Import of Dassault Rafale aircraft into India will be tax free, according to sources in the Indian finance ministry.
“Since, it is government-to-government (G2G) deal, it will not attract any duty (basic custom duty, special additional duty SAD or counter veiling duty CVD),” a senior Finance Ministry official was quoted as saying by the Businessline daily.
According to the new Finance Act 2015 duty exemption to certain defense imports and direct has been withdrawn. The Act also states that the direct imports by the Center and State Governments will continue to be exempted from Basic Custom Duty (BCD), Special Additional Duty (SAD) and Counter Veiling Duty (CVD).
“Had it been a deal between public sector undertaking Hindustan Aeronautics (HAL) and French Company Dassault Aviation, the import would have attracted duties,” the official said.
Finance Minister Arun Jaitley in his reply on the Finance Bill had announced withdrawal of the excise duty exemption currently available to the Defence PSUs and Ordnance Factory Boards, besides the exemption from CVD, and SAD in certain cases.
This has been done to provide a level playing field to domestic manufacturers in the private sector vis-à-vis Defence Public Sector Undertakings and Ordnance Factory Boards and imports.
This meant such imports will attract SAD at the rate of 4 per cent and CVD at the rate of 12 per cent. However, basic custom duty will be not be levied. The new regime will come in to effect from June 1.
“All these exercises are to encourage Make-in-India efforts,” the official said.
India and France are yet to sign the inter-government deal to buy 36 Rafales for US$ 6 billion.