Home |About Us|News Room|Events|Awards|Enquiry|Site Map

Policy_______________________::




 

 

LEATHER SECTOR SPECIFIC HIGHLIGHTS OF UNION BUDGET 2003-04

 

In the Union Budget 2003-04 presented by Hon’ble Finance Minister Shri Jaswant Singh on Feb 28, 2002, there have been significant changes in respect of direct taxes, and indirect taxes. The highlights of the Budget relating to leather & leather products Industry are outlined below:

Direct Taxes

  • The exemption from Income Tax on the export profits will continue to be phased out (which commenced from the year 2000-01). There has been no new announcement in this regard. 

  •  Deduction of export profits allowed to certain units such as EOU and EPZ units under Sections 10A & 10B of the Income Tax Act, continues for the assessment year 2004-05. Restrictions on continuation of exemptions under these Sections, in the event of change in ownership/shareholding has been removed.

  • There is no change in the tax structure except as follows: 

    I. 5% surcharge has been reduced to 2.5% in the case of corporates and firms 
    II. In the case of individuals and HUFs, having income upto Rs.8.5 lakhs, 5% surcharge has been removed 
    III. In the case of individuals and HUFs having income above Rs.8.5 lakhs, surcharge of 10% has been imposed.
      

  • Dividend in the hands of recipients has been exempted from tax, and distribution tax @ 12.50% is to be paid by the companies paying dividends 

  • Present discretion-based system of selection of returns for scrutiny is abolished. This is replaced by a computer generated, intelligent, random selection of only 2% of the returns, annually. 

  • Tax clearance certificate currently needed by a person leaving India or any person submitting a tender for a government contracts, has been abolished. Henceforth, only expatriates who come to India in connection with business, profession or employment would have to furnish a guarantee from their employer etc in respect of tax payable before they leave India. An Indian citizen, before leaving India, will only have to give his / her Permanent Account Number, and the period of his / her intended visit abroad to the emigration authorities

Indirect Taxes

Customs duty

  • The peak rate of Basic Customs duty has been reduced from 30% to 25%. There would now be three basic ad-valorem rates of customs duties i.e. 5%, 15%, and 25%.

  • The raw hides & skins falling under Customs Tariff heading No.41.01 & 41.02 & 41.03 continues to be exempted from import duty.

  • The import of wet blue chrome tanned leather, crust leather, finished leather of all kinds, including splits and sides thereof also continues to be fully exempted from Basic Customs duty in terms of Sl.No.149 of Customs Notification No.21/2002 dated March 1, 2002, as amended by Customs Notification No.26/2003 dated March 1, 2003.

  • The concessional import duty of 5% on machinery & equipments used by the leather & leather products Industry continues with nil Countervailing duty (CVD). These are specified in List 34 of the Customs Notification No.21/2002 dated March 1, 2002 under Sl. No.257, as amended by Customs Notification No.26/2003 dated March 1, 2003. 

  • In the aforesaid List 34, a total of 265 machinery & equipment have been listed, which are eligible for concessional import duty of 5%. Descriptions in respect of two items appearing under List 34 has now been amended vide Customs Notification No.26/2003 dated March 1, 2003 as detailed below:

    Sl.no in 
    List 34    		 Previous Description  Amended Description
    110 Injection Moulding of PVC/TPR Soles, Inserts and Half Soles Injection Moulding of PVR/TPR/EVA Soles, Inserts and Half Soles
    171 PVC/PU direct injection soling machine (DIP construction) PVR/TU/EVA direct injection soling machine (DIP construction)

    (Note: PVR instead of PVC and TU instead of PU is wrongly printed. This will be taken up for suitable corrections)

  • Certain leather chemicals, components, consumables etc., used in the leather & leather products Industry continue to be dutiable at 25% with CVD equivalent to Central Excise duty on such inputs. These are listed under List 9A & 9B of Customs Notification No.21/2002 dated March 1, 2002 under Sl No.174, as amended by Customs Notification No.26/2003 dated March 1, 2003. In any case, this concession hitherto enjoyed does not now have any relevance as the peak rate of 30% Customs duty has generally been brought down to 25%. 

  • The concessional import duty of 5% on saddle tree continues in terms of Sl.No.143 of Customs Notification No.21/2002 dated March 1, 2002, as amended by Customs Notification No.26/2003 dated March 1, 2003.

  • Wattle extract continues to be exempted from any CVD. However, the CVD will continue to be levied on import of other vegetable tanning extract like quebracho extract, chestnut extract, gambier extract etc falling under Chapter 32 with basic Customs duty of 15%.

  • The import of Tags, label, printed bags, stickers, belts, buttons or hangers continue to be exempted from duty when imported by bona-fide exporters, in terms of Sl.No.140 of Customs Notification No.21/2002 dated March 1, 2002, as amended by Customs Notification No.26/2003 dated March 1, 2003.

  • The duty free import facility to the extent of 3% of the previous year’s FOB export value, available to the manufacturer-exporters of leather garments, continue to be available in terms of Sl.No.167 & 168 of Customs Notification No.21/2002 dated March 1, 2002, as amended from time to time.

  • The duty free import facility to the extent of 1% of the previous year’s FOB export value, available to the manufacturer-exporters of leather footwear, and other specified products continue to be available in terms of Sl.No.167 & 168 of Customs Notification No.21/2002 dated March 1, 2002, as amended from time to time.

  • Levy of Special Additional Duty of Customs (SAD) of 4% under Sec 3A of the Customs Tariff Act, 1975 continues. The import under advance licenses, EPCG Scheme etc would continue to be exempted from SAD, in terms of Customs Notification No.23/2002 March 1, 2002, as amended by Notification No.63/2002 dated June 18, 2002, and Customs Notification No.29/2003 dated March 1, 2003.

  • All goods falling under Chapter 43.01 & 43.02 ie., raw, tanned, dressed fur skins have been exempted from Basic Customs duty in terms of Sl No.150 of the Customs Notification No.21/2002 dated March 1, 2002, as amended by Customs Notification No.26/2003 dated March 1, 2003.

  • For import of commercial samples by the industry, the present duty free limit of Rs.60000/- in value or 15 units in number, per year, continues

  • Customs duty on baggage has been reduced from 60% to 50%

Changes made in the Customs Act 1962

  • Section 25 of the Customs Act amended to provide that no duty will be collected if the total amount of duty leviable is Rs.100 or less

  • Section 30 of the Customs Act amended to provide for delivery of import manifest before the arrival of vessel or aircraft and within 12 hours of arrival of a vehicle, and for levy of penalty not exceeding Rs.50,000/- if there is no sufficient cause for delay

  • The period for which goods may remain warehoused has been increased. Section 61(1) of the Customs Act amended to provide that the period of warehousing in respect of goods (other than capital goods) intended for use in 100% EOUs increased from one year to three years

  • Section 61(2) of the Customs Act amended so as to increase the interest free period for warehoused goods from 30 days to 90 days. The rate of interest has been reduced, and linked to market rate of interest.

  • Section 68 of the Customs Act amended so as to enable the owner of any warehoused goods to relinquish his title to the goods on payment, rent etc, at any time before an order for clearance of these goods for home consumption has been made. On his relinquishing title, the importers will not be liable to pay duty on such goods

  • The interest will be paid for drawback claims delayed beyond one month instead of present period of two months.

  • A self assessment scheme for importers and exporters has been introduced, under which the importer will determine the classification of goods, including claim for any exemption benefit, and the system will calculate the duty based on his / her declaration. Physical inspection of imported goods will be done by using risk-assessment and management techniques on computer-based system, and not on the orders of customs examining staff. Further, the existing system of concurrent audit of import documents will be replaced by post-clearance audit as prevalent in developed countries.

  • The power of adjudication of Customs officers is being raised. AC/DC will now have the power to adjudicate upto an amount of Rs.2 lakhs as against Rs.50,000 now. For officers below the rank of AC/DC, the limit will be Rs.10,000 as against Rs.2500 now.

Central Excise duty

  • Three-tier duty structure of 8%, 16% and 24% 

  • Central Excise duty of 16% on footwear components, leather chemicals, articles of fur skins etc remain unchanged. 

  • Wattle Extracts falling under chapter 32 has been exempted from central excise duty in terms of S.No.59 of Central Excise Notification No.6/2002 dated March 1, 2002, as amended by Central Excise Notification No.6/2003 dated March 1, 2003. 

  • The SSI units continue to be fully exempted from central excise duty for first clearances up-to an aggregate value of Rs.1 Crore, when CENVAT facility has not been availed; vide Central Excise Notification No.8/2003 dated March 1, 2003. 

  • For SSI units availing the CENVAT facility, the first clearances upto an aggregate value of Rs.1 Crore, will be subjected to 60% of the normal rate of excise duty in terms of Central Excise Notification No.9/2003 dated March 1, 2003. 

  • Value of exempted goods will be included (but excluding export) for calculating the eligibility limit of Rs.3 crores for eligibility under SSI exemption with effect from 01.04.2003 

  • The footwear falling under Central Excise Tariff Heading No.64.01 whose MRP is less than Rs.125/- per pair is exempted from central excise duty in terms of Central Excise Notification No.6/2002 dated March 1, 2002 vide Sl No.157. 

  • At present, the footwear falling under heading No.64.01 (whose MRP is more than Rs.125) is subject to 16% Central Excise duty on 60% of the MRP. The present abatement of 40% on MRP continues vide Central Excise Notification No.13/2002-Central Excise(N.T) dated March 1, 2002, as amended by Notification No.10/2003-Central Excise(N.T) dated March 1, 2003 

  • The central excise duty on cotton sewing thread (not containing the synthetic staple fibres) increased from 8% to 16% in terms of Central Excise Notification No.6/2002 dated March 1, 2002 vide Sl No.104, as amended by Notification No.6/2003 dated March 1, 2003. 

Changes in Central Excise 

  • The definition of Retail Sale Price (RSP), as mentioned in Explanation 1 to Section 4A of the Central Excise Act is modified so as to extend it to cases where the governing law on such goods permits declaration of RSP exclusive of taxes. 

  • The present scheme of payment of excise duty on fortnightly basis is being replaced by payment on monthly basis. Now, the assessee would be required to pay duty for a particular month by the 5th of the next month. However, duty for the month of March will have to be paid by the 31st March, both for SSI and non-SSI units. This provision will come into effect from 01.04.2003. 

  • The date of deposit of cheque or other similar instruments in the bank would be treated as the date of payment of excise duty subject to realization of the cheque.

  • It has been provided that in the case of default in making the payment of duty assessed, the facility of paying duty in monthly instalment will not be withdrawn nor will the assesses be debarred from utilization of the CENVAT credit. However, in addition to payment of duty assessed, an interest of 2% per month or Rs.1000 per day, whichever is higher, starting from the date on which the duty was required to be paid till the date of payment (subject to interest not exceeding the duty amount) will have to be paid. This provision will come into effect from 01.04.2003 

Service Tax 

  • The rate of service tax proposed to be raised from 5% to 8%. This increased rate will be effective from the date to be notified. 

Sales Tax

  • The Value Added Tax (VAT) will be introduced at the State level, as scheduled from April 1, 2003. 

  • CST has been reduced from 4% to 2% for sales to registered dealers. 

De-reservation

  • The SSI reservation in respect of 75 more items including leather & leather products has been withdrawn. The Ministry of SSI will issue necessary Notification in this regard. It may be mentioned here that only tanning and leather shoes alone were de-reserved in 2001 and the remaining leather products continued under SSI scope.