Clarification on Social Welfare Surcharge on Imported Goods

Central Board of Indirect Taxes and Customs (CBIC) vide a Circular no. 3/2022 dated 1^st February 2022 issued Clarification on Social Welfare Surcharge on Imported Goods. The Social Welfare Surcharge (SWS) is calculated at the rate of 10% cent on the aggregate of duties, taxes, and cesses that are levied and collected under section 12 of the Customs Act, 1962. The present article briefs the CBIC Clarification on Social Welfare Surcharge on Imported Goods.

The Gist of CBIC Notification

Central Board of Indirect Taxes and Customs (CBIC) has received various requests from trade and industry seeking clarification on the issue of applicability of Social Welfare Surcharge (SWS) on goods that are exempted from basic customs duty which are levied as a duty of customs. Know more about the IGST Exemption List CBIC vide a Circular no. 3/2022 dated 1^st February 2022, clarified that the amount of Social Welfare Surcharge payable would be ‘Nil’ in cases where the aggregate of customs duties (which form the base for computation of SWS) is zero even though SWS has not been exempted. For more details on Customs Duty, click here

Social Welfare Surcharge (SWS) on Imported Goods

In the Finance Budget 2018, Social Welfare Surcharge was introduced vide Section 110 of Finance Act 2018, and thereafter Social Welfare Surcharge was levied on the customs duty and collected to the extent of 10% of such amount.

SWS was introduced to meet the Government's obligations to finance education, health, and social security. SWS is levied in place of education Cess

Law Governing the SWS

As mentioned above, Section 110 Finance Act, 2018 has introduced a new levy of SWS on the goods specified in the First Schedule of Customs Tariff Act, 1975 with the intent to fulfill the commitment of the Government to finance education, health & social security Sub-section (3) provides that the computation of such levy stipulates that the SWS shall be calculated at the rate of 10% of the aggregate of duties, taxes, and Cesses which are leviable. However, in reality, such SWS was made payable on the Basic Customs Duty levied only and at the rate of 10% of such duty leviable.

Rate of Levying Social Welfare Surcharge

Social Welfare Surcharge is calculated at the rate of 10 percent on the aggregate of duties, taxes, and cesses which are levied and collected by the Central Government as a duty of customs on goods imported into India.

CBIC Clarification on Social Welfare Surcharge

CBIC clarified that Social Welfare Surcharge (SWS) is levied and collected as a duty of customs.SWS is levied at the rate of 10% of the aggregate of customs duties payable on the import of goods and not on the value of imported goods. Customs law does not require computation of SWS on a notional customs duty calculated at a tariff rate where the applicable aggregate of duties of customs is zero. Thus CBIC clarified that the amount of Social Welfare Surcharge payable would be ‘Nil’ in cases where the aggregate of customs duties (which form the base for computation of SWS) is zero even though SWS has not been exempted.

Duty credit scrips and Payment of SWS

CBIC clarifies Social Welfare Surcharge to be paid in cash and not through duty credit scrips. SWS, being levied under different legislation and without any specific reference to it in the exemption notifications, cannot be paid through scrips and has to be paid by the importer in cash. Click here to know more about the Customs Duty Exemption on Oxygen Imports