Circular No.17/2007-Cus F.
No.528/26/2005-Cus(TU)
Government of India, Ministry of
Finance, Department of Revenue,
Central Board of Excise & Customs
Sub: Clarification in respect of
classification of higher technology
featured mobile / cellular handset
or telephones - regarding.
Board has received certain
representations from the trade and
industry regarding classification of
higher technology featured mobile /
cellular handsets or telephones, which
contain GPS features apart from other
functions like music, camera, voice
recording, e-mail, internet and related
editing features. Field formations have
also requested to issue a clarification
in the matter of classification of a
hybrid product containing PDA,
mobile phone with camera and GPS,
which are being imported presently...
3. The issue was examined in the Board. Telephones
for cellular networks or other wireless networks
are presently classified under sub-heading 8517
12 of the First Schedule of the Customs Tariff
Act, 1975. This Act does not provide specific
Chapter Note or Sub heading Note on this product.
As per Harmonized Commodity Description and Coding
System (HS in short) effective from 1.1.2007,
'telephones for cellular networks or for other
wireless networks' are classified under heading
8517. Earlier, prior to HS changes 2007, cellular
phones were classified under heading 8525. There
is no mention of the mobile phones that also have
features of word processing, e-mail, internet,
Global Positioning System (GPS) Receiver, Personal
Digital Assistant (PDA), Smart phone etc. in the
HS Notes. Further, tariff Item 8526 91 90 covers
'other radio navigational aid apparatus', which,
inter alia, includes Global Positioning System
(GPS), radar apparatus. Similarly, sub-heading
8471 30 covers 'portable digital automatic data
processing machines, weighing not more than 10
kg., consisting of at least a central processing
unit, a keyboard and a display'. HS explanatory
notes to sub-heading 8471 30 state that machines
which are equipped with flat screen, capable of
operating without an external source of electric
power and having an acoustic modem for establishing
a link via the switched network are classifiable
under sub heading 8471 30. However, there is no
exclusion or specific note for classification
of mobile/cellular phones with other functions
as described above, in the HS Notes. Therefore,
field formations were experiencing difficulty
in classifying a product having combination of
characteristics of a Personal Digital Assistant
(PDA) / Personal Computer, GPS receiver, Camera
and cellular phone...
5. In terms of the First Schedule to the Customs
Tariff, 'telephones for cellular networks or other
wireless networks, push-button type or other',
would be classifiable under sub-heading 8517 12.
Similarly, 'portable automatic data processing
machine weighing not more than 10 Kgs., consisting
of at least a CPU, a key board and a display'
would be classifiable under sub heading 8471 30;
and 'radio navigational aid apparatus' would be
classifiable under sub heading 8526 91. From the
scope of the headings / sub-headings, Board found
that all mobile or cellular telephones whether
working on the Global System for Mobile Communications
(GSM) standard, Code Division Multiple Access
(CDMA) cellular systems, Wireless Local Loop (WLL)
or any other Mobile technologies, principally
used as communication device would get covered
under subheading 8517 12. These are essentially
communication devices working on the basis of
towers and base stations arranged into a network
of cells, which send and receive radio signals
for the cellular / mobile phone for communication.
In view of the above, Board clarifies that sub-heading
8517 12 will cover all types of telephones that
work on cellular networking technology or other
wireless network...
7. Certain cellular/ mobile phones
called as 'smart phones' may also
have other additional features such as
accessing the Internet, sending and
receiving E-mails, video recording/
camera, word processing, radio or
audio capabilities with color screens,
QWERTY keyboard, touch screen.
It may also run application software
and synchronize with PCs, function
as Global Positioning System (GPS)
receiver. These devices work on
operating systems (software) like
Symbian OS, Microsoft Windows
Mobile OS, Linux OS, which are
similar to the software used in desktop
PC / laptop. All these functionalities
grouped as PDA or pocket PC or
camera or GPS receiver, contained
in cellular/ mobile phones, though
represent as composite machine,
for the purpose of classification, it
will be governed by the Customs
Tariff Act and the General Rules for
Interpretation (GRI) as explained in
para 4 above. Accordingly, in terms
of Section Note 3 to Section Note XVI
when the goods satisfy the following
conditions these would be characterized
as transmission apparatus in cellular
/ wireless network rather than as an
Automatic Data Processing (ADP)
machine or camera or GPS receiver.
(i) use transmission of signals
(representing speech, messages, data or
pictures) by means of electro-magnetic
waves which are transmitted through
the ether without any line connection
i.e., wireless, in any of the bandwidth
allotted to
mobile/
cellular
networks say
850 MHz
to 1900
MHz; and
(ii)
consist of
transmission
and
reception
hardware
such as
transceivers, antenna, microphone,
speaker, battery, radio-frequency
chip, basic band chip, power
management chip, Subscriber Identity
Module (SIM), International Mobile
Equipment Identity (IMEI) or other
unique identity for cellular/mobile
phone as well as radio-frequency
transmission software such as GSM,
General Packet Radio Service
(GPRS) and Enhanced Data rates
for GSM Evolution (EDGE) etc.,
Hence, such cellular/ mobile phones
remain classified in sub-heading 8517
12, as the principal function of these
equipments remain as 'telephony'.
8. It is further explained that cellular / mobile
phones can also be employed as data modems to
form a wireless access point connecting a personal
computer to the Internet. In this use, the mobile
phone is providing a gateway between the cellular
service provider's data network and PCs. In terms
of chapter note 5 D (ii), it is made clear that
such mobile phones shall not be classified under
heading 8471 when they are presented separately.
In other words, only when such phones are presented
along with ADP machine or when composite machines
consisting of ADP and mobile phones, where ADP
is the principal function, these would be classified
under heading 8471. Further, it is clarified that
GPS receivers having phone function that does
not operate through any of the cellular network
or mobile technologies for the transmission or
reception of signals, but operates exclusively
through direct satellite connection or differential
GPS (on the longwave radio frequencies between
say 285 kHz to 325 kHz) is however classifiable
under sub-heading 8526 91 as other radio navigational
aid apparatus...
http://www.cbec.gov.in/customs/
cs-circulars/cs-circulars07/
circ17-2k7-cus.htm |
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The Central Board of Excise and Customs (CBEC) has gone back on a move
to classify GPRS phones as radio navigational apparatus (better known as
satellite phones) for tax purposes. This means GPRS-enabled phones will face
a 4% Customs duty rather than the 34% applicable on satellite phones.
The move comes as a major relief to mobile phone and PDA |
manufacturers
like Nokia, Samsung, Blackberry, Motorola, PalmOne, O2, i-mate and HP.
In January 2007, a circular from the Office of the Commissioner
Customs classified HP's iPAQ 6515 GPRS phone as a GPS
receiver, subjecting it to a Customs duty of 34% instead of 4%
levied on mobile phones. The circular caused widespread panic in
the industry, which feared prices of GPRS phones would go up by
25% if the same principle is applied to other similar models.
The mobile handset market in India is estimated at over
Rs.30,000 crore at present, with high-end (GPRS, MP3,
camera) phones accounting for nearly 40% of the market.
On April 19, the under-secretary, Customs policy, in CBEC
issued a clarification rescinding the January circular. "An apparatus will
be classified as a mobile phone rather than an ADP machine or camera or
GPS receiver when its principal function is telephony. For transmission of
signals, it should use the bandwidth allotted to cellular/mobile networks.
It should comprise a transceiver, antenna, subscriber identity module (SIM), IMEI
(International Mobile Equipment Identity) or other unique identity for cellular/mobile
phones as well as software such as GSM, GPRS and EDGE etc," the clarification
said. Despite the presence of many advanced features, many users of GPRS phones
use them mainly for basic functions such as voice calls and text messages.
After the January circular, GPRS-enabled phones with GPS (global positioning
system), MP3 and PDA features were being compared with GPS, MP3 players and
computers (as they carry higher duty) by tax officials though no formal order had
been issued in this regard. There was also confusion among taxmen over classification
of PDAs, camera phones and GPS receivers with respect to the duty bracket.
In the HP iPAQ case, the now withdrawn January circular noted
that since the equipment had "three principal functions of phone,
GPS receiver and PC, it was thus classifiable under CTH (custom
tariff heading) 8526 as a GPS receiver (satellite phones)".
GPS receivers having a phone function that doesn't communicate through cellular/
mobile networks but satellite connection or differential GPS (on longwave
radio frequencies) are now, following the April clarification, classifiable as
radio navigational aid apparatus. HP iPAQ used normal cellular networks. |
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