Project Imports - Chapter 98

Project Imports cover all Items of Machinery / Equipment including all components (whether finished or not) or raw materials for manufacture of the aforesaid items required for the initial setting up of an Industrial / Irrigation / Power / Mining / Oil or Mineral Exploration Projects and such other Projects as may be approved by the Central Government or for their Substantial Expansion as well as Spare Parts, other raw materials (including semi-finished materials) or consumable stores not exceeding 10% of the value of the goods specified above provided such Spare Parts, raw materials or consumable stores are essential.

Normally, imported goods get classified on “merits” under the relevant Customs and Excise tariffs for levy of duty.

This implies that each individual article is to be classified separately and assessed not only to Customs Duty at the appropriate rate but also for Additional Duty of Customs which is equivalent to Excise Duty applicable for that article as if it had been manufactured in India.

For setting up of a Project a number of goods may have to be imported in one or more instalments.

If all the goods required for the Project are to be classified and valued separately for assessment of duty, the process may prove to be cumbersome.

This may also lead to delay in clearance of goods.

Further, the overseas suppliers while despatching the goods for a contracted Project may not value each and every item or the machinery parts despatched in various instalments.

Ascertaining values for different items may further delay assessment on “merits” and lead to substantial demurrage, time and cost overrun for the Project.

2 With the objective of simplifying the assessment in respect of import of capital goods and all the related items required for setting up of a Project, a flat rate of duty is levied on all such goods under heading 98.01 of Chapter 98 of the Customs Tariff.

Even this flat rate is subject to change from time to time

The recent Central Budget has reduced the rate from 7.5% to 5% effective March 1, 2008.

It is understood that the machinery / equipment proposed for LEC Project attracts 7.5% or 10% Customs Duty based on the Tariff item, if they get assessed on “merits” under the respective Customs Tariff Headings as compared to 5% duty applicable for Project imports.

LEC may hence consider taking advantage of this concessional duty of 5%.





For the purposes of Project Import Regulations

(a) “Industrial Plants” means an industrial system designed to be employed directly in the performance of any process or series of processes necessary for manufacture, production or extraction of a commodity.

(b) “Sponsoring authority” means an authority specified in the Table annexed to these Regulations.

In the case of LEC, ‘Sponsoring Authority’ is the concerned Administrative Ministry or Department in the Central Government viz. Ministry of Industry.

(c) “Unit” means and self contained portion of an industrial plant or any self-contained portion of a project specified under the said Heading No.98.01 and having an independent function in the execution of the said project.

3 For availing the concessional Rate of 5% Customs Duty under Project Import Regulations, LEC has to submit an application to

The Secretary to Government of India
Ministry of Industry
Department of Industrial Development
Secretariat for Industrial Approvals
Licensing Section
Udyog Bhawan
New Delhi – 110 011

along with the following documents.

- Copy of the IEM # ________ Dated _________

- Copy of the Contract # _______ dated ________ between LEC and the Overseas supplier.

- Essentiality Certificate, in Original, dated _______ issued by a Chartered Engineer together with the detailed list (4 sets) of Equipment to be imported duly certified by him.

- Copy of the Letter of Credit # _____ dated _______ established by _____ Bank, in ________ favour of ___________ for ________


4 Registration of Contracts with the Customs Authorities

The basic requirement for availing the benefit of Project Import Regulations under Heading # 98.01 is that the importer should have entered into one or more contracts wit the suppliers of the goods.

Such contracts should be registered prior to clearance in the Customs House through which the goods are expected to be cleared.

The importer shall apply for such registration in writing to the proper officer of Customs.

The contract is required to be registered before any order is made by the proper officer of Customs permitting the clearance of the goods for home consumption.

To expedite early registration, the importers are to submit the following documents at the time of registration :-

a An application for Registration of the Contract.

b Copy of the Contract duly attested by the Importer’s Authorised Official.

c Copy of the IEM.

d Recommendatory letter for Duty Concession from the concerned Sponsoring Authority, showing the description, quantity, specification, quality, dimension of each item.

Sponsoring Authority should indicate whether the Recommendatory Letter is for initial set-up or substantial expansion, giving the installed capacity and proposed addition thereto.

e Continuity Bond for the total CIF value with Cash Security Deposit equivalent to the 2% of CIF value of Contract sought to be registered subject to the maximum of Rs.50,00,000/- and the balance amount by Bank Guarantee backed by an undertaking to renew the same till the finalisation of the contract.

The said continuity bond should be made out for an amount equal to the CIF value of the contract sought to be registered.

LEC shall with in 3 months of clearance for home consumption of last consignment of the goods, submit a statement indicating details of goods imported together with necessary documents as proof regarding the value and quantity of goods so imported.

f Process Flow Chart, Plant Layout, Drawings showing the arrangement of imported machines along with an attested copy of the Project Report submitted to the Sponsoring Authorities,. Financial Institution etc.

g Write up, Drawings, Catalogues and Literature of the items under import.

h Such other particulars as may be considered necessary by Proper Officer for the purpose of assessment under Heading No.98.01.