Date:06/02/2005 URL: http://www.thehindubusinessline.com/2005/02/06/stories/2005020602130100.htm

Back Education cess not applicable for imports under advance licences

K.R. Srivats

New Delhi , Feb. 5

THE 2-per-cent education cess imposed in the 2004-05 Budget would not be applicable for imports cleared against advance licences, the Finance Ministry has clarified.

The revenue department has, however, held that the cess would be payable on imports under the duty free replenishment certificate (DFRC) and export promotion capital goods (EPCG) schemes.

As regards imports under the duty entitlement passbook (DEPB) scheme, which accounts for 52 per cent of the country's exports value-wise, the Finance Ministry has now decided that the 2 per cent cess would be "debited from the DEPB scrip".

These clarifications have been spelt out in a circular issued by the Finance Ministry in response to doubts raised as to whether the 2 per cent education cess would be levied on imports cleared under various export promotion schemes.

On the issue of advance licences, the Finance Ministry said that imports against advance licences were exempt from all duties of customs and, therefore, such imports would not attract the education cess.

For imports under DFRC, the Finance Ministry pointed out that additional duty of customs was payable and, therefore, education cess was also payable. On the same principle, the revenue department held that the education cess was also payable in the case of imports under the EPCG scheme under which the goods attract a concessional duty of 5 per cent.

On the matter of DEPB scheme, the Finance Ministry noted that the imports were governed by exemption notifications. Despite this, the Finance Ministry said the fact remained that in the case of such imports the basic duty and the additional duty were debited from the DEPB scrip. "Therefore, it has been decided that in the case of imports under DEPB scheme, the education cess of 2 per cent would also be debited from the DEPB scrip," the circular said.

For the fiscal 2004-05, the centre hopes to realise revenue of Rs 2,400 crore from the education cess on indirect taxes (customs, excise and service tax taken together). The education cess on customs and excise duties came into effect on July 9, 2004.