CBIC has set the quantity of chemicals to be categorized as Laboratory Chemicals at 500 grams or 500 ml. This means such a quantity will attract a lower import duty at 10 per cent, while a package in a larger quantity will attract a differential or higher duty.
The new quantity norm has been made effective from September 19. This issue became contentious after the Union Budget when the duty on chemical laboratories was raised to 150 per cent. Later, after a lot of criticism, it was lowered.
According to a CBIC circular, “laboratory chemicals” means all chemicals, organic or inorganic, whether or not chemically defined, imported and intended only for own use (i.e. other than purposes like trading, further sale etc.) in packings not exceeding 500 grams or 500 millilitres and which can be identified with reference to the purity, markings or other features to show them to be meant for use solely as laboratory chemicals.
Earlier, with effect from August 1, the Finance Ministry offered relief for researchers and academicians by carving out a new section for the use of lab chemicals for R&D purposes. A notification was issued under which those importing lab chemicals for R&D and lab use will be taxed on customs duty only at 10 per cent. 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 mis-declaring them as lab chemicals to circumvent the 150 per cent duty on undenatured ethyl alcohol and to curb this misuse, the Budget 2024-25 had increased the duty of chemicals under HS Code 9802 to 150 per cent
Essentially, the government’s July 31 notification gave concessions for specific entities and activities. Companies that use lab chemicals for R&D purposes need to give an undertaking that they will only use them for R&D purposes and that these chemicals will not be sold or traded after importation.
Post July budget, businessline had reported that the steep duty hike, which was meant to curb chemical misclassification, will impact research labs and other R&D units that widely use these reagents for analysis. Academicians and universities were up in arms about the 15x duty hike and highlighted the huge cost burden this imposed on pursuing experimental research.
