CBIC Clarification w.r.t. exemption on import of gifts

Background:

Clarifications were sought as regards Notification No. 35/2015-2020 dated December 12^th, 2019 issued by the Directorate General of Foreign Trade (“DGFT”) and how the same has to be read with Notification No. 50/2017 – Customs dated June 30^th, 2017 (“said Notification”) especially in relation to the exemption available for imports of bonafide gifts up to CIF value of Rs. 5,000/-. References have been made to Instruction No. 9/2017 – Customs dated July 5^th, 2017 (“Instruction”) raising the issue of difficulty in implementing the DGFT Notification due to the Instruction.

Clarification:

The Central Board of Indirect Taxes & Customs (“CBIC”) vide Circular No. 4/2020 – Customs dated January 21^st, 2020 has clarified that –

DGFT notification effectively means that if goods are imported through courier or post (be it e-commerce gifts or otherwise) as gifts & seek the exemption available for imports of bonafide gifts up to a CIF value of Rs. 5,000/- vide SI. No. 608A of the said Notification, then the imports will be prohibited. However, the goods imported as gifts can be allowed import free (i.e. without prohibition) on payment of full applicable duties.

Since the goods imported as gifts will be personal imports, hence the applicable duties on them will be as follows –

1. Basic Customs Duty @ applicable tariff rate as per the First Schedule of Customs Tariff Act for the heading 9804 which is currently at 35%.
2. IGST @ rate specified for the heading 9804 (SI. No. 227 Schedule IV) in Notification No. 1/2017 – Integrated Tax (Rate) dated June 28^th, 2017 for IGST which is currently at 28%.

Lifesaving drugs/medicines can continue to avail exemption available under SI. No. 607A as well as SI. No. 608A of the said Notification. Also, Section 25(6) of the Customs Act provides that if the duty on any goods is less than one hundred rupees, then same will not be collected.

The Instruction was issued to clarify the application of clause 3(1)(i) of Foreign Trade (Exemption from application of Rules in certain cases) Order 1993 which puts a restriction on personal imports above CIF value of Rs. 2,000/-. However, the FTO 1993 has since been amended and further, vide Notification No. 16/2015-20 dated July 12^th, 2017, the DGFT has removed the value cap of Rs. 2,000/- w.r.t personal imports as well as fully aligned the chapter notes in ITC (HS) with those enacted under Chapter 98 of the Customs Tariff Act. Therefore, the Instruction is rendered obsolete and are now rescinded.

Further, the officers are advised to strictly follow the provisions of Section 14 of the Customs Act r.w. Customs Valuation (Determination of value of Imported Goods) Rules, 2017, for valuation of imports through courier and posts, to avoid undervaluation by unscrupulous importers.

Read more at : http://www.cbic.gov.in/resources/htdocs-cbec/customs/cs-circulars/cs-circulars-2020/Circular-No-04-2020.pdf

CA Bimal Jain