CBIC Restores Concessional Import Duty On Lab Chemicals, Addresses Misuse

New Delhi, Aug 2 (KNN) The Central Board of Indirect Taxes and Customs (CBIC) has issued an order modifying the recent duty hike on imported laboratory chemicals, effectively restoring a concessional 10 per cent import duty for genuine users.

This move comes in response to concerns raised following the Union budget for FY25, which had increased the duty to prevent tax evasion.

According to the order, the 10 per cent duty will apply to laboratory chemicals imported in packages not exceeding 500 ml or 500 gm, subject to a declaration regarding the end use of the imported consignment.

Importers failing to comply with this condition will be ineligible for the concessional rate.

Notably, undenatured ethyl alcohol has been specifically excluded from this concessional duty structure. This exclusion addresses the misuse of the provision by some importers who were wrongly declaring undenatured ethyl alcohol as a lab chemical to avoid the applicable 150 per cent duty.

A senior tax official, speaking on condition of anonymity, explained the rationale behind the initial duty hike and subsequent modification. "Most chemicals attract import duties ranging from 2.5 per cent to 10 per cent under the Customs Tariff Act.”

“The dedicated classification code for lab chemicals was created to facilitate trade. However, instances of misuse necessitated corrective action," the tax official further added.

The official further clarified that the restoration of the 10 per cent duty aims to balance the needs of genuine users with the prevention of tax evasion. Importers benefiting from this concessional rate are prohibited from selling or trading the imported consignment.

These changes take effect from August 1, 2024. The CBIC's move is expected to provide relief to research institutions and laboratories while maintaining safeguards against potential misuse of the import duty structure.

(KNN Bureau)