WAREHOUSINGCentral

Section 66 of The Customs Act,1962

Power to exempt imported materials used in the manufacture of goods in warehouse.

If any imported materials are used in accordance with the provisions of section 65 for the manufacture of any goods and the rate of duty leviable on the imported materials exceeds the rate of duty leviable on such goods, the Central Government, if satisfied that in the interests of the establishment or development of any domestic industry it is necessary so to do, may, by notification in the Official Gazette, exempt the imported materials from the whole or part of the excess rate of duty.

Summary

Section 66 of the Customs Act, 1962 allows the Central Government to grant tax exemptions for raw materials imported for warehouse manufacturing.
This applies when the import duty rate on raw materials is higher than the tax rate on the finished products made under Section 65.
To grant this tax relief, the Central Government must determine that it is necessary to help establish or develop domestic Indian industry.
The exemption is officially published in the Gazette and can waive the entire excess duty rate or part of it.

Practical examples

1AutoParts India imports steel alloy tubes (taxed at eighteen percent) to manufacture bicycle frames (taxed at ten percent) in a Section 65 warehouse. Under Section 66, the Central Government issues an official notification exempting the steel tubes from the eight percent excess duty to help the domestic bicycle industry grow.

2A local pharmaceutical firm imports chemical ingredients taxed at twenty-five percent to produce essential life-saving medicines taxed at five percent. To promote local manufacturing, the Central Government utilizes Section 66 to exempt the imported chemicals from the twenty percent tax difference.

FAQ

1. When can the Central Government grant an exemption under Section 66 of the Customs Act, 1962?

Under Section 66 of the Customs Act, 1962, an exemption can be granted if imported materials are used for manufacturing under Section 65, and the tax rate on those raw materials is higher than the rate on the finished goods.

2. What is the main objective of Section 66 of the Customs Act, 1962?

The main objective of Section 66 of the Customs Act, 1962 is to protect and encourage the establishment or development of domestic Indian industries by removing tax anomalies on imported raw materials.

3. How is an exemption under Section 66 of the Customs Act, 1962 officially made public?

Under Section 66 of the Customs Act, 1962, the tax exemption is officially enacted and made public by a notification issued in the Official Gazette.

Test yourself

1.Under Section 66 of the Customs Act, 1962, what must be true about the tax rates before the Government can grant an exemption on raw materials?

2.Who has the authority to issue a tax exemption notification under Section 66 of the Customs Act, 1962?

3.Under Section 66 of the Customs Act, 1962, what is the key policy justification required to grant this excess tax waiver?

4.How does Section 66 of the Customs Act, 1962 connect with Section 65 of the same Act in the manufacturing chain?

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