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Friday , 9 December 2016
Breaking News

ICA Recommends Amendments in the new IGCR Rules 2016

  • New IGCR Regime – Not easing business; rather it is more cumbersome in some ways than the previous Rules
  • Request for some amendments to promote ease of doing business

The following is a summary of the problem areas with suggestions from ICA to make the scheme easy to follow by domestic manufacturers:

Issues Suggestions
The requirement of continuity bond backed

by surety for availment of the concession

duty is a new condition under Rule 5(2) of

IGCR 2016. Earlier IGCR 1999, Rule 4(3)

required only a simple bond and undertaking from the manufacturer. The result is that the transaction cost and compliance cost, instead of coming down, has actually increased. Industry feels that there should be a trust based system. As it is, the checks of registrations and penalties for misuse are more than sufficient to deter the black sheep. In case of misuse, the defaulters can be subjected to exemplary penal action.

 

We should go back to the simple bond with undertaking system as envisaged under the original IGCR 1999. Rule 5(2) of IGCR 2016 may be amended accordingly
The utilization period of the imported goods

is only three months in the new Rule 7(1).

After this, the import must be squared up by

way of re-export, destruction under excise

supervision or payment of duty differential.

In the earlier IGCR Rules 1999, the period of

use was six months, While it is true that imported goods should be used at the soonest, there are cases when it is necessary to maintain the raw material or parts stock for a longer period. For example, a set of 10,000 parts for a particular item may contain a series which is defective

or not compatible; the replacement may take more than three months since export and import to rectify the mistake take a long time. The balance parts in stock will thus cross the three month barrier and enter the zone of reexport/ destruction/payment of duty differential. Secondly, buying in bulk in many cases gives a cost advantage which is taken away by the three months restriction.

 

It is suggested that we may return to the earlier six month period of utilization of the imported input. This is also the norm in standard job work procedures. It may also be noted that the normal limitation period for demanding duty has been raised to two years. As such, restoring the period to six months will not create any disadvantage to the department for demanding any short payment of duty.
Teething troubles: Reports indicate that

field formations are yet to understand the

trust based system envisaged in the new

IGCR which substitute permissions with self declaration. Many field formations are requiring approval as if the earlier system of

applications is still in place. As of now, the IGCR requires only information to be supplied. It is based on self-declaration except in cases where utilization is not within the set period of three months. There is a Procurement Certificate system in operation in some of the Commissionerates which is akin to the permission system in the 1999 rules since superseded by 2016 Rules.

 

Presently, there is no process flow chart available in public domain to follow under new IGCR Rule 2016. Standard process guidelines including the modalities of the bond, procedure for deducting the duty forgone amount from bond balance may be circulated for the benefit of the manufacturers.

Central excise job work notification No 214/86-CE 

We now take up the issue of job work. Job work is an essential element in the process of manufacture as all parts/components required for manufacture cannot be efficiently

produced in the same premises. Having recognized this, Government had notified a scheme which allows inputs, raw materials etc. to be supplied to job workers. Under the scheme, job workers are not required to pay excise duty on the job worked goods so long as the supplier of such inputs and raw materials undertake to pay the excise duty on return of the job worked goods. This exemption introduced by notification No 214/86 – CE has been a very important feature of tax administration facilitating manufacture.

The suggestions are summarized below:

(a)  The simple bond with undertaking system as envisaged under the original IGCR 1999. Rule 5(2) of IGCR 2016 may be restored

(b)  The period of utilization of the imported input may be restored to the earlier period of six months which is also the norm for sending goods out for job work under notification 214/86 -CE.

(c)  Standard process guidelines for following the IGCR including the modalities of the bond, procedure for deducting the duty forgone amount from bond balance may be circulated for the benefit of the manufacturers.

(d)  A clarification may be issued to the effect that there is no bar to inputs/raw materials imported subject to the provisions of IGCR against availing the benefit of notification No 214/86 -CE provided, of course, that all the conditions of notification 214/86 -CE are complied with.

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