Circular No. 27dated 21^st April 1998

I am directed to refer to Board's F. No. 305/52/85-FTT dated the 15th April 1987 wherein the method for calculating the depreciation on 'Capital goods' permitted to be taken outside the units, was prescribed, and the over all limit of depreciation was fixed at 70%. Subsequently Board in their F. No. 314/19/94- FTT Part - VI, dated 11th April, 1997 had provided for accelerated rate of depreciation for the computers in view of their rapid obsolescence, keeping, the overall limit at 70%.

2.      It had been suggested by the Ministry of Commerce and Deptt. of Electronics that the existing scale prescribed for depreciation is not adequate and the overall limit be raised to 90%. The issue had been examined by the Board and it had been noted that it would be in the interest of export promotion to provide higher depreciation for the purpose of payment of duty on clearance both for imported and indigenous capital goods. It was also felt that separate formulation for the computers and other capital goods should be prescribed because of the rapid obsolescence of the computers as compared to other capital goods.

3.      In view of the above it has been decided that for computer following rate of depreciation may be allowed: -

For every quarter during 1st year -7%

For every quarter during 2nd year - 7%

For every quarter during 3rd year - 5%

For every quarter during 4th year and onwards - 3%

Subject to an overall limit of 90%

and for capital goods other than computers, the following depreciation rate may be allowed: -

For every quarter in the 1st year - 4%

For every quarter in the 2nd year - 3%

For every quarter in the 3rd year - 3%

For every quarter in the 4th year - 2. 5%

For every quarter in the 5th year - 2%

and thereafter.

Subject to a maximum of 75%

4.      The period of depreciation would be counted from the date the capital goods have been put into the manufacturing process in the EOU/ EPZ/ STP/ EHTP up to the date are sought to be cleared to the DTA. In case of the 2nd hand imported capital goods, the depreciation shall be calculated from the value, which has been accepted by the Assistant Commissioner Customs at the time of assessing the Into Bond Bill of Entry.

5.      The depreciation shall be calculated as per straight-line method. However in case of partial debonding of the computer of other capital goods as the case may be, are sold at a value higher than that arrived after allowing depreciation at the above said rates, the transaction value may be taken as the assessable vale for the purpose of calculation of duty.