Indirect Tax Alert - Amendments and Clarifications pertaining to Import Policy Conditions under HSN 8471

Notification no: 23/2023 dated 3 August 2023 (Notification no: 23/2023) introduced various Import Policy Conditions for import of goods falling under HSN 8471¹. While the aforesaid amendments were brought into effect on an immediate basis, vide a subsequent Notification no: 26/2023 dated 4 August 2023, the aforesaid amendments were notified to be effective from 1 November 2023.

Vide Notification 38/2023 dated 19 October 2023, the aforementioned Import Policy Conditions have been amended as under:

1. IT hardware can be imported can be made without import authorisation in the following cases:

• IT hardware manufactured in a Special Economic Zone (SEZ) which is imported by a Domestic Tariff Area unit on payment of applicable customs duties. Activities such as re-packing, labelling, refurbishing, testing and calibration alone within the SEZ will not be considered as ‘manufacturing’ for claiming the aforesaid benefit of exemption from furnishing import authorisation.
• IT hardware imported by private entities is exempted from filing import authorisation for supply to –
  • Central Government or agencies, undertakings owned and controlled by the Central Government, for Defence or Security purposes;
  • State Government for Security purposes.
    To avail of this exemption, the importer would need to furnish a valid End User Certificate (issued by the relevant government entity) to the Customs authorities at the time of import.

2. Further, the Import Policy Condition 4(iv) is amended as under:

• Exemption from furnishing import authorisation is now expanded and is available for import for repair and/or return and/or replacement of IT Hardware sold earlier as well as re-import of such items repaired abroad on self-certification basis, without a cap on a number of units in a consignment. Earlier, only up to 20 items per consignment were allowed for repair and re-export. However, the cap of 20 items per consignment remains for the goods imported for R&D, testing, benchmarking and evaluation and product development purposes.
•  Further, the exemption under Import Policy Condition 4(iv) was subject to the following conditions, which are removed:
  • Imported goods shall be used for the specified purposes only and will not be sold.
  • After the intended purpose, the products would either be destroyed beyond use or re-exported.

In respect of the aforesaid Import Policy Conditions, the following clarifications have been provided by DGFT vide Policy Circular no: 06/2023-24 dated 19 October 2023:

1. As per Rule 27 of the Special Economic Zone Rules, 2006 and Para 6.01(d) of the Foreign Trade Policy, 2023, SEZ units and EOUs/EHTP/STPI/BTP are not required to obtain import authorisation for importing IT hardware. However, such an exemption is available only for the captive consumption of the concerned importing unit(s).

2. There are no import restrictions on spares, parts, assemblies, sub-assemblies, components and other inputs necessary for IT hardware devices specified in Notification no: 23/2023.

3. Notified IT hardware items essential for Capital Goods (for example laptops/tablets accompanying machinery such as MRI machines, CNC machines, and Unmanned Aerial Vehicles) are exempted from import licensing requirements. However, the said exemption will not apply if servers or laptops themselves are the primary capital goods.

4. Importers are allowed to apply for multiple authorisations. The authorisations issued shall be valid up to 30 September 2024. Subsequent to the issuance of an Import Authorisation, the quantity mentioned on the Import Authorisation may also be amended at any point, subject to the overall value of the Import Authorisation remaining unchanged. The application for amendment can be made online on the DGFT website.

[Notification no: 38/2023 and Policy Circular no: 06/2023-24, dated 19 October 2023]