| # To handle customs duty as costs This functionality is specific for India. Custom duty is not claimable and is handled as costs. You need not set up a tax code for customs duty. In the Accounts Payable module, you must enter a cost invoice for the customs duty that you pay for imported goods. The custom duty is calculated based on the assessable value of the item. To get the actual cost of item, add costs like insurance and freight to the purchase price. In LN, you can use the cost components and the item surcharges features to obtain the assessable value of the item. Calculate the assessable value of the item in the following sessions: Items - Costing (ticpr0107m000) Select the Surcharges by Item check box. Item Surcharges (ticpr1110m000) Create lines for the cost components and enter the values in the following fields: Booking Triggered By: select Receipt. Calculation Line Type: select Surcharge. Surcharge Method: select Selective (Added Costs). Surcharge Percentage enter the average expected additional costs. Calculate Cost and Valuation Prices (ticpr2210m000) Calculate the standard cost of the item. This is the final assessable value of the item inclusive of surcharges. Create a purchase order for the item. If you release the purchase order line to warehouse and confirm the receipt, the additional costs for insurance, freight and any other charges are included as item surcharges in the inventory valuation. Example If the value of an item is INR 1000, customs duty is 20 per cent and countervailing duty (CVD) is 16 per cent, the duty is calculated as follows:
Description | Tax rate or formula | Amount
--- | --- | ---
Taxable amount | not applicable | 1000
Basic customs duty | 20 per cent | 200
Sub total for calculating CVD (basic custom duty + taxable amount) | not applicable | 1200
Countervailing duty (CVD) | 16 per cent of 1200 | 192
Education cess on CVD | 2 per cent of CVD | 4
Sub total for calculating education cess | Basic custom duty + CVD | 396
Education cess on taxable amount | 2 per cent of 396 (normal rounding) | 8
Total taxable amount: 404. The assessable value can be calculated as follows: Select item and aggregate cost components in the Items - Costing (ticpr0107m000) session. Item = Electrical Control Material = Aggregate Material Operation = Aggregate Operations Surcharge = Aggregate Surcharge Select the Surcharges by Item check box. In the Item Surcharges (ticpr1110m000) session, create lines for the cost components and enter the values in the following fields: Booking Triggered By: select Receipt. Calculation Line Type: select Surcharge. Surcharge Method: select Selective (Added Costs). Surcharge Percentage enter the average expected additional costs. The following surcharges to be maintained: 1 receipt surcharge line for 20 per cent on Basic Custom Duty 1 receipt surcharge line for 16 per cent on Countervailing Duty 1 receipt surcharge line for 2 per cent on Education cess on Countervailing Duty 1 receipt surcharge line for 2 per cent on Education cess on total taxable amount. In the Calculate Cost and Valuation Prices (ticpr2210m000) session, calculate the standard cost of the item. This is the final assessable value of the item inclusive of surcharges. Related topics Custom Duty- Overview Cost components in Manufacturing |