“Customs duty” refers to the tax levied on goods when transported across international borders. The Customs Act and The Customs Tariff Act  (CTA), along with various related rules and regulations, serve as an integrated code for imposing tariffs on India’s imports and exports. The goal behind imposing tariffs is to protect each country’s economy, employment, environment, residents, etc. by restricting the movement of goods in and out of each country, especially prohibited and restricted goods. Every item has a predefined tariff rate that is determined based on a variety of factors, such as where the item was purchased, where it was manufactured, and what it is made of. Also, anything you bring to India for the first time must be declared in accordance with customs regulations. For instance, you need to declare the items purchased in a foreign country and any gifts which you acquire outside India.

Types Of Customs Duty

Types Of Custom Duties

Customs duties are charged almost universally on every good which are imported into a country. These are divided into:

  •   Basic Customs Duty (BCD)
  •   Countervailing Duty (CVD)
  •   Additional Customs Duty or Special CVD
  •   Protective Duty,
  •   Anti-dumping Duty
  •   Integrated tax

Basic Customs Duty 

Basic customs duty (hereinafter referred to as BCD) is a  tax levied under the Customs Act 1962. Before discussing this customs tax, it is important to note its primary source. The basic customs duties levied on goods originate from Section 12 of the Customs Act, which deals with taxable goods. 

Countervailing Duty 

Certain goods are subsidies to some extent by a country either produced/manufactured in that country or their exports or sometimes even their transportation. In such a scenario, to put domestic producers on an equal footing with traders in terms of subsidized imports, Section 9 of the CTA empowers the central government to impose anti-subsidy duties on goods. it is by notification in the Official Gazette. This section applies to goods that are not imported directly from the country or place of their manufacture/production, as well as to goods not in the same condition in which they are exported from the place of manufacture or production. their output. However, the article forbids the imposition of such amounts in excess of subsidies and periods beyond 5 years.

An Additional Customs Duty Or Special CVD 

There are goods that are domestically produced or produced that the government levies excise taxes. To avoid any manifestation of unfairness against domestic producers or domestic producers of goods, section3(1) provides for the application of a tax rate equivalent to the excise tax on goods imports of the same type. 

Protective Duties

Sections 6 and 7 of the CTA allow the central government to impose protective tariffs on certain imports if it deems it appropriate to protect domestic industry. The procedure for imposing such protection obligations is comprehensive and can be understood in the following ways: 

The Customs Commission of India recommends and specifies the level or rate of protective tariffs imposed on certain imports to the central government. 

Based on such recommendations, if the government is convinced that such a levy is necessary to protect the domestic industry, the government must impose it by notification in the official gazette. The amount of tariffs levied shall not exceed the Commission’s recommendations. 

The Government is obliged to submit such notification to Parliament in the form of a bill within six months of the issuance of such notice. 

If the government does not comply with the above, or if the bill is not adopted, the notified obligations will no longer apply. 

If circumstances make the government believe that the protective duty has exceeded or failed to reach its target, the government can lower or raise the tax level.

Anti-Dumping Duty

The dumping of goods is one of the widespread problems in the trading world. If the exporter exports the item to another country or region at a lower price than usual, it is a dumping practice. To prevent such dumping of imported goods in India, Section 9A of the CTA imposes an anti-dumping tax on goods exported to India for dumping purposes. However, the amount of obligation to be collected must not exceed the dumping margin. Normal value – Export value, as well as the deadline for such collection, must not exceed 5 years (although it may be canceled before the specified deadline).  

Integrated Tax 

With the introduction of GST in 2017, goods imported into India will be subject to the  Integrated Goods and Services Tax (IGST) in addition to BCD. Under the newly amended Section 3 (7) of the CTA, the integrated tax is charged at a rate equal to (but less than 40%)  the rate at which the IGST is levied on goods of similar nature shipped in the taxable country.  The value of imported goods. The above taxes are in addition to BCD and, if applicable, additional obligations.