Import Manifest or Import Report.

Entry Inwards

• Goods can be unloaded only after grant of ‘Entry Inwards’.

Risk Management System

• Self Assessment on basis of ‘Risk Management System’ (RMS) has been introduced in
respect of specified goods and importers.

Bill of Entry for home consumption on payment of customs duty

• Importer has to submit Bill of Entry giving details of goods being imported, along with
required documents. Electronic submission of documents is done in major ports.

• White Bill of Entry is for home consumption. Imported goods are cleared on payment of
customs duty.

Bill of Entry for warehousing

• Yellow Bill of Entry is for warehousing. It is also termed as ‘into bond Bill of Entry’ as bond is
executed. Duty is not paid and imported goods are transferred to warehouse where these
are stored. Green Bill of Entry is for clearance from warehouse on payment of customs duty.
It is for ex-bond clearance.

18
19