Social Welfare Surcharge has been introduced for the first time under the Finance Act, 2018. It is an additional charge on import of goods being levied under clause 108 of the Finance Bill (Act), 2018 to fulfil the commitment of the Government of India to provide and finance the education, health and social security. The Social Welfare Surcharge on imported goods shall be in addition to any other duties of customs or tax or cess chargeable on such goods under the Customs Act, 1962. The surcharge is introduced by abolishing the Education Cess and Secondary and Higher Education Cess on imported goods.
The Social Welfare Surcharge will be calculated at the rate of 10% on the aggregate of duties, taxes and cesses which are levied and collected by the Central Government under Section 12 of the Customs Act, 1962. The levy of Social Welfare Surcharge exempts imported goods from Integrated Tax under section 3(7) and GST compensation cess under section 3(9) of the Customs Tariff Act, in case they fall under First Schedule of the Customs Tariff Act, 1975 vide Notification No.13/2018- Cus. dated 02.02.2018 read with the clause 108 of the Finance Bill, 2018. Moreover, Social Welfare surcharge is not levied on the Safeguard duty, Countervailing duty and Anti-dumping duty.
The introduction of Social Welfare Surcharge would have an additional impact of approximately 7% to be levied on aggregate duties of customs on import of goods (increased from the earlier 3% to the current 10%) across all the sectors except petrol, diesel, silver, gold and mobile phones, including sectors where cess was not leviable earlier. Further, in case of petrol, diesel, silver, gold and mobile phones the cumulative impact is of 3 % as surcharge in addition to that is exempted by Notification No. 12/ 2018-Cus. dated 02.02.2018. The imports must be aware that in order to claim the exemption specific entries are required to be made in the Bill of Entry at the time for submitting the same.
No Input Tax Credit under GST Law shall be applicable for the Social Welfare Surcharge as the same is levied under Customs Act, 1962 and that is to mean that SWS would be an additional cost for importers.