India: Customs Duty And Tax Planning In India: Advance Authority Ruling

Last Updated: 8 September 2008
Article by Ashok Sagar

Tax has fundamental implication on the viability and planning of most projects. A conclusive determination of tax liability is therefore highly desirable. With this in view, the Indian Government has created a quasi-judicial body called the 'Authority for Advance Ruling' (Authority). Under this statutory scheme, (created under the Indian Customs Act, 1962) any foreign investor can get a fix on his customs duty in respect of imports or exports. A Ruling by the Authority is binding on both the customs authorities, as well as the applicant. The Authority comprises of a three member panel, headed by a former Judge of the Supreme Court of India.

This article sets forth the contours of the Advance Ruling mechanism in India.

Issues on which Advance Ruling may be sought

Advance ruling may be sought in respect of five issues, namely:-

(i) Classification of goods under the Customs Tariff Act, 1975;

Each type of goods being imported may carry a different rate of duty depending on its classification under the Customs Tariff Act. Therefore, a correct classification of the goods is important for determining the rate of duty applicable.

(ii) The applicability of notifications issued under section 25 (1) of the Customs Act;

The rate of duty applicable on goods is specified under the Customs Tariff Act. However, the Central Government has the power to exempt goods either wholly or partially from customs duty. This is by way of Notifications issued by the Central Government under Section 25 of the Customs Act.

(iii) The principles that are to be adopted for purposes of determination of the value of the goods;

Valuation is an important aspect as the quantum of duty may depend upon the same (where duties are on ad valorem basis). The normal basis for valuation is the "transaction value" and price is the sole consideration for the sale. For purposes of determination of the value of goods the Central government has framed the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. These provide, inter alia, the circumstances in which the transaction value is accepted. The Rules further provide for the methodology for determining the value of goods in case the transaction value is not available or circumstances exist in which the transaction value may not be accepted. Similarly Rules have also been framed for the determination of value of goods meant for exports.

(iv) The applicability of notifications issued in respect of duties under the Customs Act, the Customs Tariff Act and any duty chargeable under any other law for the time being in force in the same manner as duty of customs is leviable under the Customs Act;

In addition to customs duty certain additional duties of customs such as special duties of customs may also be imposed on goods being imported into India. The Central Government also has the power to grant exemptions in such cases either from the whole of such duties or a part of such duties, absolutely or subject to conditions. Further, anti-dumping duty may be imposed on import of certain goods. It would be open to an applicant to make an application to determine if such anti dumping duty would be imposable on goods imported by it.

(v) The determination of origin of the goods in terms of Rules notified under the Customs Tariff Act, 1975;

India has entered into various trade agreements. Under these, reduced rates of customs duties are leviable on goods originating from such countries. These Rules provide the manner in which the origin of goods is to be determined.

Persons that may apply for Advance Ruling

Only the following categories of persons may apply for an advance ruling:-

(i) a non-resident setting up a joint venture in India in collaboration either with another non-resident or a resident;

(ii) a resident of India setting up a joint-venture in collaboration with a non-resident;

(iii) a wholly-owned subsidiary incorporated in India of which the holding company is a foreign company;

(iv) a resident falling within any such class or category of persons as the Central government may by notification specify. At present the Central Government has issued one Notification which covers a person proposing to import any goods from the Republic of Singapore under the Comprehensive Economic Cooperation Agreement between India and Singapore. The advance ruling may be sought in respect of the determination of the origin of the goods.

The terms "non-resident", "Indian company" and "foreign company" have not been defined under the Customs Act and it is provided that they carry the same meanings as are given to them under the Indian Income Tax Act, 1961.

Stage at which an application may be made

An applicant seeking an advance ruling may make an application to the Authority only in relation to an "activity" proposed to be undertaken by it. "Activity" has been defined to mean "import or export". The Authority does not allow an application if the activity of import or export is already underway.

Procedure followed by the Authority

On the filing of an application, a copy thereof is forwarded to the concerned Commissioner of Customs for his comments.

There are two stages of determination.

First Stage

In the first instance the Authority has to determine whether the application is maintainable.

An application for advance ruling is liable to be rejected outright in the following circumstances (proviso to section 28-I [2] of the Customs Act):-

Where the issue/question raised in the application is

(i) already pending in the applicants case before any officer of Customs, the Customs Excise and Service Tax Appellate Tribunal or any court;

(ii) the same in a matter already decided by the Customs Excise and Service Tax Appellate Tribunal or any court.

However, it is mandatory for the Authority to give the applicant an opportunity of being heard before rejecting the same and in case an application is being rejected, the Authority has to give reasons for such rejection.

Second Stage

In this stage the Authority determines the questions on merits. The Applicant must request for a hearing if it so wishes. It is stipulated that the Authority should pronounce its Ruling in writing within 90 days of the receipt of the application. An applicant has the right to withdraw its application within 30 days from the date of filing of the same (section 28H [4] of the Customs Act). If, however, the applicant desires to withdraw its application any later point of time, it may do so only with the permission of the Authority.

Binding Nature of an Advance Ruling Order

The advance Ruling made by the Authority is binding on the applicant as also on the Customs departments and all authorities subordinate to him. It is binding in respect of the questions that have been raised in the application (section 28J [1] of the Customs Act), unless there is a change in law or in the facts on the basis of which the advance ruling had been pronounced (section 28J [2] of the Customs Act).

The Authority has the power to declare an advance ruling made by it to be void ab initio if it finds that such Ruling has been obtained by the applicant by fraud or misrepresentation (section 28K [1] of the Customs Act).

Summing up

Advance Rulings allow traders and investors to make business decisions in a stable and predictable environment. Typical disputes with regard to tariff headings, valuation and original are avoided. Advance rulings thus do away with time-consuming complaints and appeals to the various appellate forum. Advance Ruling is thus a very useful tool in aid of investments in a foreign venture.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.