The Research and Development Cess Act, 1986
(as amended by The Research and Development Cess (Amendment) Act, 1995)
The Research and Development Cess Act, 1986 is the main legislation which provides for the levy and collection of a cess on all payments made for the import of technology for the purpose of encouraging the commercial application of indigenously developed technology and for adapting imported technology to wider domestic application and for matters connected therewith or incidental thereto. The Research and Development Cess (Amendment) Act, 1995 came into force on 1st September, 1996 bringing about a few significant changes to the main legislation.
Important definitions:
‘Technology’ : As per Section 2(h) of the Act "technology means any special or technical knowledge or any special service required for any purpose whatsoever by an industrial concern under any foreign collaboration and includes designs, drawings, publications and technical personnel".
‘Payment’: The Central Government has made Research and Development Cess Rules, 1987. As per these rules, the word ‘payment’ u/s.3 of the Act shall include :
(a) Payment made towards import of technology as approved by the Central Government in terms of any foreign collaboration agreement.
(b) Payment made towards the cost of drawings and designs as approved by the Central Government.
(c) Payment made to foreign collaborator or any other person for or in connection with deputation of technical personnel to India in accordance with the approval granted by Central Government or Reserve Bank.
(d) Any other payment made towards import of techno-logy and approved by the Central Government.
"Board" means the Technology Development Board constituted under the Technology Development Board Act, 1995.
"Industrial concern" has the meaning assigned to it in clause (c) of section 2 of the Industrial Development Bank of India Act, 1964 (18 of 1964), and includes any other person in whose favour a foreign collaboration involving the import of technology is approved or automatically approved in accordance with the Industrial Policy of the Government of India in force from time to time".
The Government of India constituted the Technology Development Board (TDB) in September 1996, as per the provisions of the Technology Development Board Act, 1995.
The TDB Act, 1995 enables creation of a Fund for Technology Development and Application to be administered by TDB. The Fund receives grants from the Government of India out of the Cess collected by the Government from the industrial concerns under the provisions of the Research and Development Cess Act, 1986. Therefore the proceeds of the cess levied and collected will be credited to TDB instead of“Industrial Development Bank of India".
Levy & Collection: As per Section 3 of the Act, 5% on all payments made towards import of technology shall be paid as cess. The cess shall payable to the Central Government by an industrial concern which imports technology on or before making any payments towards such import and shall be paid by the industrial concern to any specified agency.
Information to be submitted: Under Section 8 of the R&D CESS Act read with Rule 5 of R&D CESS Rules, 1996, the industrial concern is required to furnish statistical and other information to the Secretary, Technology Development Board, Technology Bhavan, New Mehrauli Road, New Delhi-110016 in Form – A (copy enclosed) within a period of 30 days from the date of entering into the agreement. Any change or modification in the particulars furnished in Form – A shall be communicated by the industrial concern to the Board immediately but in no case later than 30 days from the date of effecting the modification or change.
Power of Central Government to exempt: If the Central Government is satisfied that it is necessary or expedient so to do in the public interest, it may, by notification in the Official Gazette and subject to such conditions, if any, as may be specified therein, exempt any industrial concern from the payment of the cess payable under this Act for the import of such technology as may be specified in such notification.
Penalty for non-payment of cess: If any cess payable by an industrial concern is not paid on or before making payments towards the import of technology, it shall be deemed to be in arrears and the same shall be recovered by the Board in such manner as may be prescribed.The Board may, after such inquiry as it deems fit, impose on the industrial concern, a penalty not exceeding ten times the amount in arrears.