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1. High Sea sales (HSS) is a sale carried out by the carrier document consignee to another buyer while the goods are yet on high seas or after their dispatch from the port/ airport of origin and before their arrival at the port / airport of destination.
2. HSS is accepted under the import trade control regulation. Refer para – of export import policy.
3. HSS contract/ agreement should be signed after dispatch of goods from origin & prior to their arrival at destination. The agreement should be on stamp paper.
4. On concluding the HSS agreement, the B/L should be endorsed in favour of the new buyer. In respect of air shipment, HSS seller should write to the airline / consol agent informing that a HSS agreement has been established with the HSS buyer and that the carrier document should therefore be considered as endorsed in favour of the HSS buyer and further the IGM should be filed by the carrier in the name of the HSS buyer.
5. If the EDI system allows name of HSS buyer to be entered in the system, then there may not be any need to amend the IGM. In this case the B/E is filed in the name of the original importer as the IGM is in this importer name. However , the B/E shows the name of HSS buyer under a separate head in the B/E format. If the system has no provision for showing the name of HSS buyer on the B/E ,then the IGM should be got amended and B/E filed in the name of the HSS buyer.
6. In the case of HSS , the CIF value for calculation of duty is taken to be the HSS value.
7. There is practice followed in customs that in case the HSS transfer takes place at import invoice value only , the custom would add 4% of CIF value as HSS loading factor . There have been cases where HSS sellers have sold at two percent more than import CIF but custom have added 4% of CIF as HSS value addition. Such practice of customs can be challenged at the customs duty is chargeable on genuine transaction value.
8. In HSS contracts the HSS seller may not like to disclose the import value to the HSS buyer. However, the customs can call for the original import invoice, in which case the HSS seller may have to part with this information. To overcome this, HSS seller should take on the responsibility of custom clearance and site delivery. After custom clearance, the HSS seller could withdraw import invoices and only hand over clearance documents with HSS agreement to the HSS buyer. The custom bill of entry does not indicate original import value and is prepared on HSS value.
9. There is no bar on same goods being sold more than once on high seas. In such cases, the last HSS value is taken by customs for purposes of duty levying. The last HSS agreement should give indication of previous title transfers. The last HSS buyer should also obtain copies of previous HSS agreement as such documents may be called upon by the customs.
10. HSS is considered as a sale carried out outside the territorial jurisdiction of India. Accordingly, no sales tax is levied in respect of HSS. The customs documents (B/E) is either filed in the name of HSS buyer or such B/E has an endorsement indicating HSS buyer’s name.
11. The title of goods transfers to HSS buyer prior to entry of goods in territorial jurisdiction of India. The delivery from customs is therefore on account of HSS buyer. The CENVAT credit in respect of CVD paid on import is entitled to HSS buyer.
12. HSS goods are entitled to classification, rates of duty and all notification benefits as would be applicable to similar import goods on normal sale.
13. HSS is also applicable to goods imported by air. Sea appearing in HSS should not be constructed by its grammatical meaning. As long as the sale is formalized after dispatch from airport / port of origin and before arrival at the first port of discharge / airport at destination, such sale is considered as HSS.
14. Sometime HSS buyers buy goods after their arrival. Such sale are not HSS. The stamp paper on which the HSS agreement is executed must not bear the stamp paper purchase date as being post cargo arrival date. Such a case can easily be detected by customs as being a post arrival sale.
15. If the HSS does not mind disclosing original import values to HSS buyer, in such case it is better from custom clearance point of view for the seller to endorse the B/L, invoice , packing list in favour of the HSS buyer. The endorsement should read “Transferred on High Sea Sales basis to M/S ——– for a sales consideration of Rupees ——–“. Such endorsement should be stamped and signed by the HSS seller.
BUDGET 2002-2003 HIGHLIGHTS DIRECT TAX PROPOSAL
Tax Proposal on Income Tax
6. Computation of Capital Gains and Real Estate Transaction
It is proposed to insert a new section 50C to make a special provision for determining the full vale of consideration in case of transfer of immovable property. It provides that where the consideration is less than the value adopted by any assessing authority of the State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted shall be deemed to be a value of the consideration and capital gains will be computed accordingly.
It is also proposed that where the assessee claims that the value assessed for stamp duty purpose exceeds the fair market value of the property, the Assessing Officer may refer the valuation of such property of the Valuation Officer.
If the market value determined by the Valuation Officer is less than the value adopted for stamp duty purpose, the such fair market value is to be full value of the consideration.
However, if the fair market value determined by the Valuation Officer is more than the value assessed for stamp duty purpose, the Assessing Officer shall adopt the value assessed for the stamp duty purpose.
This is effective from the assessment year 2003-04.
7. Long-term Capital Loss
Under the existing provision, capital loss, whether short term or long term, is allowed to be set off from capital gains irrespective of whether such gain is a short term or long term.
It is proposed that long term capital loss will be allowed to be set off against long term capital gain only and the balance, if any, will be allowed to be carried forward separately and will be allowed to be set off against long term capital gains only.
There is no change of existing provision in regard to the adjustment of short term capital loss, which will be allowed to be set off against all capital gains whether it is short term or long term.
This is effective from the assessment year 2003-04.
8. Investment in SIDBI & National Housing Bank Bonds exempted under Section 54EC
Under the existing provision, the long term capital gains invested in bonds issued by National Bank for Agriculture and Rural Development, National Highway Authority and Rural Electrification Corporation Limited are exempt from payment of tax.
Now, it is proposed that long term capital gains invested in SIDBI and National Housing Bank bonds will also be exempt from payemnt of capital gains tax.
9. Credit for Tax Deduction at Source
Under the existing provision, credit for tax deduction at source is given to the assessee on the basis of actual certificate produced by him before the assessment and it is given in the assessment year for which such income is assessable.
If it is not possible to obtain the original TDS certificate and produce the same before the assessing authority, no credit for TDS is given to the assessee for non production of TDS certificate.
With a view to mitigate this hardship, it is proposed that in case the assessee cannot produce the TDS certificate at the time of assessment, the credit for the same can be given at any time within 2 years from the end of the assessment year in which such income is assessable subject to the production of TDS certificate. This can be done by a petition filled under section 155 of the income Tax Act.
As a consequence, it is also proposed that the return of income shall not be regarded as defective if the TDS certificate is not furnished along with the return of income.
The proposed amendment will take effect from 1st June, 2002.
10. Individual and HUF to Deduct Tax
Under the existing provision individual and HUF is not required to deduct tax from any type of payment. It is proposed that individual and HUF families whose
sales or gross receipts from the business or the profession exceeds Rs. 40 lacs or
Rs. 10 lacs, as the case may be, are required to deduct tax at the time of making the specified payment, viz, payment to contractor, of rent, interest, commission, etc.
This is effective from 1st June, 2002.