written by | April 18, 2022

Overview of Custom Duty in India

Are you new to the import and export business world and completely confused about the customs duty payment terminology and the details? The world of customs duty on imported goods is definitely a tricky one, but fret not! We have your back. This article will give you a deeper insight into everything about customs duty and importing goods from other countries into India. Before we begin, it is always important for you to understand that going by the law remains a top priority. Always ensure that you have the complete information before you get started. 

Did you know?

Customs duty is applicable only on goods, not on services.

What is a Custom Duty?

It is a type of flux tax that is put by the customs on behalf of the country on products and items entering or leaving the customs region following the tariff laws established by the country, as well as the taxation laws and exports and imports tariffs espouses and incorporates by the country. Customs duty is perhaps the most basic custom duty form. The country is eligible for custom duty taxes. Customs collects tariff rates on behalf of the country from consumers. The products and items entering or departing the customs domain are the subjects of taxes. The country's laws, governmental norms, and regulations serve as the basis for such collections.

Importance of Custom Duty

The fundamental character of customs duty determines its significance. Even though the role of customs duty varies from country to country, the essential role of this is the constant expression of territorial integrity. The goal of taxes and duties collections is to preserve sovereignty and encourage the country's economic development.

In practice, the idea of "import duties and taxes" differs from the term of import customs duties in several international treaties and accords. Import customs duties, as well as other local taxes, are kept on all the importing items which come under "import duties and taxes". Following the completion of the levy of custom duty process and approval by authorities, all the importing items come under domestic goods and treat similarly to locally made items, and thus they must charge domestically.

Also Read: Start Export Import Business From Home – Easy Step-By-Step Guide

Customs Duty in India

The customs law of 1962 defines duties and taxes in India. It allows the power to impose a tax on exports and imports goods, restrict the exporting and importing of products, processes for importing/exporting and violations, fines, etc. The central board of excise and customs is in charge of each customs duty. The CBIC is a branch of the ministry of finance's department of revenue. The Central Board of Indirect Taxes and Customs develops policies about customs duty collections or imposes new policies, customs duty avoidance, trafficking control, and government decisions about customs design. 

CBIC has several sections that handle fieldwork, such as the commissioner of customs, precautionary and excise duties regions, central revenues monitoring laboratory, etc. The central board of excise and customs is also in charge of ensuring appropriate tax management for both overseas and inland travel.

Types of Customs Duties

Customs taxes are virtually always charged on all items coming into the nation. Import tariffs are not put on a few commodities, such as life-saving pharmaceuticals and equipment, fertilisers, food grains, etc. Import taxes are also classified as basic charge, supplementary customs duty, real offsetting duty, protecting duty, educational surcharge, and anti-dumping or safeguarding duty. Below are the customs duty types.

Basic Customs Duty

The basic customs duty is the charge levied on the cost of the products at a fixed rate. The tax is set at a predetermined ad-valorem level. This charge has gone through many changes after the establishment of this duty. The national government has the power to exclude any item from taxation.

Countervailing Duty 

The national government imposes this charge when a nation pays subsidies to exporters who sell products to India. This sum of tax is equal to the subsidies they paid. This tax is obligatory based on section 9 of the customs act.

Additional Customs Duty or Special CVD 

A particular counterbalance duty is a levy on all imported products to equalise importation with city taxes such as goods and services tax, vat, and other internal taxes that apply from period to period. As a result, it applies to put imports on par with products made or developed in India. It is to encourage fair commerce and competitiveness in our nation.

Safeguard Duty 

In the interest of protecting our regional industries and ensuring that no damage happens to India's local production, lead the formation of safeguarding duty. It depends on the losses sustained by our regional industries.

Anti-Dumping Duty 

Large manufacturers from overseas may frequently export items at extremely low prices when contrasted to pricing in the home market. A crippling domestic business or disposing of excess inventory is one of the goals of dumping. To prevent this dumping, the central govt may levy anti-dumping duties on this kind of product up to the margins of dumping within article 9(a) of the customs act, whereas if products are sold for much less than their normal worth. According to the World Trade Organisation's agreement, such anti-dumping duties are acceptable. Especially whenever there is an Indian business manufacturing 'similar items', they bring anti-dumping actions.

National Calamity Contingent Duty 

Section 129 of the finance act imposes this responsibility. Nicotine, pan masala, and other commodities that damage one's well being are subject to the tax. The customs rate of tax ranges from 10% to 45%, with varying rates imposed for various causes.

Education Cess on Customs Duty

Imposing a specific amount as a proportion of total duties and taxes. No cess is recompense if products are free from duty, are subject to zero duty, or move without any customs duty payment through approved procedures like clearing on surety.

Protective Duties

The formation of the Tariff Commission is based on the Tariff Commission Act of 1951. In case the Tariff Commission advises, the central govt agrees and finds that prompt action needs to be taken to defend the rights of the Indian industry. A preventive customs tariff at the proposed amount can apply as per section 6 of the customs act. The protective duty shall be in effect until the date specified in the notice.

Also Read: How to Master the Export-Import Business as an Agent/Broker in India?

How is Customs Duty Computed?

Each import is subject to tax, and the amount is determined by a variety of factors. Keep reading to learn about the import duty calculation in detail.

  • The very first duty imposed is customs duty. It is compulsory for a set price on the units or as an ad valorem tax.
  • On the purchase price of each good, there is a 10% social welfare fee. Imposing of IGST is a mix of elements, including BCD, social assistance surcharges, and the total amount of the transaction.
  • GST levies severance tax
  • Anti-dumping duties can be kept on some goods.
  • The governments can also impose a safeguarding responsibility to secure local industry from every threat.
  • Lastly, each import will indeed assess a 1% customs processing fee.

Payment of Custom Duty

Follow the procedures outlined below to pay customs tax payments electronically:

  • Navigate to the icegate electronic payment site.
  • Input the import/export key, or the integrated access credentials.
  • Select e-payment.
  • You will now complete details about the overdue challans.
  • Choose the challan which you wish to pay and also the banking or payments method.
  • Now you will see the payment portal of the specific bank.
  • Make your payout.
  • Next, you will see the payment confirmation; press print to keep a receipt of your transaction.

Conclusion

To summarise, customs duty is an indirect tax imposed on imported products to safeguard native products and manufacturers from overseas abuse. It also contributes to the government's turnover. You may compute your customs tax and see the amount of customs duty charges on each good online using the integrated site. In a nutshell, it is a government measure used to regulate the exports and imports of products in India.

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FAQs

Q: What is the customs duty on mobile phones?

Ans:

In India, the customs tax on smartphones is 10% service welfare activity on top of the current 20% basic customs duties. Customs duty on cell phone chargers and motherboards is 20%.

Q: Who introduces customs duty?

Ans:

The Indian government imposes customs tax underneath the Indian Customs Act, enacted in 1962 following article 265 of the Indian constitution.

Q: What exactly is a customs duty exemption?

Ans:

Customs duty exemption indicates that the federal Indian government does have authority under the customs act of 1962 to refuse to levy any customs tax on a certain item. It can all be officially done that is tactical or hidden in form or uses for charity objectives.

Q: What is the definition of basic customs duty?

Ans:

The customs act of 1962 imposes a sort of tax known as basic customs duty. The basic customs duty levies vary per product, and the national Indian government does have the authority to exclude or lower any product from paying the basic customs duty.

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