Export-Import of Information - An Overview,
Anomalies and Suggested Solutions
Vimal Kumar Varun
National Information System for Science & Technology
Department of Scientific & Industrial Research
Technology Bhawan, New Delhi 110016.
The paper is divided into two parts, viz., introduction to information industry & Customs Tariff Act,1975 in general with respect to import of magnetic tapes, compact disc-read only memory (CD-ROMs) and floppy diskettes containing scientific and/or educational material. Anomalies, problems in regards to acquisition of these materials vis-a-vis customs tariff and possible solutions are set in. Issues which need to be rationalised are also highlighted.
The information industry is one of the fast growing industries and is projected to grow from US $ 1.5 trillion to US $ 3.0 trillion in the next 10 years. In the recent years, there has been a commensurate growth in the utilisation of optical information technolgies like CD-ROM.
It is estimated that from the present level of 12,000 CD-ROM drives installed by March, 1995, the population would grow to 35,000 to 40,000 by the end of current year. In 1994-95, compact discs containing databases, software and games accounted for about Rs. 50 crores and by the next year is expected to reach Rs. 120 crore.
The import of CD-ROM databases in terms of the subject areas, type of information and target users shows an increasing growth parallel to that of the CD-ROM drives.
In India, custom duties are levied on the goods and at the rate specified in the Schedule of the Customs Tariff Act, 1975. Customs duties now form a significant source of revenue for all countries, more so in the case of developing countries like India. The taxable event is import into or export from India. Export duties are practically non-existent at present. They are levied occasionally to mop up excess profitability in international prices of goods in respect of which domestic prices may be low at the given time. But sweep of import duties is very wide, almost universal, barring a few goods like foodgrains, fertilisers, life saving drugs and equipment, etc. Import duties generally consist of the following :
i) Basic duty is levied at the standard rate or in the case of import from some countries at the preferentialrate.
ii) Additional customs duty equals to central excise duty leviable on like goods produced or manufactured in India. It is commonly (though erroneously) referred to as countervailing duty or CVD.
iii) True countervailing duty or additional duty leviable on man-made textile articles, stainless steel utensils and transformer oil, etc. to offset the disadvantage to like Indian goods due to high excise duty on their inputs which is not modvated.
iv) Anti-dumping duty for import of specified goods from specified country(ies) with a view to protecting domestic industry from unfair injury. (Section 12, Customs Tariff Act, 1975).
Goods which are exported out of India would, on their re-import, attract import duty equal to the export benefits (drawback, etc.) taken at the time of export. No duty would be payable if such benefits were not claimed. However, goods manufctured in a free trade zone and exported out of India or goods exported in bond would, on re-importation, be charged to normal custom duty. (Section 20, Customs Tariff Act, 1975).
The Central Government has the power to exempt, in public interest, specified goods from levy of custom duty by issue of notifications or special orders. Rules and notifications take effect from the date of their publication in the Official Gazette. If conditions of a notification have been substantially complied with and only some procedural conditions could not be fulfilled due to bonafide reasons, the benefit cannot be denied to the assesse. (Section 25, Customs Tariff Act, 1975)
Most of the customs duties are ad valorem. Goods have, therefore, to be valued for the purpose of assessment. Our Valuation Rules, 1988 follow the GATT provisions where-under the norm is the transaction value or invoice price but is subject to the rider that the invoice value to be acceptable should be fully commercial and genuine price. Unless the invoice price already includes ocean freight and insurance, these elements have been added to make it CIF (Cost Insurance Freight) Value. Loading charges realised by the port authorities have also to be added.
Government has the power to fix its tariff values for goods in which case duty is assessed on such tariff values. For goods found damaged or deteriorated before clearance, proportionate abatement in value is allowable. (Section 14, 22, Customs Tariff Act, 1975)
The following documents have usally to be submitted by importer or exporter for clearance of goods through customs:
|For Imports||For Exports|
|1. Bill of Entry||1. Shipping bill#|
|2. Invoice & Packing List||2. Invoice & packing list|
|3. Import License, where necessary||3. Export license/quota certificate, where necessary|
|4. Country of origin certificate, where preferential rate is claimed||4. Export Inspection agency's certificate, where necessary|
|5. Insurance memo / policy||5. GR Form|
|6. Bill of lading or delivery order||6. AR 4 / AR 4A Form of Central Excise|
|# Use Green coloured shipping bill if export is under claim for drawback and white in other cases.|
Present day information technologies provide the information producer / supplier / user, a wide array of delivery options such as print, digital magnetic, optical and online modes. The generic products could be journals and books; directories, reports and encyclopedias; databases and other scientific / educational material. At the same time, a particular information product may be distributed in print form, on floppies, on CD-ROMs or even in online mode.
The summary of various notifications issued by the Ministry of Finance, Deparment of Revenue for the import of recorded magnetic tapes, CD-ROMs and floppy diskettes containing scientifc and / or educational material are given in Annexure - I.
The procedure for getting the consignment cleared by the customs authority is given in Annexure - II. Sometimes it takes at least two months to get the consignment cleared by the customs, and therefore the value of information itself is lost by the time it reaches the customer.
Anomalies, Problems and Suggested Solutions
On the basis of specific cases received from the National Information on Oceanography, Goa; National Aerospace Laboratory, Bangalore; Informatics (India) Pvt Ltd, Bangalore; Ahmedabad Textile Industrys' Research Association, Ahmedabad and National Chemical Laboratory, Pune, the details of various anomalies, problems along with suggested solution is given below :
Anomalies in various notifications (as listed in Annexure-I)
Notification No. 216/89-Customs dated 1.8.89 and as amended by 98/91-Customs dated 25.7.91
Refers to CD-ROMs, magnetic tapes, floppy diskettes recorded with educational/ scientific material.
Institutions / research centres under UGC
Duty is nil
Notification No. 68/93-Customs dated 28.2.1993
Refers to CD-ROMs, magnetic tapes, floppy diskettes recorded with educational/ scientific material.
Non-commercial R & D institutions
Duty is 15% ad valorem
Notification No. 186/93-Customs dated 8.12.93
All goods falling within Schedule of the Customs Tariff Act, 1975 (51 of 1975) includes CD-ROMs, magnetic tapes, floppy diskettes recorded with educational / scientific material.
DRDO Labs, IITs, CSIR Labs, CPRI, Bangalore and any test centre approved by any Ministry in the Government of India.
Duty is nil
Notification No. 152/94-Customs dated 13.7.1994
Refers to equipment i.e., CD-ROM drive and it excludes consumable items such as CD-ROMs, magnetic tapes, floppy diskettes recorded with educational / scientific material.
Research institutions other than hospitals
Duty is nil
From the above observations, it is therefore suggested that:
there should be only one notification for importing CD-ROMs, magnetic tapes, floppy diskettes and CD-ROM Drives covering all possible institutions to remove ambiguity among the beneficiaries.
the differential rate of duty is to be removed and rationalised.
the Notification No. 216/89-Customs dated 1.8.89 and as amended by 98/91-Customs dated 25.7.91 exempts payment of Custom duty for institutions / research centres approved by the University Grants Commission (UGC), may be amended and extended to Institutions under the Council of Scientific & Industrial Research (CSIR), Ministry of Science & Technology, Department of Space, Department of Atomic Energy, Department of Electronics, Department of Ocean Development & Department of Environment, the Indian Council of Agricultural Research (ICAR) , the Indian Council of Medical Research (ICMR), In-house R&D units in Industry and Scientific & Industrial Research Organisations (SIROs) recognised by the Department of Scientific & Industrial Research, the Defence Research & Development Organisations (DRDO), Institutions of national importance like the Indian Institute of Technology, the Indian Institute of Management or any other test centres / laboratory(ies) / organisations approved by any ministry in the Government of India.
While we have done away with industrial licensing and import license for almost every item of import (except for a small list of negative items), we still have retrogressive policy of certification / introducing permit system for information products like CD-ROMs. This does not seem to be logical.
It is therefore suggested that the import of recorded CD-ROMs, magnetic tapes, floppy diskettes may be allowed without any certification or any other tag. There is a provision under which CD-ROMs, magnetic tapes and floppy diskettes can be completely exempted from custom duty. The chapter 49 of Customs Tariff Schedule which covers printed material like books and periodicals.
Here the term printed also means reproduced by means of a duplicating machine, produced under the control of a computer, embossed, photographed, photocopied, thermocopied or typewritten.
Invoking this definition, CD-ROMs can be interpreted to come under printed matter provided, this definition is made more explicit to include all electronic or optical media used for recording and distributing information physically or through computer networks.
Scientific / educational material on magnetic media like tapes and optical media like CD-ROMs are updated on a regular frequency, i.e, weekly to annually and the passbook facility gets tied up entirely with the clearance of these updates. Every time, the subscriber has to run after the Customs / Foreign Post Office to get the consignment cleared and due to procedural delays, it may even take upto two months. But by the time, it gets cleared, the value of information itself is lost.
It is therefore suggested that only the first disk of a serial subscription with documentation may be examined for necessary checks. If deemed required, opinion of a scientific ministry may be sought. Subsequent updates should reach the subscriber automatically.
Secondary databases (abstracting & indexing) and full text databases on magnetic media like tapes and optical media like CD-ROMs, are replicas of what is contained in printed form. While printed books and journals do not require customs clearance or payment of custom duty, there is no logic to levy customs duty on the same material appearing in modern media.
It is therefore suggested that the definition of books / journals may be extended to include materials on magnetic media like tapes and optical media like CD-ROMs. This would be in consonance with modern development of technology and at the same time help protecting ecology and environment (by reducing consumption of paper and associated denudation of forest cover).
For the purposes of assessment, it is difficult for the custom authorities to recognise/ identify the information contents of CD-ROMs, magnetic tapes, floppies and so on. In addition, new IT tools like CD-ROM drive, multi-media kit (sound blaster card, video blaster card, etc) attached to the computer would be required for such assessment tasks.
It is suggested that DSIR may organise refresher course on new information technologies for the custom authorities like appraisers, inspectors, and officers and the customs may have the CD-ROM drives and adequate hardware and software to assess the various facets of information.
With the use of access to online datahosts like DIALOG, STN, ESA-IRS, etc, the information (like patents, market intelligence reports, market survey reports, etc) is downloaded using computer and communication technologies. The international Datahosts send the periodic bills for the services rendered and the payment is to be made in foreign currency. At the time of getting FE to make the payments to online datahosts, Reserve Bank of India (RBI) requires physical proof of import of information generated out of online systems.
It is suggested that the bills received from datahosts, duly certified by the head of institution, may be treated as valid proof of getting the information online.
To Sum up :
Redefine the books to include the same coming in magetic and optical media.
Rationalisation of various notifications issued so far by Department of Revenue, Ministry of Finance, for import of CD-ROMs, magnetic tapes and floppy diskettes recorded with scientific /or educational material.
Products / services generated out by using newer technolgies like CD-ROM / online merit exemption from income tax.
Information products and services, delivered through electronic media such as online and CD-ROM should be treated at par with printed information products for the purpose of exemption of all duties and taxes.
Streamline procedures to facilitate faster custom clearances.
Knowledge updation for custom authorities to help appropriate, timely assessment of entertainment / software / databases on magnetic tapes, CD-ROMs and floppy diskettes.
Minimize / liberalize requirements for producing physical proof of import of information generated through electronic means and from datahosts.
Summary of various Notifications issued by Ministry of Finance, Deparment of Revenue for the import of Recorded Magnetic tapes, CD-ROMs and Floppy Diskettes containing Scientifc and / or educational material
No.Notification Description of Goods Rate Applicable to Conditions
1. 229/88-Customs dated 1-8-1988 and revised vide 233/89-Customs dated 1-9-1989
All scientific and technical instruments, apparatus, equipments, accessories, spare parts and consumable goods
Public funded research institutions and universities
The goods covered by a Pass Book issued by Department of Science & Technology for Public funded research institutions and Department of Education for Universities.
A certificate from an officer not below the rank of Deputy Secretary in the Department of Science & Technology or Department of Education (as the case may be) to certify that the importer is not engaged in any commercial activity.
The Head of the Institution or University, as the case may be, certifies in each case, in the said pass book, that the goods being imported are as such as, are not manufactured in India, are essential for research purposes and will be used only for the purposes and shall not be transferred to any other person.
2. 216/89-Customs dated 1-8-1989 and as amended by 98/91-Customs dated 25-9-1991
Recorded magnetic tapes, Compact Disc-Read Only Memory (CD-ROMs) and floppy diskettes
Institutes/or Research Centres duly approved by the University Grants Commi-ssion
A Certificate from an officer not below the rank of a Deputy Secretary in the Ministry of Education, Government of India, to the effect that such magnetic tapes, compact disc-read only memory(CD-ROMs) and floppy diskettes are recorded with educational/or scientific material for use in computers and are required by Institutes/or Research Centres duly approved by the University Grants Commission,
the importer, at the time and place of clearance, gives an understanding to the Assistant Collector of Customs to the effect that such magnetic tapes, compact disc-read only memory (CD-ROMs) and floppy diskettes shall not be used for any other purpose and such tapes, CD-ROMs and floppy diskettes shall not be subsequently recorded with any other material, and
such magnetic tapes, compact disc-read only memory (CD-ROMs) and floppy diskettes shall not be sold or parted with, without the prior permission of the Collector of Customs at the port of importation.
3. 68/93-Customs dated 28-2-1993
Recorded magnetic tapes, compact disc-read only Memory (CD-ROMs) and floppy diskettes
Non-commercial R&D Institutions
A certificate from an officer not below the rank of a Deputy Secretary to the Government of India in the Ministry of Science & Technology, certfiying in each case that
the magnetic tapes, CD-ROMs and floppy diskettes in respect of which the exemption is claimed are recorded with educational or scientific material and are required in the research activity,
the institution is not engaged in any commercial activity, and
the grant of exemption under this notification is recommended.
4. 186/93-Customs dated 8-12-1993
All goods falling under the Schedule to the Customs Tariff Act, 1975 (51 of 1975) which includes magnetic tapes, CD-ROMs and floppy diskettes recorded with educational /or scientific material
DRDO Labs, Indian Institutes of Technology; CSIR Labs, Central Power Research Institute, Bangalore or any other test centre approved by any Ministry in the Government of India for this purpose
The head of organisations specified above certifies that goods have been imported only for the purpose of testing and shall not be used or sold after testing.
5. 152/94-Customs dated 13-7-1994
All scientific and technical instruments, apparatus and equipments including spare parts, computer software. component part, accessories thereof and compact disc-read only memory (CD-ROM) but excluding consumable items
Research institutions other than hospital
A certificate from an officer not below the rank of an Under Secretary in the Ministry administratively concerned with the said institution to the effect that
import of goods in respect of which the exemption is claimed is essential for research, and
imported goods shall be used only for the such purposes by the said institution and the said institution is not engaged in any commercial acitivity.
6. 94/95-Customs dated 18-5-1995
compact disc-read only memory (CD-ROMs) and floppy diskettes
No certification required.