Two rupees nobody can explain
An importer asks for the duty before the ship sails. The agency works it out in a spreadsheet and sends a figure. The assessment comes back a few rupees higher. On one line it is two rupees; on a forty-line entry it can be a few hundred, and the conversation that follows is always awkward.
Every one of those rupees comes from the order and direction in which the figures are rounded. Here is one line, worked the way Customs works it. The exchange rate is illustrative.
| The line | Value |
|---|---|
| 8516.79.20, electric kettles | 1,200 pieces |
| CIF value | USD 7,446.35 |
| Exchange rate | 301.9250 |
| Rates | CID 20%, PAL 5%, SSCL 2.5%, VAT 18% |
1. The exchange rate has four decimals
Customs publishes its exchange rates every week, to four decimal places. Cut the rate to two and the whole line moves before a single tax is worked out.
| Rate used | Customs value | Total tax |
|---|---|---|
| 301.9250, as published | 2,248,239 | 1,184,262 |
| 301.93, rounded | 2,248,276 | 1,184,282 |
Twenty rupees on one line, from two decimal places. Use the schedule for the week the declaration is dated, not the week the invoice arrived.
2. The customs value is rounded to the nearest rupee
USD 7,446.35 × 301.9250 is 2,248,239.22375. The customs value is 2,248,239: rounded to the nearest rupee, once, before any tax is charged on it.
3. Every tax is rounded up
This is the rule that catches the most spreadsheets. Each tax is worked out and then rounded up to the next rupee. Never down, and never left in cents.
| Tax | Worked out | Spreadsheet ROUND() | Customs charges |
|---|---|---|---|
| CID 20% | 449,647.80 | 449,648 | 449,648 |
| PAL 5% | 112,411.95 | 112,412 | 112,412 |
| SSCL 2.5% | 75,878.07 | 75,878 | 75,879 |
| VAT 18% | 546,322.12 | 546,322 | 546,323 |
| Total | 1,184,260 | 1,184,262 |
There are the two rupees. In Excel the fix is one word: ROUNDUP(amount, 0) instead of
ROUND(amount, 0).
4. VAT and SSCL are charged on more than the value
VAT and SSCL are not charged on the customs value. They are charged on 110% of it, plus the duties already on the line: CID, PAL and CESS, and excise and surcharge where they apply.
1.10 × 2,248,239 + 449,648 + 112,412 = 3,035,122.90. VAT at 18% of that is 546,322.12, charged as 546,323.
Work VAT on the customs value alone and it comes out at 404,684. That is not a rounding difference. It is Rs 141,639 missing from the estimate, and it is the most expensive mistake on this page.
5. Customs works item by item
Each item's taxes are worked out and rounded on their own, then added up. Rounding up happens once per tax, per item, so working on the entry's totals gives a different answer.
A four-line shipment of kettles, rice cookers, toasters and fans, customs value 8,026,737:
| Worked | PAL | SSCL | VAT | Total tax |
|---|---|---|---|---|
| On the entry's totals | 401,337 | 270,903 | 1,950,498 | 4,228,086 |
| Item by item, as Customs does | 401,339 | 270,905 | 1,950,500 | 4,228,092 |
The same reason explains why the customs value printed on the header can differ by a rupee from the sum of the items. Customs assesses on the items.
Two more that catch people out
- "20% or Rs 75 per kg" means whichever is higher, item by item. A per-unit rate is charged on the exact quantity in its own unit, even where the printout shows it rounded.
- A trade agreement is not always cheaper. Some agreements change PAL or CESS as well as the duty. Claim a preference on an item only where its total tax actually falls.
Check your own duty sheet in two minutes
- Is the exchange rate typed with four decimals, from the right week's schedule?
- Is the customs value rounded to the nearest rupee before any tax?
- Is every tax rounded up, with
ROUNDUP, notROUND? - Are VAT and SSCL charged on 110% of the value plus the duties?
- Is each item worked on its own, and only then added up?
Five yeses, and the arithmetic will match the assessment to the rupee.
Or let the software carry it
ClearWay works every line by these rules, automatically. On real Customs assessments it reproduces every tax line to the rupee: 591 of 591. Bring an entry you cleared last month, and compare it yourself.