Indian Customs guidelines about Project imports, Registration of contracts, Clearance of goods after registration, Finalization of contract, Baggage and Postal imports for personal use
Under this post, the details about Project imports, Registration of contracts, Clearance of goods after registration, Finalization of contract, Baggage and Postal imports for personal use are extracted from Indian customs manual for 2023.
What is the purpose of Project Imports as per Customs manual 2023? How does Indian customs function on project imports? How to assess the value under project imports? What is the accounting method on realization of foreign exchange?
The customs manual 2023 also explains about the process of registration of contracts, step by step formalities to register and other guidelines related to customs procedures and formalities. The Customs Manual 2023 also explains in detail about the documents required for registration. The Customs Manual 2023 also explains about the process on clearance of goods after registration.
The customs manual also explains about finalization of contract, baggage and postal imports for personal use.
The Indian Customs Manual 2023 about Project imports, Registration of contracts, Clearance of goods after registration, Finalization of contract, Baggage and Postal imports for personal use are explained below:
The extract of Indian Customs Law 2023 is given under:
Chapter 5: Classification/Assessment of Projects Imports,
Baggage and Postal Imports
1. Introduction:
1.1 For the sake of convenience, a special classification has been introduced in the Customs Tariff
for project imports, baggage and postal imports. By virtue of this classification, the diverse goods
that are imported for the purpose of execution of projects or as baggage and postal imports are
classified under one heading and subjected to a uniform rate of duty. This facilitates assessment
and ensures faster clearances since the alternative would be to classify each item distinctly and
subject the same to the applicable duty.
2. Project imports:
2.1 ‘Project Imports’ is an Indian innovation to facilitate setting up of and expansion of industrial
projects. Normally, imported goods are classified separately under different tariff headings and
assessed to applicable Customs duty, but as a variety of goods are imported for setting up an
industrial project their separate classification and valuation for assessment to duty becomes
cumbersome. Further, the suppliers of a contracted project, do not value each and every item or
parts of machinery which are supplied in stages. Hence, ascertaining values for different items
delay assessment leading to demurrage and time and cost overruns for the project. Therefore, to
facilitate smooth and quick assessment by a simplified process of classification and valuation, the
goods imported under Project Import Scheme are placed under a single Tariff Heading 9801 in
the Customs Tariff Act, 1975. The Central Government has formulated the Project Import
Regulations, 1986 prescribing the procedure for effecting imports under this scheme.
2.2 The Project Import Scheme seeks to achieve the objective of simplifying the assessment in
respect of import of capital goods and related items required for setting up of a project by
classifying all goods under heading 9801 of the Customs Tariff Act, 1975 and prescribing a uniform
Customs duty rate for them even though other headings may cover these goods more specifically.
2.3 The different projects to which heading 9801 applies are; irrigation project, power project, mining
project, oil/mineral exploration projects, etc. Such an assessment is also available for an industrial
plants used in the process of manufacture of a commodity. The Central Government can also
notify projects in public interest keeping in view the economic development of the country to which
this facility will apply. Thus, a number of notifications have been issued notifying a large number
of projects for assessment under Tariff Heading 9801. However, this benefit is not available to
hotels, hospitals, photographic studios, photographic film processing laboratories, photocopying
studios, laundries, garages and workshops. This benefit is also not available to a single or
composite machine.
2.4 Goods that can be imported under Project Import Scheme are machinery, prime movers,
instruments, apparatus, appliances, control gear, transmission equipment, auxiliary equipment,
equipment required for research and development purposes, equipment for testing and quality
control, components, raw materials for the manufacture of these items, etc. In addition, spare
parts, consumables up to 10% of the assessable value of goods can also be imported under
Project Import.
2.5 The purposes for which such goods can be imported under the Project Import Scheme are for
“initial setting up” or for “substantial expansion” of a unit of the project. The “unit” is any selfcontained portion of the project having an independent function in the project. A project would fall
under the category of “substantial expansion” if the installed capacity of the unit is increased by
not less than 25%, as per the Project Import Regulations, 1986.
2.6 The scope of the items eligible for import under the Project Import Regulations 1986, shall cover
construction equipment as auxiliary equipment; if essentially required for initial setting up or
substantial expansion of registered projects. The construction equipment may be permitted to be
transferred to other registered project under CTH 9801, after completion of its intended use, on
recommendations of sponsoring authority. The “Plant Site Verification Certificate” required to be
submitted for finalization of project as per Circular No. 14/2006-Cus., dated 17-4-2006 shall
incorporate the details of construction equipment imported and used for the project, to ensure
proper utilization of goods imported.
[Refer Circular No. 49/2011-Cus. dated 4-11-2011]
3. Registration of contracts:
3.1 In terms of Regulation 4 of the Project Import Regulations, 1986 (PIR), the basic requirement for
availing the benefit of assessment under Tariff Heading No. 98.01 is that the importer should have
entered into one or more contracts with the suppliers of the goods for setting up a project. Such
contracts should be registered, prior to clearance, in the Custom House through which the goods
are expected to be imported. The importer shall apply for such registration in writing to the proper
officer of Customs.
3.2 Regulation 5 provides in the manner of registering contracts, which is as follows:
(i) Before any order is made by the proper officer of Customs permitting the clearance of the
goods for home consumption;
(ii) In the case of goods cleared for home consumption without payment of duty subject to reexport in respect of fairs, exhibitions, demonstrations, seminars, congresses and
conferences, duly sponsored or approved by the Government of India or Trade fair Authority
of India, as the case may be, before the date of payment of duty.
3.3 To expedite registration, the importers are advised to submit the following documents along with
the application for registration:
(i) Original deed of contract together with true copy thereof.
(ii) Industrial License and letter of intent, SSI Certificate granted by the appropriate authority
with a copy thereof.
(iii) Original Import licence, if any, with a list of items showing the dimensions, specifications,
quantity, quality, value of each item duly attested by the Licensing Authority and a copy
thereof.
(iv) Recommendatory letter for duty concession from the concerned Sponsoring Authority,
showing the description, quantity, specification, quality, dimension of each item and
indicating whether the recommendatory letter is for initial set-up for substantial expansion,
giving the installed capacity and proposed addition thereto.
(v) Continuity Bond with cash security deposit equivalent to 2% of CIF value of contract sought
to be registered subject to the maximum of Rs. 50 lakhs and the balance amount by the
bank Guarantee backed by an undertaking to renew the same till finalization of the contract.
The said Continuity Bond should be made out for an amount equal to the CIF value of the
contract sought to be registered.
(vi) Write up, drawings, catalogues and literature of the items under import.
(vii) Process flow chart, plant layout, drawings showing the arrangement of imported machines
along with an attested copy of the Project Report submitted to the Sponsoring authorities,
Financial Institution, etc.
(viii) Two attested copies of foreign collaboration agreement, technical agreement, knowhow,
basic/detailed engineering agreement, equipment supply agreement, service agreement, or
any other agreement with foreign collaborators/suppliers/ persons including the details of
payment actually made or to be made.
(ix) Such other particulars, as may be considered necessary by proper officer for the purpose
of assessment under Heading No. 9801.
3.4 In regard to the requirement of registration of the contract (or contracts) and production of the
“original deed of contract”, the Board noted that as per Section 10 of the Indian Contract Act, 1872
a valid contract contains certain essential elements viz. (a) it is entered into by free consent of
parties competent to contract; (b) there should be lawful consideration; (c) there should be a lawful
object; and (d) it is not expressly declared to be void under the statute. It is therefore decided that
a purchase order that contains all the essential ingredients of a valid contract must be treated as
one under the Indian Contract Act, 1872. Thus, such a purchase order can be accepted as a “deed
of contract” for the purpose of Regulation 5 of Project Import Regulations, 1986.
[Refer Circular No. 31/2013-Cus. dated 6-8-2013]
3.5 After satisfying that goods are eligible for project imports benefit and importer has submitted all
the required documents, the contract is registered by the Custom House and as a token of
registration the provisional duty bond is accepted by the Assistant/ Deputy Commissioner of
Customs, Project Import Group. The details of the contracts are entered in the register kept for the
purpose and a Project Contract Registration Number is assigned and communicated to the
importer. The importer is required to refer to this number in all subsequent correspondence.
4. Clearance of goods after registration:
4.1 Earlier, on every Bill of Entry filed for clearance of goods under the Project Import Scheme, the
importer/Customs Broker was required to indicate the Project Contract Registration Number
allotted to it. After noting, the Bill of Entry was sent to the Project import Group, which was required
to check the description, value and quantity of the goods imported vis-a-vis the description, value
and quantity registered. In case these particulars were found in order, the Bill of Entry was
assessed provisionally and handed over to the importer or his agent for payment of duty. The
Project Import Group kept a note of the description of the goods and their value in the Project
Contract Register and in the file maintained in the Group for each project.
4.2 Roll out of Project Import Module in ICES:
To overcome the difficulties faced due to manual processing, Project Imports module has been
developed in ICES. ICES Advisory 13/2019 dated 29.05.2019 has been issued in this regard
wherein processes relating to Project Import Module were explained. Project import module covers
the following processes:
(a) Registration of a Project and generation of a Project number.
(b) Bond Registration for Project Imports.
(c) Filing of provisional BEs with project number and bond details. Item wise debits in the
project/bond for every BE.
(d) Finalization of the Provisional BEs and re-crediting of the Bond
[Refer Circular No. 27/2019-Customs dated 03.09.2019]
5. Finalisation of contract:
5.1 Under Regulation 7 of the PIR, 1986 the importer is required to submit, within three months from
the date of clearance of the last consignment or within such extended time as the proper officer
may allow, the following documents for the purpose of finalization of the assessment:
(i) A reconciliation statement i.e. a statement showing the description, quantity and value of
goods imported along with a certificate from a registered Chartered Engineer certifying the
installation of each of the imported items of machinery;
(ii) Copies of the Bills of Entry, invoices, and the final payment certificate is insisted upon only
in cases where the contract provides that the amount of the transaction will be finally settled
after completion of the supplies.
5.2 To ensure that the imported goods have actually been used for the projects for which these were
imported, plant site verification may be done in cases where value of the project contract exceeds
Rs.1 crore. In other cases, plant site verification is normally done selectively.
5.3 In the normal course, after submission of the reconciliation statement and other documents by the
importers, the provisional assessments are finalized within a period of three months where plant
site verification is not required and within six months where plant site verification is required. In
cases where a demand has been issued and confirmed on such finalization and importer has not
paid the duty demanded, steps are taken as per law to realise the amount.
6. Baggage:
6.1 All goods imported by a passenger or a member of crew in his baggage are classifiable under
Tariff Heading 9803 and levied to a single rate of duty. Such goods need not be classified
separately in the Tariff. However, Tariff Heading 9803 does not apply to motor vehicles, alcoholic
drinks, and goods imported through courier service. Such assessment will also not apply to goods
imported by a passenger or a member of the crew under an import license or a customs clearance
permit.
7. Postal imports for personal use:
7.1 All goods imported by Post or Air for personal use are classifiable under a single Tariff Heading
9804 and levied to duty accordingly. This heading has been sub-divided into two subheadings,
one applicable to drugs and medicines and the other, to the balance of items so imported. Such
goods will however be governed by the FTP as far their importability is concerned. Motor vehicles,
alcoholic drinks and goods imported through courier service can, however, not be classified under
this heading. Goods imported under an import license or a customs clearance permit will however
not be classified under this tariff heading.