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Education cess on customs duty — Ministry rejects industry request for change in calculation method

K.R. Srivats

New Delhi , Aug. 23

THE Finance Ministry has rejected the industry's suggestion for a change in the method of calculation of education cess on customs duty. The revenue department has held that the method recommended by industry was not acceptable as it goes against the relevant legal provisions.

A section of industry had urged the Finance Ministry to take a re-look at the method of calculation of education cess on customs duty and undertake remedial steps to do away with what they termed as an unintentional `cess on cess'.

Industry had suggested that the 2 per cent education cess on customs duty should be imposed on the basic customs duty (BCD) and to this the amount of 2 per cent cess on countervailing duty (CVD) should be added. This would tackle the issue of `cess on cess', the industry had contended.

Informed sources said that the revenue department has not agreed to this suggestion and has now pointed out to industry that the 2 per cent education cess on CVD is an education cess of excise.

The Finance Ministry has categorically said that the 2 per cent education cess should be calculated on the aggregate duties of customs -- basic customs duty (BCD) and the CVD (on which education cess of excise is also applicable).

"The aggregate duty of customs include the basic customs duty leviable under the Customs Tariff Act and also the additional duty under Section 3(1) of customs tariff (loosely worded as countervailing duty). CVD is equal to the corresponding excise duty, on which education cess of excise is also applicable," the revenue department has said.

The education cess on the customs duty is, however, not to be applied on the safeguard duty under Section 8B and 8C, countervailing duty under section 9 and anti-dumping duty under Section 9A of the Customs Tariff Act.

Meanwhile, a revenue department official said that the Centre expects to realise revenue of Rs 2,400 crore from the 2 per cent education cess on indirect taxes (customs, excise and service tax taken together) during the remaining part of the current financial year.

While the education cess is already applicable in respect of customs and excise duties with effect from July 9,2004 on account of declaration under the Provisional Collection of Taxes Act, 1931, in respect of service tax, the cess would come into effect only on enactment of the Finance Bill 2004.

As regards the 2 per cent `education cess on income tax', this cess is proposed to be levied with effect from April 1, 2004 on income distributed by companies and mutual funds, tax deducted at source, tax collected at source and advance tax paid during the financial year.

The centre hopes to collect about Rs 2,510 crore from the education cess on corporation tax and taxes on income other than the corporation tax.

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