Duties, Taxes and Freight:
- Excise duty: This is statutory on all indigenous procurement and is generally included through the supplier although giving the budgetary quotation. Nevertheless, it should be ensured through clarifications, if not clearly spelt out in the reference being used. The present applicable rate is @ 16% with 2% education cess aggregating to 16.32%.
- Customs duty: This is statutory and applicable in case of imported procurements. The rates for a particular item are available in the customs manual. Nevertheless, a blanket rate of 10% is applicable, considering whole imports under "project import" category, if the import value is over Rs. 5.0 crores. For less than Rs. 5.0 crores, the applicable rate is 15% - the peak rate of duty applicable as on date. On top of it, imported supplies are to be applied with countervailing duty (CVD) that is the equalizing counterpart of excise duty on indigenous procurements to provide a level playing field for indigenous manufacturers. Budget of 2005-2006 has imposed 2% education cess on customs duty. Therefore if the applicable customs duties are 10% and 15%, the aggregated rate of import duty swells to 28.511% and 34.443%, respectively.
The infrastructure projects qualify for additional concessional rate of customs duty @ 5%. Once we think of gas insulated switchgear and other automation features, the import components required being involved in the schemes.
- Sales tax: In case of projects, generally the Central Sales Tax (CST) @ 4% is included. If the estimator is extremely sure about the source of procurement, then State Sales Tax /VAT can be applied, but generally the origin of goods to be procured is clear only after tendering and thus at the time of estimate, only CST is applied.