Union Budget 2021: Changes in the Custom Duty

4 min readFeb 18, 2021

> All changes in rate of Customs duty take effect from 2nd February 2021, unless otherwise stated.

> The remaining legislative changes would come into effect only upon the enactment of the Finance Bill, 2021.

Important Amendments in the Customs Act, 1962

1. IGCR Rules have been amended to allow job work on imported goods and also to allow disposal of goods at payment of duty on depreciated value.

2. Section 25 of the Customs Act, 1962 to be amended prescribing that all conditional exemptions, unless otherwise specified or varied or rescinded, shall come to an end on 31st March falling immediately two years after the date of such grant or variation.

The existing conditional exemptions in force as on the date on which the Finance Bill, 2021 receives the assent of the President (unless having a prescribed end date), shall come to an end on 31st March 2023 (if not specifically extended/ rescinded earlier). This will be after REVIEW.

3. Sub section (3) of Section 46 is being amended to mandate filing of bill of entry before the end of the day preceding the day (including holidays) of arrival of goods. Prior to this it was (excluding holidays).

4. A new Section 114AC is being inserted in the Customs Act to prescribe penalty in specific case where any person has obtained any invoice by fraud, collusion, willful misstatement or suppression of facts to utilize Input Tax Credit on the basis of such invoice for discharging any duty or tax on goods that are entered for exportation under claim of refund of any duty or tax.

5. Section 149 is being amended so as to introduce a second proviso which would allow amendments to be done through the customs automated system on the basis of risk evaluation through appropriate selection criteria and introduce a third proviso so that certain amendments, as may be specified by the Board, may be done by the importer or exporter on the common portal.

6. Chapter XVII is being amended so as to insert a new Section 154C for notification of a common portal for facilitating registration, filing of bills of entry, shipping bills, any other document or form prescribed under the Customs Act or under any other law for the time being in force or the rules and regulations made thereunder, payment of duty and for carrying out such other functions and for such purposes as may be specified

Amendments in the Customs Rules

1. Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 [“IGCR Rules”] are being amended to provide the following facilities:

> to allow job-work of the materials (except gold and jewelry and other precious metals) imported under concessional rate of duty

> to allow 100% out-sourcing for manufacture of goods on job-work

> to allow imported capital goods that have been used for the specified purpose to be cleared on payment of differential duty, along with interest, on the depreciated value. The depreciation norms would be the same as applied to EOUs, as per Foreign Trade Policy.

Agriculture Infrastructure and Development Cess

> New cess is being imposed on imports of certain items at specified rate. Simultaneously, basic customs duty is being reduced on the items being brought under new cess. This new cess is also being imposed as additional duty of excise on petrol and diesel. At the same time, Basis Excise Duty and Special Additional Duty of Excise are being reduced.

> For the purpose of calculating the AIDC, the import value of such goods shall be calculated in the same manner as the value of goods is calculated under the provisions of Section 14 of the Customs Act, 1962.

> Social Welfare Surcharge (SWS) would be levied on AIDC. However, exemption from SWS on AIDC has been given to gold and silver.

> Further, goods imported under Customs duty exemptions available under FTA and EOU as well as under advance authorization schemes are being exempted from AIDC.

Another important technical change is the adoption of the new version of Harmonized System of Nomenclature (HSN) with effect from 1st January 2022. Businesses whose products are undergoing a change of classification due to the new version of HSN should evaluate the impact of such change on duty rates, exemptions available, any regulatory restrictions and benefits of Free Trade agreements.

Some proposed actions of the government are notable for their potential impact in making India’s Trade and Customs regime more friendly and intelligible. The budget has touched multiple facets of international trade and Customs, ranging from Customs duty levies to governance easing.

-YPS Rao, DGM-EXIM, Serum Institute of India

(This article was first published in Sampada, the monthly magazine of Sampada. The online edition can be accessed here https://www.mcciapune.com/media/Publication/Publication_File/Sampada_February.pdf )




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