To handle customs duty as costs

This functionality is specific for India.

Custom duty is not claimable and is handled as costs. You need not set up a tax code for customs duty. In the Accounts Payable module, you must enter a cost invoice for the customs duty that you pay for imported goods.

The custom duty is calculated based on the assessable value of the item. To get the actual cost of item, add costs like insurance and freight to the purchase price. In LN, you can use the cost components and the item surcharges features to obtain the assessable value of the item.

Calculate the assessable value of the item in the following sessions:

  • Items - Costing (ticpr0107m000)
    Select the Surcharges by Item check box.
  • Item Surcharges (ticpr1110m000)

    Create lines for the cost components and enter the values in the following fields:

    • Booking Triggered By: select Receipt.
    • Calculation Line Type: select Surcharge.
    • Surcharge Method: select Selective (Added Costs).
    • Surcharge Percentage enter the average expected additional costs.
  • Calculate Cost and Valuation Prices (ticpr2210m000)
    Calculate the standard cost of the item. This is the final assessable value of the item inclusive of surcharges.

Create a purchase order for the item. If you release the purchase order line to warehouse and confirm the receipt, the additional costs for insurance, freight and any other charges are included as item surcharges in the inventory valuation.

Example

If the value of an item is INR 1000, customs duty is 20 per cent and countervailing duty (CVD) is 16 per cent, the duty is calculated as follows:

DescriptionTax rate or formulaAmount
Taxable amountnot applicable1000
Basic customs duty20 per cent200
Sub total for calculating CVD (basic custom duty + taxable amount)not applicable1200
Countervailing duty (CVD)16 per cent of 1200192
Education cess on CVD2 per cent of CVD4
Sub total for calculating education cessBasic custom duty + CVD396
Education cess on taxable amount2 per cent of 396 (normal rounding)8

 

Total taxable amount: 404.

The assessable value can be calculated as follows:

  • Select item and aggregate cost components in the Items - Costing (ticpr0107m000) session.

    • Item = Electrical Control
    • Material = Aggregate Material
    • Operation = Aggregate Operations
    • Surcharge = Aggregate Surcharge
    • Select the Surcharges by Item check box.
  • In the Item Surcharges (ticpr1110m000) session, create lines for the cost components and enter the values in the following fields:
    • Booking Triggered By: select Receipt.
    • Calculation Line Type: select Surcharge.
    • Surcharge Method: select Selective (Added Costs).
    • Surcharge Percentage enter the average expected additional costs. The following surcharges to be maintained:
      • 1 receipt surcharge line for 20 per cent on Basic Custom Duty
      • 1 receipt surcharge line for 16 per cent on Countervailing Duty
      • 1 receipt surcharge line for 2 per cent on Education cess on Countervailing Duty
      • 1 receipt surcharge line for 2 per cent on Education cess on total taxable amount.
  • In the Calculate Cost and Valuation Prices (ticpr2210m000) session, calculate the standard cost of the item. This is the final assessable value of the item inclusive of surcharges.

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