Generally, the duty structure in India comprises of various components: basic customs duty, additional duties (countervailing duty and special additional duty) and education cesses, calculated on the basis of the tariff rate as specified for the Harmonized System Code (‘HS Code’) of classification except for few products which are subject to duties based on tariff value. In addition, there are various other duties such as the National Calamity Contingent Duty, Anti-Dumping duty, Safeguard duty and other cesses, applicable on selected imported products.

The Government intermittently issues notifications providing for duty concessions or exemptions on specified goods, subject to fulfilment of conditions.

To facilitate faster clearance, importers and exporters may self-assess the amount of customs duty payable on import or export. To facilitate the practice, an Electronic Data Interchange (‘EDI’) system is available at selected ports and airports, through which the document submission and assessment process can be completed online. In addition, benefits such as reduced examination and inspection, acceptance of pre-arrival import and export declarations and quicker approval for new warehouses are available to importers by registering under the Authorised Economic Operator (‘AEO’) programme.
The India customs landscape continues to develop to complement international trade. In India, the Foreign Trade Policy (‘FTP’) regulates trade by prescribing items which are restricted and prohibited from being imported into India. Further, Special Economic Zones/Free Trade Warehousing Zones are designated area which are treated as outside the customs territory and provide several fiscal and tax incentives to boost export.

There is an increasing volume of litigation on a range of customs and indirect tax matters due to the aggressive approach of the authorities. In order to identify and adhere to the various customs and indirect tax compliance processes, it is imperative that the companies understand the precise implications of imports and exports, the various customs schemes available and their corresponding compliance requirements. This helps ensure tax optimisation, timely compliance and avoidance of litigation and severe penalties, several of which now have been declared as cognisable and non-bailable.

Our services

Companies across all industries have a great focus on globalisation, which in turn leads to an increase in cross border transactions. This necessitates the need for proper evaluation of cross border transactions from the perspective of Indian tax laws and regulations. The broad framework of services in customs and foreign trade provided by PwC India includes:

  • Structuring a tax efficient supply chain
  • Tariff classification and availability of exemptions
  • Customs valuation, harmonisation with Transfer pricing and assessment by Special Valuation Branch
  • Free Trade Agreements, compliance and planning
  • Import licenses for duty free procurement under Foreign Trade Policy
  • Customs Health Check review
  • Litigation support services
  • Advance Rulings
  • Duty refunds
  • Concessional duty procurement under the Project Import scheme
  • Customs bonded warehouse, Special Economic Zone or Free Trade Warehousing Zone strategies

Case studies

Weighing import through independent and unrelated distributors against import through a subsidiary company as a national distributor

The client was looking to have a better market control on the market with more price efficient operations in India. The client proposed to have a subsidiary in India for the import and onward sale and to reduce the import price to compensate the India subsidiary. The issue was whether a price reduction was justifiable to mitigate customs risk.

How we helped

  • Reviewed existing import policy for all the independent distributors and proposed distribution model
  • Identified business and commercial rationale for the reduction in import price
  • Assess the customs value and whether it was supported by transfer pricing policy

Benefit for client

  • Our position paper showing justification for the reduced import price was accepted by the customs authorities and the client avoided a customs  value challenge

Setting up operations in Free Trade and Warehousing Zone (FTWZ)

A global logistics service provider restructured its operations in order to have tax efficient supply chain hub in India for its domestic as well as Asia Pacific customers. It sought our advice on a range of issues and a multi-disciplinary team was quickly assembled and aligned to provide a holistic approach.

How we helped

  • Assessed eligibility of consolidation, break bulk, packaging, labelling activities in addition to storage facility within FTWZ
  • Analysis of various supply chain models suitable for the region
  • Implications of customs duty, tax and regulatory aspects

Benefit for the client

  • Improved supply chain
  • Deferment of customs duty and savings in other tax costs leading to better cash flow
  • Fast track clearance of goods
  • Ready and better infrastructure

Health check review under Customs and Foreign Trade Policy

PwC India team undertook an assignment for a pharmaceutical company engaged in export to identify any risk in its compliances and the availability export incentives.

How we helped

  • Supportable classification of imported product and assessment of availability of exemptions and concessions
  • Assessment of availability of export incentives under Foreign Trade Policy and to explored whether any additional benefits could be claimed
  • Assess any risk in compliance, non-fulfilment of export obligations

Benefit for the client

  • Additional export incentives were successfully applied for improving profit margin

Re-structuring the supply chain: Contract manufacturing vs. Toll manufacturing

PwC India team undertook an assignment for a pharmaceutical company engaged in export to identify any risk in its compliances and the availability export incentives. The company was operating in a particularly price sensitive market and therefore our advice was considered an important factor in overall market strategy and future planning.

How we helped

  • Assessed the current business model of the company and the limitations on the functions that could be executed by a toll
  • Evaluated the potential customs duty and related compliance consequences for each proposed business model
  • Assessed the change of customs value in light of the new transfer price and other tax implications

Benefit for the client

  • Identification of input tax credit blockage
  • Clarity on the reduction in operations flexibility against tax savings due to the change in transfer price

Contact us

Nitin Vijaivergia

Nitin Vijaivergia

Partner, India, PwC Asia Pacific Customs and Trade

Tel: +91 9820239915

Follow PwC Asia Pacific Customs and Trade Practice