10 Jul Dilemma of DSIR recognized R&D centres on Custom duty exemption
When we are seeing conflicted views on The Goods and Services Tax (GST) , implemented since 1st July 2017, by Indian public and industry, the companies which are recognized by Department of Scientific and Industrial Research (DSIR) are in dilemma with the exemption of Custom duty on purchase of capital goods under original Notification no 51/96 followed by amendments in year 2007 as Notification No 24/2007 and Notification no 24/2014 in year 2014
In brief under above stated notification if a research institution (other than a hospital) is registered with the Government of India with the Department of Scientific and Industrial Research (DSIR), on purchase of any goods (equipment, consumables, computer software, prototypes etc) for conducting R&D, company doesn’t have to pay any Custom duty on the same. Having said that, it was only custom duty which was exempted but not the other indirect taxes such as (cess, VAT etc).
For example: If a good is worth Rs. 100 as Gross value and the indirect taxes levied were Rs. 20 (including Rs. 10 for custom duty, and Rs. 10 for cess, VAT etc). Then its only Rs.10 which was exempted under said notification.
But now GST implemented all the indirect taxes gets included under IT, therefore the dilemma is that, the whole Rs. 20 is going to be exempted or its going to be only custom duty Rs. 10. If it’s going to be only Custom duty then what is going to be happen to cess VAT etc, and if it’s full indirect taxes exemption (Custom, cess VAT etc) then it’s going to be a loss of revenue for a Govt. as now all indirect taxes are merged into GST.
Though we have not till now received any official notification from the Govt on these kind of custom or excise exemption, because of industry is not clear stated exemption. As a feedback provided by one of our big pharma client where they mentioned that “on purchase of any goods for R&D, neither the custom officials are accepting the old notification certification nor they are providing the updated information on the same”. Due to which the DSIR recognized companies and R&D centres are facing issues on import of an R&D equipment/goods.
By this article we want to put Government’s focus on these kind of special exemptions, where it should be clear that how these kinds of exemptions are going to be implemented under GST.
Written by Nitesh Singh
——-Lead Consultant, Scinnovation Consultants Pvt Ltd.