The Finance Ministry on Wednesday offered relief for researchers and academicians by carving out a new section for R&D use, to bring customs duty on lab chemicals to 10 per cent from the 150 per cent rate it had set in the 2024-25 Budget.
To address concerns of genuine users of lab chemicals, the government issued a relief whereby those importing lab chemicals for R&D and lab use will be taxed customs duty only at 10 per cent effective August 1. Such importers must submit an undertaking.
“If the importer submits an undertaking before the Deputy Commissioner of Customs or the Assistant Commissioner of Customs, as the case may be, that the goods so imported shall be for use in laboratory or for use in research and development purposes, and shall not be sold or traded after importation...” the notification dated July 31 read. “In case of failure to comply with this condition, he shall be liable to pay, in respect of such quantity of the said goods as is proved to have not been so used for the specified purposes, an amount equal to the duty leviable on such quantity but for the exemption under this notification,” it added.
The government further explained that some importers were importing undenatured ethyl alcohol after misdeclaring them as lab chemicals to circumvent 150% duty on undenatured ethyl alcohol and to curb this misuse, the Budget 2024-25 had increased duty of chemicals under HS Code 9802 to 150%.
Tax experts and academicians told businessline earlier that while the original hike was passed to curb misclassification of chemicals, the steep hike will impact research labs and other R&D units that widely use these reagents.
Essentially, the new section gives concessions for specific entities and activities, wherein companies who use lab chemicals for R&D purposes need to give an undertaking that they will only use it for R&D purposes and these chemicals will not be sold or traded after importation.
“Companies in this sector will face huge scrutiny, but that should be normal and should not be a problem for these companies since they will enjoy a lower duty rate, if lab chemicals are imported only for R&D activities,” Shashi Mathews, Partner, IndusLaw, said.