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F1: Indian GP will have to pay duty on consumables
September, 15th 2011

With exactly 45 days to go for the inaugural Formula One Indian Grand Prix in Greater Noida, the organisers are grappling with the issue of customs duty payments on the temporary import of equipment for the October 30 race.

Unlike last year's Commonwealth Games and this year's ICC World Cup, which were given 'national importance' status by the sports ministry, the Indian GP has not been accorded the same gradation and hence Jaypee Sports International (JPSI) - the promoters of the race - are bound to pay duty for the "consumables" which will be imported for the race.

Since this is the first time such an event is being held in India, there are a lot of factors that will come into play before the race is actually held.

The crux of the matter is the value of the items that will be temporarily imported for the race. Items like oil filters, engine plugs, engine oil, racing fuel, tyres, drivers' apparel, food and beverages will be brought to India and used up during the race. These items will thus be taxed when the remaining equipment is shipped back.

The Buddh International Circuit in Greater NoidaThe process starts with a 'customs bonded area' where all the material will be evaluated and JPSI will be asked to pay duty on it. The value of these items is pegged at Rs. 150- 200 crore and the amount of duty on it varies from 10- 20 per cent.

After the race, when the equipment is shipped back, it will be assessed again.

All the items consumed would be deducted and JPSI would be entitled to get 'duty drawback' up to 98 per cent on the amount paid as duty.

Sameer Gaur, managing director of JPSI, said the company had received 'in- principal' approval for a bonded area and will pay the amount of duty that the Excise and Customs department deems fit.

"JPSI has full support from the government, the sports ministry and the customs department for the F1 event scheduled for October this year.

"We have an in- principle approval from the customs department for creating a customs bonded area for F1 equipment that will be temporarily imported to India.

"If required, as per the law of the land, JPSI will pay customs duties and taxes etc. for the temporary import of equipment.

"The estimated value of this equipment is about Rs. 150 crore and the final duty payable on this will be approximately Rs. 8 crore," Gaur said in a statement.

However, the issue doesn't end there. The 'custom bonded area' hasn't been clearly defined as yet. JPSI had asked for the Buddh International Circuit to be deemed as a bonded warehouse, where evaluation of the equipment could be valued.

However, the Central Board of Excise and Customs (CBEC) said that having an open area as a 'secure warehouse' wasn't feasible as valuation had to be done under supervision.

SD Majumder, chairman of CBEC, said the only concession that could be made was for the cars itself, which come as 'knocked down units'. "We are ready to send our officials to the site where the machines are to be opened and assembled and value it there.
Other than that, the rule of the land has to be followed. What happens in the Singapore GP etc doesn't bother us as we have our laws to follow," Majumder told MAIL TODAY on Wednesday.

F1 items that will attract customs dutyThe rest of the equipment will be assessed in the bonded area and that will be done by officials when it lands in the country.

That could be cumbersome as each and every component will need to be taken into account.

This could lead to delays and might require a dedicated force of around 80-100 officials.

"We haven't set aside any set of officials for it as yet. We will see as and when the requirement arises or if a request is sent," Majumder said.

This means that F1 teams and organisers might have to send the equipment to India at least a couple of days earlier than the norm to account for any possible delays.

The preceding Grand Prix in South Korea takes place on October 16 and the organisers have 12 days before the Indian GP weekend to sort out the customs formalities.

Interestingly, JPSI had asked the sports ministry for permission to remit $ 40 million per year for five years towards ' race promotion', which the ministry said was not under its ambit and referred to the Reserve Bank of India, as it fell under the Foreign Exchange Management Act.

The clearance by the sports ministry was given, under the condition that JPSI fulfils certain guidelines, the most important of which is an annual contribution of ` 10 crore to the National Sports Development Fund for five years.

With a plethora of processes involved, there is little doubt that holding the Indian GP would be an arduous task. However, the organisers are confident of putting their best foot forward.

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