Customs Duty is a type of indirect tax levied on goods imported into India as well as on goods exported from India. Taxable event is import into or export from India. Import of goods means bringing into India of goods from a place outside India. India includes the territorial waters of India which extend upto 12 nautical miles into the sea to the coast of India. Export of goods means taking goods out of India to a place outside India.

Custom duty in India is governed by the Customs Act 1962 and the Customs Tariff Act 1975. Imported goods in India attract basic customs duty, additional customs duty and education cess. The rates of basic customs duty are specified under the Tariff Act. The peak rate of basic customs duty has been reduced to 15% for industrial goods. Additional customs duty is equivalent to the excise duty payable on similar goods manufactured in India. Education cess at 2% is leviable on the aggregate of customs duty on imported goods. Customs duty is calculated on the transaction value of the goods.

• Rates of customs duty for goods imported from countries with whom India has entered into free trade agreements such as Thailand, Sri Lanka, BIMSTEC, south Asian countries.Customs duties in India are administrated by Central Board of Excise and Customs under Ministry of Finance

Customs Duties...

• Customs duties are levied at specific percentage ad valorem, specific amount per unit of quantity or both, depending on the classification of the imported goods in the Customs Tariff Act.

• The classification of goods and the applicable rates for the levy of import duties are furnished in the Customs Tariff Act. Duty rates may change according to the country of origin and the type of product. For example, complete exemption or rate concessions are allowed on the import of specified items from some neighboring and developing countries such as Bangladesh, Bhutan, Egypt, Myanamar, Nepal, and Sri Lanka

Types of Customs Duties

• Basic duty : This is the basic duty levied under the Customs Act. The rate varies for different items from 5% to 40%.
   

• Export Duty : Such duty is levied on export of goods. At present very few articles such as skins and leather are subject to export duty. The main purpose of this duty is to restrict exports of certain goods. The Central Government has been granted emergency powers to increase import or export duties if the need so arises. Such increase in duty must be by way of notification which is to be placed in the Parliament within the session and if it is not in session, it should be placed within seven days when the next session starts. Notification should be approved within 15 days.
   

• Additional Duty: This additional duty is levied under section 3 (1) of the Custom Tariff Act and is equal to excise duty levied on a like product manufactured or produced in India. If a like product is not manufactured or produced in India, the excise duty that would be leviable on that product had it been manufactured or produced in India is the duty payable. If the product is leviable at different rates, the highest rate among those rates is the rate applicable. Such duty is leviable on the value of goods plus basic custom duty payable. eg. If the customs value of goods is Rs. 5000 and rate of basic customs duty is 10% and excise duty on similar goods produced in India is 20 %, CVD will be Rs.1100/-.
   

• Protective Duty : If the Tariff Commission set up by law recommends that in order to protect the interests of Indian industry, the Central Government may levy protective anti-dumping duties at the rate recommended on specified goods. The notification for levy of such duties must be introduced in the Parliament in the next session by way of a bill or in the same session if Parliament is in session. If the bill is not passed within six months of introduction in Parliament, the notification ceases to have force but the action already undertaken under the notification remains valid. Such duty will be payable upto the date specified in the notification. Protective duty may be cancelled or varied by notification. Such notification must also be placed before Parliament for approval as above.
   

                  Import Restrictions

• Goods may be imported freely without any restriction unless regulated on grounds of public policy or listed in the negative list of imports. The negative lists comprise prohibited, restrictive list of imports. The negative lists comprise prohibited, restricted and canalized items :
  a. The importing of prohibited items is banned.
  b. The importing of restricted items is permitted under specific license, or in accordance with a public notice conveying a general schedule.
  c. Canalized items can be imported only through designated public sector agencies, such as the Indian Oil Corporation and the State Trading Corporation. However, the central government may grant licenses to others to import any canalized goods.

• The negative list of import is under constant review; it is important to check the current list at the time of import.

• The import of consumer goods and durables continues to be restricted (with exceptions for a Specific items).

• The import of capital goods machinery has been liberalized and is generally allowed without license. Secondhand capital goods are also allowed, subject to certain conditions.

• Special licensing schemes permit the import of capital goods required for export production either duty-free import of inputs required for export production.

• The import of gold and specified items of consumer goods is also permissible under special import licenses issued to certain categories of exporters on the basis of either the net foreign exchange earning or the FOB value of physical exports.