Custom duty is a variant of Indirect Tax and is applicable on all goods imported and a few goods exported out of the country. Duties levied on import of goods are termed as import duty while duties levied on exported goods are termed as export duty. Countries around the world levy custom duties on import/export of goods as a means to raise revenue and/or shield domestic institutions from predatory or efficient competitors from other countries.
Types of Custom Duty:
Custom duties are levied almost universally on all goods imported into the country. Export duties are levied on a few goods as specified under the Second Schedule. Import duties are not levied on a few items including lifesaving drugs/equipment, fertilizers, food grains etc. Import duties are further divided into basic duty, additional customs duty, true countervailing duty, protective duty, education cess and anti-dumping duty or safeguard duty.
- Basic Custom Duty:Basic custom duty is applicable on imported items that fall under the ambit of Section 12 of the Customs Act, 1962. These duties are levied at the rates prescribed in First Schedule to Customs Tariff Act, 1975, under the terms specified in Section 2 of the act. The levied rates may be standard or preferential as per the country of import.
- Additional Customs Duty (Countervailing Duty (CVD)):This duty is levied on imported items under Section 3 of Customs Tariff Act, 1975. It is equal to the Central Excise Duty that is levied 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 imposed to shield the domestic industry against imports at a rate recommended by the Tariff Commissioner.
- Education Cess:This duty is levied at 2% and higher education cess at another 1% of aggregate of customs duties.
- Anti-dumping Duty:Anti-dumping duty may be imposed if the good being imported is at below fair market price, and is limited to the difference between export and normal price (dumping margin).
- Safeguard Duty:Safeguard duty is levied if the government feels that a sudden increase in exports can potentially damage the domestic industry.
Custom Duty Calculations:
Custom duties are calculated on specific or ad valorem basis, i.e. on the value of goods. The value of goods is determined by Rule 3(i) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. This rule pegs the value of imported goods at the transaction value that has been adjusted according to the provisions under Rule 10.
- Comparative Value Method which compares the transaction value of similar items (Rule 4)
- Comparative Value Method which compares the transaction value of similar items (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)
Online Custom Duty:
Online custom duty is available from ICEGATE or Indian Customs Electronic Commerce/Electronic Data Interchange (EC/EDI) Gateway. This portal allows E-Filing services to clients of Customs Department including trade and cargo carriers, collectively known as Trading Partner. ICEGATE offers services such as electronic filing of Bill of Entry, Shipping Bills, and other related messages between customs and the trading partner through e-mail, FTP and web-upload.
Custom Duty Payment:
Custom duty can be paid online by following the steps given below:
- Access the ICEGATE e-payment portal
- Enter Import/Export code or login credential supplied by ICEGATE
- Click on e-payment
- You can now see all the unpaid challans in your name
- Select the challan you want to pay and select a bank or payment method
- You will be redirected to the particular bank’s payment gateway
- Make the payment
- You will be redirected to ICEGATE portal, click print to save payment copy
Custom Duty Rates:
Custom duty rates can be specific (rupees per unit) or ad valorem (percentage of value). In general, duty varies anywhere from 0% to 150%, with the average rate lying around 11.90%. There is also a list of goods that are exempted from custom duty.
Other fees related to custom duties include:
- Landing Charge (LC) – 1% CIF
- Countervailing Duty (CVD) – (0%, 6% or 12% (CIFD + LC))
- CEX (Education and Higher Education Cess) – 3% CVD
- CESS (Education + Higher Education) – 3% (Duty + CEX (Education and Higher Education Cess) + CVD)
- Additional CVD – 4% (CIFD + LC + CVD + CESS + CEX)
