Union Budget 2022: Changes in Customs

The Finance Minister, Smt. Nirmala Sithraman presented the second digital union budget 2022-2023 in Lok Sabha on February 1, 2022. Changes in Customs, Central Excise, GST law, and rates have been proposed through the Finance Bill, 2022. In the present article, we will briefly understand all the proposed Custom, and Central Excise amendments introduced vide the Finance Bill, 2022. For more details on Union Budget 2022 -2023 Updates, Click here

Key Highlights of Union Budget 2022 - Changes in Customs

Critical Changes of Custom and Central Excise introduced vide the Finance Bill, 2022 are as follows:

Exemptions are being introduced to allow duty-free imports of handicrafts, apparel, and leather goods for use in the manufacture of value-added goods to be exported within six months, subject to IGCR rules.
A comprehensive review of Customs Duty Exemption on capital goods and project imports has been undertaken through crowdsourcing and inputs from various ministries.
After a detailed review of custom duty exemptions on capital goods and project imports, more than 40 customs exemptions will be gradually phased out by the specified end date.
Grated import duty rate structure to be notified to operationalize Phased Manufacturing Program for wearable and hearable devices, smart meters and parts, sub-parts, and assemblies thereof.
Unconditional concessional rates prescribed through various notifications are being moved to Tariff (First Schedule in the Customs Tariff Act). These changes in tariff rate shall come into effect from May 1, 2022.
Specific rate changes in the custom Tariff are coming into effect immediately under the Provisional Collection of Taxes ACT declaration.
Revised IGCR Customs (Import of Goods on Concessional Rate of Duty) Rules and Forms notified to make the center process digital and transparent, which will come into effect from 1.03.2022
Significant legislative changes in the Customs act are being made, particularly as regards specifying the class of officers and assignment of function and jurisdiction of the proper officers. Specific actions by such officers of Custom, taken in Customer being valid Custome through Finance bill, 2022.

Click here to know more about Union Budget 2022-2023: Announcements for MSME Sector.

Tariff Structure Simplified

As mentioned above, Unconditional concessional rates prescribed through various notifications are being moved to the Tariff (First) Schedule in the Customs Tariff Act. These changes in tariff rate shall come into effect from May 1, 2022. Accordingly, the respective entries in the concerned notifications will be omitted from May 1, 2022. The duty rates on such items shall then operate through the First Schedule of Customs Tariff Act, 1975. Note: Certain rate changes in the Customs Tariff are coming into effect immediately under the Provisional Collection of Taxes Act declaration.

Legislative changes in the Customs Act

Specific significant changes are being made in the Customs Act through the Union Budget 2022.

The definition of the officer is being modified; officers of DRI, Audit, and Preventive formation are included explicitly in the class of officers of Customs.
Procedures concerning Advance Ruling are being rationalized
A section is being added to make unauthorized publication of import or export data an offense under the Customs Act.

Legislative changes in the Customs Act Rules

As a central trade facilitation measure, the Import of Goods Concessional Rate of Duty (IGCR) Rules, 2017, have been comprehensively revised through budget 222.

End-to-end automation is being introduced in the entire process. Various forms are being standardized any transaction-based permissions, or intimations are being done away with.
A periodical statement under these rules shall also be submitted on the common portal.

Proposed Amendments in the Customs Act, 1962

Proposed Amendments in the Customs Act, 1962, through the Finance Bill, 2022, are explained below.

Modified Definition definition officer

The definition of the officer is being modified; officers of DRI, Audit, and Preventive formation are included explicitly in the class of officers of Customs.

Amendment on Section 2 of Custom Act

Clause (34) of section 2 contains the definition of an officer”. This Section is being modified to expressly state that assignment of functions to an officer of Customs by the Board or the Principal Commissioner of Customs, or the Commissioner of Customs shall be done under the newly inserted sub-section (1A) and (1B) of Section 5 in the Customs Act, 1962 (52 of 1962).

Amendment on Section 3 of the Custom Act

Section 3 is being amended to include the officers of DRI, Audit, and Preventive formation in the class of Officers. This amendment has been made to remove any ambiguity as regards the type of officers of Customs.

Amendment on Section – 5 (Powers of officers of customs)

Sub-Section (1A) and 1(B) to Section 5 have been inserted in section 5 of the Customs Act to explicitly provide the power of assignment of function to customs officers by the Board or, as the case may be, by the Principal Commissioner of Customs or Commissioner of Customs. This amendment has been necessitated to correct the infirmity observed by the Courts in recent judgments that the Act required explicit provision conferring powers for assignment of function to officers of Customs as “proper officers” for the Act, besides the definition clause (34) in section 2 of the Customs Act.

Amendment on Section 14 – Valuation of goods

As a measure to address the issue of undervaluation in imports, Section 14 is being amended through budget 222. The amendment is carried out to include provisions for rules enabling the Board to specify the additional obligations of the importer in respect of a class of imported goods whose value is not being declared correctly, the criteria of selection of such goods, and the checks in care of such goods.

Amendment on Section 28 of Custom Act

Section 28E is being amended to omit the Explanation under clause (c) and omit clause (h).

Rationalized Advance Ruling Procedures

Advance Ruling procedures are rationalized through the Finance bill 2022-2023.

Amendment on Section – 28H (Application for advance ruling)

Section 28H of the Customs Act is being amended to make provisions for prescribing appropriate fees by Board relating to the application for advance Ruling and also give flexibility to the applicant to withdraw his application at any time before a ruling is pronounced from the current 30 days time period. Through this amendment, sub-section (3) is omitted.

Amendment on Section – 28I (Procedure on receipt of application)

Sub-section (7) under Section 28I is being substituted to remove the word “Members” and make changes accordingly.

Amendment on Section – 28J (Applicability of advance ruling)

Sub-section (2) under Section 28J is being substituted. The advance ruling under sub-section (1) of Section 28J is now valid for three years or till there is a change in law or facts based on which the advance ruling has been pronounced, whichever is earlier. A new proviso is also being inserted to provide that the advance rulings in force on the date on which the Finance Bill, 2022 receives the assent of the President, the said period of three years shall be reckoned from the date on which the Finance Bill gets the approval of the President.

Amendment on Section – 110AA

A new Section 110AA is being inserted in Custom Act to affirm the principle that wherever an original function duly exercised by an officer of competent jurisdiction is the subject matter of a subsequent inquiry, investigation, audit, or any other specified purpose by any other officer of customs, then, notwithstanding, such studies, research, audit or any other purpose. This officer who initially exercised such jurisdiction shall have the sole authority to exercise jurisdiction for further action like reassessment, adjudications, etc., consequent to the completion of such inquiry, investigation, audit, or any other purpose.

Protection of Import and Export Data

New Section – 135AA (Protection of data)

Section 135AA is being inserted to protect the import and export data submitted to Customs by importers or exporters in their declarations by making the publishing of such information, unless provided by the law, as an offense under the Customs Act.

Section – 137 (Cognizance of offenses)

Section 137 is being amended to provide that no court shall take cognizance of any offense concerning the protection of the import and export data submitted to Customs by importers or exporters in their declarations without the sanction of the Principal Commissioner/ Commissioner of Customs.

Proposed Amendments in the Customs Tariff Act, 1975

In the Customs Tariff Act, the First Schedule shall be amended to revise the rates in respect of certain tariff items with effect from February 2, 2022 The Third Schedule of the Customs Tariff Act, 1975 has been amended through The Finance Bill, 2022 to harmonies specific entries with Harmonized System of Nomenclature to create new tariff lines in respect of certain thresholds and to revise the rates in respect of certain tariff items with effect from May 1, 2022.

Proposed Amendments in the Customs Tariff Act, 1975

Changes in the Customs Rules Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 (“the IGCR Rules”) are being amended to provide the following facilities:

To introduce end-to-end automation in the entire process of Custom. The requiCustom of submitting all the necessary details electronically, through a common portal, is being brought out through finance bill 222
Standardize and notify the various forms in which components must be submitted electronically.
Leveraging the advantage of submissions of details electronically, the need for any transaction-based permissions and intimations are all being removed.
The procedure to claim the notification benefit is simplified and automated.
For effective monitoring of the use of goods for the intended purposes, a Monthly Statement is being proposed, which is to be submitted by the importer on the Common Portal.
An option for voluntary payment of the necessary duties and interest through the Common Portal is being provided to the importer.

Duty Concessions on Specified Items

A scheme is being introduced for bonafide exporters. Certain exemptions are being submitted for duty-free import of specified goods by the bonafide exporter of items like handicrafts, apparel, and leather goods. The value-added export goods shall be exported in six months, and the exporter shall follow IGCR Rules.