Cvd under customs

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

02 September 2012 hi all,
why we take refund of CVD paid under custom tariff act under sub section 5 of section 3
and why do not take credit of CVD paid under custom tariff act under sub section 1 of section 3

CA Suresh Jain

CA Suresh Jain (Expert)
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02 September 2012 Please make this question more clear

Asha Kanta Sharma online

Asha Kanta Sharma online

(Expert)
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20 July 2024 Under the Customs Tariff Act, the CVD (Countervailing Duty) is levied to counterbalance subsidies provided by foreign governments on imported goods that compete with domestically produced goods. Here’s an explanation of why refunds and credits are handled differently for CVD:

1. **Refund of CVD under Section 3(5)**:
- **Exported Goods**: When goods on which CVD has been paid are subsequently exported, Section 3(5) of the Customs Tariff Act allows for a refund of the CVD paid. This provision is designed to prevent the double taxation of goods that are both imported with CVD and subsequently exported.

- **Procedure**: To claim a refund under Section 3(5), the exporter needs to file an application with the customs authorities providing evidence that the goods were exported and that CVD was paid on them upon importation.

2. **Credit of CVD under Section 3(1)**:
- **Utilization against Duty Liability**: Section 3(1) of the Customs Tariff Act allows for the credit of CVD paid on imported goods against other duties payable on subsequent imports. This means that if CVD has been paid on imported goods and those goods are subsequently used in the manufacture or processing of other goods, the CVD paid can be utilized as a credit against customs duty liabilities on the final products.

- **Conditions**: The credit of CVD under Section 3(1) is subject to specific conditions and procedural requirements as laid down by the customs authorities. Importers must comply with these regulations to claim and utilize the credit effectively.

**Why Different Approaches?**

- **Refund vs Credit**: The distinction between refund and credit arises from the nature and timing of the transactions involving imported goods:
- **Refund** is applicable when the goods on which CVD was paid are exported, ensuring that the CVD paid is not a cost to the exporter.
- **Credit** is used when the CVD paid on imported goods is intended to be offset against future duty liabilities, thereby reducing the overall tax burden on subsequent imports or manufactured products.

In summary, refunds under Section 3(5) of the Customs Tariff Act are provided to prevent double taxation on exported goods where CVD was already paid upon import. Credits under Section 3(1) allow for the utilization of CVD paid on imported goods as a credit against future customs duty liabilities, promoting efficiency and reducing costs in the import and manufacturing processes.

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