Zero duty; Nil duty and free duty
A netizen asked us, “Please clarify as to what is the exact difference between Zero duty, NIL duty and Free duty”
Free Duty: This is not a term used frequently. In fact the term more often used is duty free. Both of course mean the same thing that there is no duty. Proviso to Rule 3 OF The Baggage Rules mention,
“Provided that such Indian resident or such foreigners returning from Pakistan, by land route, shall be allowed clearance free duty articles in his bona fide baggage to the extent mentioned in column (2) of Appendix “B”.
“The appellant has filed Bill of Entry No. 9385 on 22-6-1987. It was assessed by the customs department on 23-6-1987. Free duty exemption benefit was given under Notification No. 126/85 on producing REP licence” – Tribunal in ANGEL OVERSEAS LTD. v COMMISSIONER OF CUSTOMS, MUMBAI
Zero Duty: Both the terms zero duty and duty free are used in Board’s Circular No. 29/2003-Cus., dated 3-4-2003
(vi) To Enlarge List of Zero Duty Items under Notification No. 6/97-C.E., (relating to wastes) to Cover other Agro Items
(a) In the erstwhile Notification No. 6/97-C.E., dated 1-3-1997, clearance of goods, namely, waste of fish or crustaceans, castor oil cakes, guar meal, cotton waste and jute yarn and fabric, jute carpets and other goods of jute were allowed on payment of ‘Nil’ rate of duty provided such goods were manufactured out of wholly indigenous raw materials. This notification was, basically, for clearance of waste items of agricultural/aqua-cultural goods having very low value. The trade and industry have requested to allow duty free clearance of additional items, namely, bone meal, rice husk and shark, residue of wheat, residue of pulses and other cereals, tea waste or coffee waste; waste of castor oil seed, waste of caster oil derivatives, waste of sesame seeds and waste of other oil seeds and waste from food industries.
The Finance Minister in his budget speech of 2002-03 used both the terms:-
137. In the EXIM;policy for the year 2000-2001, my colleague, the Minister of Commerce and Industry announced the scheme of setting up Special Economic Zones that are intended to provide comprehensive facilities at one place for export production. Special Economic Zones would be entitled to procure duty free equipment, raw materials, components, etc. whether imported or purchased locally. The benefit of such exemption shall be applicable to both the developers of Special Economic Zones as well as the units located therein.
138. In order to encourage development of world class infrastructure facilities, I propose to reduce the customs duty on specified equipment for Ports and Airports to 10%.
139. In view of the;difficulties being faced by the civil aviation sector, I propose to exempt duty on aeroplanes, helicopters, gliders, simulators of aeroplanes and their parts and raw materials.
140. Mr. Speaker, Sir, Indiais signatory to the Information Technology Agreement. The House may recall that, in 1998, I had announced that zero duty regime on IT products would be preponed and implemented by 2003. However, the local manufacturers have urged me strongly that it may be made effective only from the year 2005. This would give them an opportunity to gear up to meet the challenge of international competition. I have decided to accept their demand. As a further measure of assistance to indigenous industry, I propose to reduce the customs duty on a number of hardware inputs to 5% and on certain capital goods to 15%. The duty on certain IT items would be reduced to 10% or 5% as per the WTO binding.
Nil Duty: Board in a clarification, F. No. 345/2/2004-TRU (Pt.), dated 10-8-2004 mentioned,
Issue No. (2) : Whether goods that are fully exempted from excise duty/customs duty or are cleared without payment of excise duty/customs duty (such as clearance under bond or fulfilment of certain conditions) would be subjected to Cess.
Clarification : The Education Cess is leviable at the rate of two per cent of the aggregate of all duties of excise/customs (excluding certain duties of customs like anti-dumping duty, safe guard duty etc.), levied and collected. If goods are fully exempted from excise duty or customs duty, are chargeable to NIL duty or are cleared without payment of duty under specified procedure such as clearance under bond, there is no collection of duty. Thus, no education cess would be leviable on such clearances. In this regard, letter D.O. No. 605/54/2004-DBK, dated 21st July, 2004 issued by Member (Customs) may also be referred to.
So ultimately they all mean the same thing that there is no duty. But Nil duty can be when the tariff rate of duty is Nil. Zero duty may be when the effective duty payable is zero mostly by an exemption notification. Duty free could be when goods are allowed to be cleared without payment of duty like under bond for exports. The goods are neither chargeable to nil rate of duty nor exempted but allowed clearance under a rule without payment of duty.
But the terms are often loosely used. Will one more zero make a difference?