Government Restores 10% Import Duty on Lab Chemicals with Conditions

The Central Board of Indirect Taxes and Customs (CBIC) has reinstated a 10% import duty on chemicals used in laboratories, effective from August 1. This change reverses a previous duty hike announced in the FY25 Union budget aimed at preventing tax evasion.

The 10% duty applies to genuine lab chemical users who declare the intended use of their imports. Importers who do not meet this condition will not qualify for the reduced rate.

Notably, undenatured ethyl alcohol is excluded from the 10% duty due to past misuse of this provision. It will continue to attract a 150% duty.

Most chemicals fall under import duties of 2.5%, 5%, 7.5%, or 10% as per the Customs Tariff Act. A special classification code exists for lab chemicals packaged in quantities not exceeding 500 ml or 500 gm, now set at a 10% duty.

Previously, some importers falsely declared undenatured ethyl alcohol as lab chemicals to avoid the 150% duty. To prevent this, the budget temporarily increased the duty on lab chemicals to 150%.

To support genuine users, the duty on lab chemicals (excluding undenatured ethyl alcohol) for laboratory and R&D purposes has been reduced back to 10%. Importers must not sell or trade these chemicals; failure to comply will result in losing the concessional rate.