BCD rate on goods suitable for use in motor vehicles

by | Oct 27, 2021 | Insight

Several auto OEMs and part manufacturers are dealing with classification disputes vis-à-vis parts and accessories of motor vehicles. For imported goods, there is a customs duty arbitrage under Heading 8708 / 8714 covering parts and accessories of motor vehicles versus other Headings. 

The Government vide Notification No. 2/2021-Customs dated February 1, 2021, and Notification No. 21/2021-Customs dated March 31, 2021 increased effective Basic Customs Duty (‘BCD’) rate on several products and provide concessional rate of BCD on several goods. By virtue of said Notifications, specified goods suitable for use in motor vehicles attract higher BCD rate vis-à-vis other goods falling under same Heading. An illustrative list of such goods is given hereunder: 

  • Heading 7007 covering safety toughened glass
  • Heading 8414 covering gas compressors
  • Heading 8501 covering motors
  • Heading 8536 covering relays
  • Heading 9031 and 9032 covering measuring, checking, and regulating instruments, appliances, and machines 

NITYA Comments: Expression ‘suitable for use’ has wider connotation. The expression ‘suitable for use’ has been judicially interpreted to mean ‘actually, practically and commercially fit for use and not casual, incidental or possible use’. Thus, criteria to determine whether a product is excluded from above concessional BCD is basis fitness or appropriateness of product to be used in motor vehicles and not basis exclusive (sole or principal) use in motor vehicles. Thus, any imported product capable of being used or being fit for use with a motor vehicle, is excluded from benefit of concession even if such product is not designed specifically for motor vehicle and can be used in other goods.