Custom Duty and Import Duty Overview

Custom duty is a government indirect tax that is levied on import and export goods. This tax is charged on all commodities that are imported as well as on the exported items. Importers and distributors pay customs duty and then charge the cost to the consumers. When the tax is levied on imported items it’s said to be import duty and when it’s levied on export items it’s known as export duty. Custom taxes are imposed by the government on the items that are exported and imported all over the world for the purpose of raising money or for income generation and also for the protection of domestic institutions from competitors that are foreign. 

Custom duties are imposed on harmful products like in the case of tobacco and alcohol which are harmful to health. This tax is imposed on these items in order to discourage their use. Terms that are used to describe the taxes levied on the items that are imported and exported are known as import tariffs and export duties.

This indirect tax is imposed on the basis of different criteria like the value of goods, weight, dimensions, and much more. Valorem duties are the duties on the value of goods, while specific duties are duties on the quantity or weight of the goods. The combination of the value and other factors on goods are compound duties.

Customs Duty in India

In India, the costs of customs duty vary, depending upon what kind of goods are involved, the origin of the goods, where they are coming from, and what these goods are made up of. In India HSN Code or HS code will help out in custom duty rates for your products. Harmonized Commodity Description and Coding System is a globally agreed method that helps in the identification of the types of the product, HSN Code is used in this method. 

In India the custom duty comes under the Customs Act of 1962, this act provides rights to impose duties on imports and exports. This act gives the government the authority to prohibit products that are not imported and exported, and to establish different types of procedures for import and export. It also helps in knowing what sanctions are imposed on the offenders. 

The Central Board of Excise & Customs abbreviated as CBEC is in charge of all the things related to the customs duty. CBEC is in charge of developing policies that help in the formation of customs. These policies are relevant to the customs administration, the imposing of collecting in the customs duties. It is also responsible for the prevention of smuggling and duty evasion detection. 

The divisions of the CBEC take care of Customs Commissionerate, Preventive Zones and Central Excise Zones, Directorates, Central Revenues Control Laboratory, and many others. Moreover, CBEC is also responsible for taking care of foreign and inland travel by overseeing the proper tax administration. 

Read More: What are licenses needed for import-export business in India?

Types of Custom Duty

The tax collection system of India has witnessed a major change, the government of India changed the whole tax system with the implementation of Goods and Services Tax (GST). This new Tax system subsumed many different Custom duties namely additional customs duty, protective duty, true countervailing duty, safeguard duty, and many more. The custom duty types that come under the GST regime are as under: 

Basic Customs Duty: The basic customs duty or BCD is a type of duty that varies from 5% to 40%, it is applicable to the goods being imported. This duty has been amended from time to time and comes under the Customs Tariff Act of 1975. The rate of this duty depends on the HS code and its origin. It is applicable to items that are imported into India. The actual fee of custom duty depends on different factors like the type of goods, imported region, and products made from. The Central Government of India exempts some goods from BCD like in the case of lifesaving drugs. 

Countervailing Duty (CVD): The rate of Countervailing Duty rate varies from 0% to 12% depending upon the goods being exported. It is imposed by the central government of India on the goods that receive tax benefits or subsidies. The benefits are received by the exporters who are exporting manufactured goods. The illegal advantage of goods is prevented with this type of duty. 

Safeguard Duty: in this type of duty the rates are applicable as per the notification. It is imposed by the Indian Customs authorities on all imported items. This type of duty safeguards the domestic industries of India so that they will not be harmed by the imported items. This safeguard duty protects the interests of the country’s local domestic industries. This duty is calculated as per the loss that has been suffered by the local industries in India. 

Import Duty 

Import duty is a tax levied and collected on the items that are imported and on specific exports by India’s customs authorities. The rate of the tax is decided by the value of goods. This type of tax is collected on imports and sometimes is also known as customs duty, import tax, and tariff, or tariff. 

Import duties have different purposes, it is used by the country to raise income for the local government and it helps the local market for growing local products. It gives an advantage to the items that are not subject to import duties. It also has another purpose to penalize a nation sometimes by importing its products under high charges. The goal of import duties is to safeguard local manufacturing products against those foreign products. 

The Indian government has made many different amendments to import duties that helped in minimizing imports in the long run. It helped in stopping the natives from spending on goods that are being imported which positively impacted national revenue. 

Read More: How to get a licence for an import-export business?

Types of Import Duty 

There are many different types of import duties in India that are imposed on imported items by the government of India. These duties included Basic customs duty, special countervailing duty, Safeguarding duty, Anti-dumping duty, and many others.

Basic duty: Basic duty is a type of import duty that is levied on imported items, this tax helps in reducing the effect of foreign products in the country. The imported items that face this type of tax fall under the Custom Act, of 1962. This type of import duty depends on different types of factors like the type and the nature of goods and the origin of the product. 

Special Countervailing Duty: The Special Countervailing Duty falls under the Customs Tariff Act, 1975, of section 3 and section 9. This type of import duty is imposed on the products that are benefited from tax breaks or subsidies in their manufactured countries. This way the government stops these products from getting an advantage over domestic products. These taxes ensure equal opportunity and also help in promoting trade practices that are fair, this helps in the promotion and the flourishing of local industries. 

Anti-dumping duty: it’s a type of import duty that is imposed on imported products in order to save the domestic market from dumping. It ensures protection from the unfair international trade practices that flood the domestic market with imported products. Anti-dumping duty prevents the selling of goods below their market value in foreign markets, this below production cost severely damages the domestic industries. Such dumping is encountered by the Anti-dumping duty in India. 

The anti-dumping duty falls under the Customs Tariff Act, 1975 of section 9A, this duty is imposed by the government of India to ensure the price balance between imported goods and local products. World Trade Organization or WTO agreement permits this duty and can be imposed on goods that are similar to that manufactured goods within the country. 

Conclusion 

Custom duty and import duty are a part of the GST regime and are levied as a type of indirect tax by the government of the country. These duties are paid by every set of people regardless of their status, or income. The government of India amends these duties from time to time to ensure equal opportunity and to safeguard the location manufacturing sector. It also keeps the expectations of the exporters in view and protects the country’s interests at large. 

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