Custom Duty

Customs means Govt. service which is responsible for the use of customs law and regulation to collect duties and taxes. It also has responsibility to use of other laws & regulations related to import, export, transportation or storage of products. Customs has been treated as the fiscal subject (topic) that charges customs duties and other taxes on export or import.

Customs Duty is a special type of tariff or tax imposed on goods when exported or imported across international borders. Objective Customs Duty is to protect each country’s economy, residents, jobs, environment, etc., by controlling the export and import of products/items, mainly restrictive and prohibited goods, into and out of the nation.

Each product/item has a predefined rate of customs duty that is determined based on several factors, including where such product/item was acquired, where such products were made, & what these products is made of. Alongside, anything that you bring into any country for the first time should be declared as per the customs rules. For example, you should need to declare the items/products purchased in a foreign country and any gifts which you get or buy outside India.

Custom Duty in India

Custom duty India came into existence under the Customs Act, 1962 & allows the government of India to levy customs duty on imports and exports, prohibit import and export of goods, procedures for importing or exporting & offenses, penalties, etc. The CBEC is a division of the Department of Revenue of the Ministry of Finance of India. All the matters related to it in India come under the (CBEC) Central Board of Excise and Customs. CBEC has created policies that are used for collection or levying of customs duties, duty evasion, smuggling prevention & administrative decisions related to customs laws and regulations. CBEC has different divisions for different works related to Custom duty on import or export of products in or out of India.

Custom Import Duty in India

Custom import duty is a tax collected on imports of goods by (any country’s customs authorities) Indian customs authorities when goods imported first time into India (any country). Import duty mainly depends on the good’s value. Depending on the context, import duty may also be called as a customs duty, custom tariff, and import tax or import tariff.

Types of custom duties

Customs duties are imposed almost universally on every good/product/item which is imported into a country. These are divided into the following types:

Basic Customs Duty (BCD)

Countervailing Duty (CVD)

Additional Customs Duty or Special CVD

Protective Duty

Anti-dumping Duty

Education Cess on Duty

Details about custom duties

Basic : Basic duty is applied on imported items/products that come under the ambit of Section 12 of the Customs Act, 1962. These custom duties are imposed at the rates prescribed in First Schedule to Customs Tariff Act, 1975, under the terms/products specified in Section 2 of the act. The levied rates can be standard or preferential as per the nation of import.

Basic duty is applied on imported items/products that come under the ambit of Section 12 of the Customs Act, 1962. These custom duties are imposed at the rates prescribed in First Schedule to Customs Tariff Act, 1975, under the terms/products specified in Section 2 of the act. The levied rates can be standard or preferential as per the nation of import. Additional (Countervailing Duty (CVD)) : This duty is imposed on imported items under Section 3 of Customs Tariff Act, 1975. It is equivalent to the Central Excise Duty that is applicable on similar goods produced within India. This duty is calculated on the aggregate value of goods including BDC and landing charges.

This duty is imposed on imported items under Section 3 of Customs Tariff Act, 1975. It is equivalent to the Central Excise Duty that is applicable on similar goods produced within India. This duty is calculated on the aggregate value of goods including BDC and landing charges. Protective Duty : Protective duty may be applied to shield the domestic industry against imports at a rate recommended by the Tariff Commissioner.

Protective duty may be applied to shield the domestic industry against imports at a rate recommended by the Tariff Commissioner. Education Cess : This is applied at 2% and higher education cess at another 1% of the aggregate of customs duties.

This is applied at 2% and higher education cess at another 1% of the aggregate of customs duties. Anti-dumping Duty : Anti-dumping duty may be levied if the good being imported is at below fair market rate, and is limited to the difference between export & normal price (dumping margin).

Anti-dumping duty may be levied if the good being imported is at below fair market rate, and is limited to the difference between export & normal price (dumping margin). Safeguard Duty : Safeguard duty is applied if the government feels that a sudden increase in exports can potentially damage the domestic industry of the country.

Custom Duty Calculations

Custom duties are evaluated on specific or ad valorem basis, i.e. on the value of goods. The value of product/goods is determined by Rule 3(i) of Customs Valuation (Determination of Value of Goods Imported by someone) Rules, 2007. This rule fixes the value of imported goods at the transaction value that has been adjusted as per the provisions under Rule 10. If there are no quantifiable or objective data related the valuation factors, valuation conditions are not satisfied, or there are some doubts regarding the accuracy or truth of declared value as per Rule 12 of Valuation Rules 2007, valuation of items/products has to be done through other means as per the below given hierarchy (sequence of steps),

Comparative Value Method which compares the transaction value of similar products/items (Rule 4)

Comparative Value Method which compares the transaction value of similar products/items (Rule 5)

Deductive Value Method which uses the sale rate of the item in importing country (Rule 7)

Computed Value Method which utilizes the costs related to fabrication, materials, and profit in the production country (Rule 8)

Fall-back method which is based on the previous methods with higher flexibility (Rule 9)

Custom Duty Calculator

You can get the online calculator freeat the ICEGATE web portal. Once you get the calculator, you need to fill the HS Code (CTH Code) of the good/product/item you are planning to import. Enter product description with a maximum length of 30 characters and select the country of origin of the product you have purchased or going to buy (for antidumping or preferential duty). Click on the Search button and you will get a list of goods/products that match your search criteria. Select one and you will be able to find a chart with all info related to the duty on selected product/item. This is a dynamic chart & you can enter values to check the actual duty you are liable to pay.

Custom import duty after GST in India

Goods and Services Tax (GST) is applicable on all imports into India in the form of levy of Integrated Goods & Service Tax (IGST). IGST is imposed on the value of imported products/goods plus customs duty chargeable on the products/goods. Hence, IGST must be calculated after adding the applicable customs duty to the value of imported items/goods. According to World Bank reports applied average tariffs by India were 6.3 %.