The Government of India levies a Customs Duty on all the imports within and some of the exports from the country. The amount to be paid as customs duty can be determined by several factors such as value, weight, dimensions, etc.‘Customs Duty’ refers to the tax imposed on the goods when they are transported across the international borders. The objective behind levying customs duty is to safeguard each nation’s economy, jobs, environment, residents, etc., by regulating the movement of goods, especially prohibited and restrictive goods, in and out of any country.
Every good has a predefined rate of duty that is determined based on various factors, including where such good was acquired, where such goods were made, and what these goods is made of. Also, anything that you bring into India for the first time should be declared as per the customs rules. For instance, you need to declare the items purchased in a foreign country and any gifts which you acquire outside India.
What is Customs Duty?
- The Government of India levies a Customs Duty on all the imports within and some of the exports from the country.
- The amount to be paid as customs duty can be determined by several factors such as value, weight, dimensions, etc.
- Here are some of the details as per the Customs Act of 1962:
- The law defines customs duty in India
- Gives the government the authority to impose duties on imports and exports
- Prohibit the import and export of products
- Establish procedures for import and export
- Prosecute offenders.
- Impose other sanctions.
- The Central Board of Excise & Customs is responsible for all things pertaining to customs duty (CBEC).
- The Department of Revenue inside the Ministry of Finance in turn houses the CBEC.
- CBEC develops policies relevant to the administration of customs formations, collection or levying of customs duties, prevention of smuggling, and detection of duty evasion.
- CBEC has various divisions that take care of the fieldwork including Commissionerate of Customs, Customs, Customs (preventive and Central Excise Zones, Central Revenues Control Laboratory and Directorates, etc. CBEC also oversees proper tax administration for foreign and inland travel.
Each product has a specific duty rate determined by factors such as its origin and composition. Items brought into India must be declared according to customs regulations, including purchases made abroad and gifts received from outside the country. Compliance with these rules ensures transparency and adherence to legal requirements when importing goods into India. Here are more details regarding Customs Duty in India.
Note: Custom Duty has been replaced by the Goods and Services Tax (GST) starting 1 July 2017
Types of Customs Duty in India
The different types of duties of customs collected are as follows.
- Basic Custom Duty
- Surcharge
- Additional duty of customs
- Special Additional duties
- Other levies like Countervailing duty, Anti-dumping duty, Safeguard duty and so on. Also, cess duty is leviable of certain goods.
Objective of Customs Act and Customs Duty
The following purposes are the reason why Customs Duty is levied on the import and export of goods in India.
- To restrict the imports for conserving foreign exchange.
- To protect the imports and exports of goods for achieving the policy objectives of the Government.
- To regulate export
- To co-ordinating legal provisions with other laws dealing with the foreign exchange such as the Foreign Trade Act and the Foreign Exchange Regulation Act.
- To safeguard domestic trade.
- To protect the revenue of resources.
- To protect the industries in India from unfair competition.
- To prevent the smuggling of goods and activities related to the same.
- To prevent the dumping of goods.
Customs Duty Calculations
Customs fees are assessed based on the worth of the goods, or on a specified or ad valorem basis. Rule 3(i) of the 2007 Customs Valuation (Determination of Value of Imported Commodities) Rules establishes the value of goods.
This regulation bases the worth of imported products on the transaction value after it has been modified in accordance with Rule 10’s guidelines.
Items must be valued using alternative methods in accordance with the following hierarchy if there is a lack of quantifiable or objective data regarding the valuation factors, the valuation conditions are not met, or there are questions regarding the accuracy or truth of the declared value as per Rule 12 of the Valuation Rules 2007.
- Comparative Value Method – which compares the transaction value of similar items (Rule 4 & Rule 5)
- Deductive Value Method – which uses the sale price of item in importing country (Rule 7)
- Computed Value Method – which uses the costs related to fabrication, materials and profit in production country (Rule 8)
- Fallback Method – which is based on the earlier methods with higher flexibility (Rule 9)
Exemptions from Customs Duty
There are a few exemptions from Customs duty, and they are as follows.
- The Central Government can grant exemptions by issuing a notification. Capital goods and spares can be imported under “project imports” at concessional/ Nil rate of customs duty.
- Section 25 of the Customs Act authorises the Central Government to issue notification granting exemption from customs duty partially or wholly on any goods.
- The exemptions may be in respect of primary duty or auxiliary duty.
- General or specific exemptions may be granted. While general exemptions are in respect to the user of goods, specific exemptions are in respect of various products.
- The exemptions are also granted subject to fulfilment of certain conditions.
Types of Exemptions
The following are the types of exemptions from Customs Duty.
- By notification
- By particular order on the Adhoc basis
- General exemptions
- Exemptions to Oil and Natural Gas Corporations Limited (ONGC)/ Oil India Limited (OIL)
- Other exemptions
FAQs
Rules under the Customs Act?
The Section 156 of the Customs Act of 1962 states that the Central Government has been empowered to make regulations that are consistent with the provisions of the Act and to carry out the main purposes of the Act. Multiple rules have been framed under these powers. The principal rules of this Act have been mentioned below.
- The Customs Valuation Rules of 1988: For the valuation of imported goods for calculating duty payable.
- The Customs and Central Excise Duties Drawback Rules of 1995: The mode of calculating rules of duty drawback on exports.
- Re-export of Imported Goods
- Baggage Rules of 1998: This stated the rules and allowances for bringing in baggage from abroad by Indian and tourists who visited the country. Duty-free baggage allowance carried by an international passenger, when coming to India is INR 50,000/- per individual. Before the 31st of March, 2016, the amount was INR 45,000/-. With effect from the First of April, 2016, all international passengers travelling to India need not file declarations if not carrying dutiable goods as part of the baggage they bring along with them.
- Customs Rules of 1996: This states the import of goods at a concessional rate of duty for manufacture of excisable goods. It also provides the procedure to be followed when goods are imported into India for export purposes.
Regulations under the Customs Act?
Under Section 157 of Customs Act of 1962, the Board has the authority to make rules that are consistent with provisions of the Act to carry out the purposes of the Act. Various regulations have been framed under these powers such as the ones stated below.
- Project Import Regulations of 1986: Procedures for project imports
- Customs House Agents Licensing Regulations of 1984
