Project Imports Scheme

Project Imports Scheme is a concept unique to Indian Customs, wherein all the goods imported to the setup of an Industrial Project or substantial expansion of existing industrial projects are subjected to a single classification under Custom Tariff Act, 1975. Typically, imported goods have to be classified ‘on merits’ as per the Customs and Excise Tariffs for levy of duty. The projects imported under the Project Imports Scheme will be subjected to a single rate of customs duty instead of a merit assessment. The current article briefs the Procedure for Availing Benefits under Project Imports Scheme. Know more about the Types of Customs Duty

The objective of the Project Imports Scheme

The Project Import Scheme’s primary objective is to simplify the assessment of the import of capital goods and all the related items required for setting up a project by the levy of a flat duty rate.

Benefits of the Project Imports Scheme

To facilitate smooth and quick assessment by a simplified process of classification and valuation, the goods imported under the Project Import Scheme are placed under a single Tariff in the Customs Tariff Act 1975. This scheme facilitates assessment and ensures faster clearances of goods.

Eligibility Criteria for Obtaining the Concessional Rate of Duty

The essential requirements to be fulfilled to be eligible for a concessional rate of duty under the project import scheme are as follows:

Goods should have been imported against a specified contract registered with the appropriate Customs House
Such registration should have been made in the manner prescribed by the regulations
Registration of the contract should have been obtained before the order (granting permission for clearance of the goods) was passed

Classification of Goods under the Project Imports Scheme

The classification of Goods under the Project Imports Scheme as per the Customs Tariff Act, 1975 is as follows:

Goods allowed under Project Imports Scheme

Under Projects Imports, the following goods are allowed to be imported at a concessional rate of duty:

All items of machinery, including
- Prime movers
- Instruments
- Apparatus and appliances
- Control gear and transmission equipment
Auxiliary equipment (required for research and development purposes, testing, and quality control
All components (whether finished or not) or raw materials for the manufacture of the aforementioned items and their components, required for the initial setup of a unit, or the substantial expansion of an existing unit
Spare parts and other raw materials. (Including semi-finished material) or consumable stores not exceeding 10% of the value of the goods specified above
Spare parts, raw materials, or consumable stores can be imported if these are essential for the maintenance of the plant or project.

Project Import for Substantial Expansion

A project will fall under the category of ‘substantial expansion’ if the unit's installed capacity is increased by above 25%, as per the Project Import Regulations.

Projects Eligible under Project Imports Scheme

Under the Scheme of Project Import, the following projects are covered:-

Industrial Plant
Irrigation Project
Power Project
Mining Project
Project for the exploration of oil or other minerals

Projects/goods not Eligible for benefit under Project Imports

The benefit under the Scheme is not available to hotels, photographic studios, hospitals, photographic film processing laboratories, laundries, photocopying studios, garages, and workshops. This benefit is also not available to a single or composite machine

Import of Construction Equipment under Project Imports

As per the Project Imports Scheme, the construction equipment as auxiliary equipment can be imported only if required for the initial setting up or substantial expansion of registered projects.
The construction equipment may be permitted to be transferred to another registered project, after completion of its intended use, on recommendations of sponsoring authority.

Note: The ‘Plant Site Verification Certificate’ (PSVC) is required to be submitted for finalization of the project

Sponsoring Authority under Project Imports Scheme

The concessional duty rate under the Project Import Scheme applies only to specified projects sponsored by specified sponsoring authorities with a detailed itemized list of goods. Under this scheme, the goods will only be imported after duly attested by the sponsoring authority and imported under specific contracts registered before the import of the goods. Depending upon the nature of the project, different Ministries/departments have been specified as sponsoring authorities. Click here to learn more about the list of projects and sponsoring authorities.

Procedure for Availing Benefits under Project Imports

To avail of the benefit of assessment under this scheme, the importer should have entered into one or more contacts with the suppliers of the goods for setting up a project.

Registration of Contracts for Project Imports

The contracts should be registered before clearance in the Custom House through which the goods are expected to be imported. The importer needs to apply for such registration in writing to the prescribed officer of Customs.

Documents Required for Contract Registration

To expedite registration, the importers are needed to submit the following documents along with the application for registration.

The original deed of contract together
Industrial Licence and letter of intent
SSI Certificate granted by the appropriate authority
Original Import license with a list of items showing the dimensions, specifications, quantity, quality, and value of each item duly attested by the Licensing Authority
Recommendatory letter for duty concession from the concerned Sponsoring Authority,
Process flow chart, plant layout, drawings showing the arrangement of imported machines
Project Report submitted to the Sponsoring authorities, Financial Institutions, etc
Continuity Bond with specified security. The said continuity Bond should be made out for an amount equal to the CIF value of the contract sought to be registered
Write-up, drawings, catalogs, and literature of the items under import
Foreign collaboration agreement, technical agreement, basic/detailed engineering agreement

Project Contract Registration Number

After satisfying that goods are eligible for project imports benefit and the importer has submitted all the required documents, the contract is registered by the Custom House. As a token of registration, the provisional duty bond is accepted by the Assistant/ Deputy Commissioner of Customs, Project Import Group. The project Contract Registration Number will be assigned and communicated to the importer. Note: The importer must refer to this number in all subsequent correspondence.

Clearance of Goods after Contract Registration

On every Bill of Entry filed for clearance of goods, the importer needs to indicate the Project Contract Registration Number. After noting, the Bill of Entry will send to the Project import Group, which is required to check the description, value, and quantity of the goods imported, value, and quantity registered. If these particulars are found in order, the Bill of Entry is assessed provisionally and handed over to the importer or agent for payment of duty.

Finalization of Contract

As per the scheme, the importer is required to submit the following documents within three months from the date of clearance of the last consignment for the finalization of the assessment:

A reconciliation statement, i.e., a statement showing the description, quantity, and value of goods imported
Certificate from a registered Chartered Engineer certifying the installation of each of the imported items of machinery
Copies of the Bills of Entry and invoices
The transaction amount will be finally settled after the completion of the supplies, and the final payment certificate will be issued after this.

Plant Site Verification

To ensure that the imported goods have been used for the projects for which these were imported, plant site verification may be done in cases where the value of the project contract exceeds Rs.1 crore. In other cases, plant site verification is usually done selectively.

Finalization of Provisional Assessment and Recovery of Differential Duty

In the ordinary course, after submission of the reconciliation statement and other documents by the importers, the provisional assessments are finalized within three months where plant site verification is not required and within six months where plant site verification is required. In cases where demand has been issued and confirmed on such finalization, and the importer has not paid the duty demanded, steps are taken as per law to realize the amount.