SAD refund

PLEASE NOTED THAT:-

A special additional duty (SAD) of Customs of 4% has been levied on all imports by the Budget 2006-2007. As no central sales tax or VAT is levied on imports, the levy of SAD is intended to create a level playing field for domestic goods vis--vis imports. However, this fairly innocuous-intentioned move has a number of anomalies and contradictions.

A manufacturer of excisable goods is permitted to utilise the SAD paid on imported goods as a credit against its excise duty liability. Therefore, SAD is not a cost for a manufacturer and as such does not operate as a countervailing tax.

However, such credit is not available to a service provider or any person engaged in other activities that do not attract excise duty such as mining, power generation and construction. An importer-trader, who imports and sells goods in India upon payment of CST/VAT, had to first pay SAD, and then CST/VAT on sale of the imported goods.

In a nutshell, until recently, the tax was countervailing for a service provider and someone engaged in mining, construction, etc, but not for a manufacturer. For a trader, rather than being countervailing, levy of SAD results in double taxation.