Customs Duty refers to the tax that is imposed on the transportation of goods across international borders. It is levied by the government on the import and export of goods. Companies that are in the export-import business need to abide by these regulations and pay customs duties as required. Customs duty is the fee collected by authorities for moving goods and services to and from that country. The tax levied for the import of products is referred to as import duty, while the tax levied on the exported goods is known as export duty.
The primary purpose of customs duty is to raise revenue and safeguard the domestic business, jobs, the environment, industries, etc., from competitors in other countries. Moreover, it helps reduce fraudulent activities and the circulation of black money. In this article, you will learn all about customs duty in India, including its various types, the basis on which it is calculated, its structure, the procedure to pay it, and more.
On What Factors Are Customs Duties Calculated?
Customs duty in India is calculated based on various factors such as:
- The place of acquisition of goods
- The place where the goods were made
- The material of goods
- Weight and dimensions of the goods, etc
Moreover, if you are bringing a good for the first time in India, you must declare it as per the customs rule.
Customs Duty In India
India has a well-developed taxation structure. The tax system in India is a three-tier system divided between the central, state, and local governments. Customs duty in India falls under the Customs Act of 1962 and the Customs Tariff Act of 1975.
Since the implementation of India’s new taxation system, GST, integrated goods, and value-added service tax (IGST) have been charged on the value of any imported goods. Under IGST, all products and services are taxed under four basic slabs: 5%, 12%, 18%, and 28%.
Furthermore, the office of the Director-General of Foreign Trade validates the registration of all importers before they engage in any import and export activities.
Structure Of Customs Duty In India
Usually, the goods imported to the country are charged customs duty and educational cess. For industrial products, the rate has been slashed to 15%. The customs duty is evaluated on the value of the transaction of goods.
The basic structure of import and export tariffs in India includes:
- Basics Customs Duty
- Additional Duty
- Special Additional Duty
- Education Assessment or Cess
- Other State-Level Taxes
The additional duty is applied to all imports except for wine, spirits, and alcoholic beverages. Furthermore, the special additional duty is calculated on top of the basic and additional duties. 2% of cess is charged on most goods.
Customs Duty Update in Union Budget 2023-2024
In the latest budget speech, the Finance Minister announced a few changes concerning customs duty in India. The following proposals have been made:
- The Basic Customs Duty (BCD) on Shea nuts has been decreased to 15%.
- The BCD on Graphite, Silicon Dioxide and Silicon Quartz has been decreased to 2.5%.
- There will be no BCD on Beryllium, Copper, Nickel, Antimony, Zirconium, Potash, Tungsten, Cadmium, Lithium, Niobium, Tin, Selenium, Silicon, Strontium, Germanium, Rhenium, Hafnium, Bismuth, Molybdenum, Gallium, REE, Indium, Tantalum, Vanadium and Tellurium.
- The BCD on mineral and vitamin pre-mixes, krill meal, fish lipid oil, crude fish oil, and algal prime (flour) for use in the manufacturing of prawn and shrimp feed or fish feed has been reduced to nil subject to IGCR condition.
- There will be no BCD on Artemia and Artemia cysts. It will also not be levied on pre-dust breaded powder when used in processing seafood.
- The BCD on insect meal used in R&D for aquatic feed manufacturing and that on Single Cell Protein from Natural Gas and SPF Polychaete worms has been reduced to 5%.
- The BCD levied on textiles and leather items has been reduced. Exemptions on certain kinds of textiles and leather items have been extended for manufacturing garments and shoes for export.
- The BCD on mobile phones, chargers, and adapters has also been slashed.
- The BCD on precious metals such as gold, silver, platinum, and palladium has been reduced.
- There will be no BCD on Ferro-Nickel and Blister Copper.
- The exemption on Ferrous Scrap will continue, and so will the concessional BCD rate on Copper scrap.
- The BCD on Ammonium Nitrate has increased by 2.5% to 10%.
- The tariff rate of CTH 3920 and 3921 has been revised. They have been increased to 25%.
- The BCD on cancer drugs, namely Osimertinib, Durvalumab, and Trastuzumab Deruxtecan, has been completely exempted.
- The BCD on PCBA of certain telecom equipment has been raised.
- The BCD on lab chemicals has also been increased.
Types of Customs Duties in India
Customs duties are levied on almost all goods that are imported into the country. However, export duties are levied on a few items, as mentioned in the Second Schedule. Customs duties are not levied on life-saving drugs, fertilizers, and food grains. Customs duties are divided into different taxes, such as:
Basic Customs Duty
This is levied on imported items under Section 12 of the Customs Act, 1962. The tax rate is levied as per the First Schedule to Customs Tariff Act, 1975.
Additional Customs Duty
Additional Customs Duty, also known as Special Countervailing Duty (CVD), is levied on goods stated under Section 3 of the Customs Tariff Act, 1975. The tax rate is similar to the Central Excise Duty charged on goods produced within India. However, Additional Customs Duty is not subsumed under the Goods and Services Tax (GST) regime and remains in effect for certain goods to protect domestic producers from unfair competition from imports.
Protective Duty
This is levied for the purpose of protecting indigenous businesses and domestic products against overseas imports. The rate of Protective Duty is determined by the Tariff Commission and is based on the difference between the landed cost of the imported goods and the price of the domestically produced goods.
Education Cess
This is charged at 2%, with an additional higher education cess of 1%, as included in the customs duty, bringing the total Education Cess to 3%.
Anti-Dumping Duty
This is levied if a particular product being imported is below the fair market price. It is done to prevent country’s local industries.
Safeguard Duty
This is levied if the customs authorities feel that the exports of a particular good can damage the country’s economy. The rate of Safeguard Duty is determined by the Tariff Commission and is based on the difference between the landed cost of the imported goods and the price of the domestically produced goods.
How To Calculate Customs Duty?
The customs duties are usually calculated on an ad valorem basis, i.e., on the value of the goods. The value of the goods is calculated according to the regulations stated under Rule 3(i) of the Customs Valuation Rules, 2007.
You can also make use of the customs duty calculator available on the CBEC website. As part of the computerised and electronic service drive in 2009, India started a web-based system known as ICEGATE (Indians Customs Electronic Commerce/Electronic Data Interchange Gateway). It calculates duty rates, import-export goods declaration, shipping bills, electronic payment, and verification of import and export licenses.
The Indian classification of the Customs Duty is based on the 6-digit Harmonized Commodity Description (HS) and Coding System.
The IGST applicable on all imports and exports is charged on the value of the goods along with the primary customs duty. The structure is as follows:
Value of Imported Goods + Basics Customs Duty + Social Welfare Surcharge = Value based on which IGST is calculated
In case there is confusion regarding the common valuation factors, the following factors are considered as per exception:
- Comparative Value Method to calculate the transaction value of the same items as per Rule 4.
- Comparative Value Method to calculate the transaction value of the same items as per Rule 5.
- Deductive Value Method to calculate the sale price of an item in an importing country as per Rule 7.
- Computed Value Method used as per the fabrication materials and profit as per Rule 8.
- The fallback Method is used to calculate goods with higher flexibility as per Rule 9.
The Central Board of Excise and Customs under the Ministry of Finance manages the customs duty process in the country. International trade yields huge returns if conducted correctly. Whatever you plan on selling, you must choose an appropriate logistics partner that can help you ship hassle-free. With ShiprocketX, you can deliver your products timely and grow your business to 220+ destinations across the globe.
How To Pay Customs Duty Online
Customs duty can be paid online by following the steps given below:
- Access the ICEGATE e-payment portal.
- Enter the 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 the ICEGATE portal. Click print to save payment copy.
Latest Rates For Customs Duty (BCD) In India [2024]
| Item | Tariff Code (HSN) | Basic Customs Duty (From) | Basic Customs Duty (To) |
|---|---|---|---|
| Air conditioners | 8415 | 10% | 20% |
| Aviation turbine fuel | 2710 19 20 | 0% | 5% |
| Bath, sink, shower bath, wash basin (plastic) | 3922 | 10% | 15% |
| Coloured gemstones (cut & polished) | 71 | 5% | 7.50% |
| Compressors (refrigerators & air conditioners) | 8414 30 00/8414 80 11 | 7.50% | 10% |
| Diamonds (broken, half-cut, semi-processed) | 71 | 5% | 7.50% |
| Diamonds (lab-grown) | 71 | 5% | 7.50% |
| Footwear | 6401 to 6405 | 20% | 25% |
| Household refrigerators | 8418 | 10% | 20% |
| Jewellery articles & parts (metal clad with precious metal or precious metal) | 7113 | 15% | 20% |
| Miscellaneous plastic articles (furniture fittings, etc.) | 3926 | 10% | 15% |
| Plastic articles for packing & conveyance (bottles, containers, etc.) | 3923 | 10% | 15% |
| Radial car tyres | 4011 10 10 | 10% | 15% |
| Silversmith/goldsmith wares & parts (metal clad with precious metal or precious metal) | 7114 | 15% | 20% |
| Tableware, household plastic items, kitchenware | 3924 | 10% | 15% |
| Trunks, briefcases, suitcases, travel bags, etc. | 4202 | 10% | 15% |
| Speakers | 8518 29 100 | 10% | 15% |
| Washing machines (less than 10kg) | 8450 | 10% | 20% |
Conclusion
Customs duty in India plays a vital role in regulating the country’s trade by imposing taxes on imported and exported goods. Understanding customs duty is crucial for anyone involved in international trade. Different types of customs duty in India include basic customs duty, additional customs duty, protective duty and anti-dumping duty among others. It ensures that domestic industries are protected and that foreign goods are fairly taxed. The duty is calculated based on various factors, including the value of the goods, their classification, and the applicable duty rates. You can calculate it by applying the aforementioned formula. It is equally important to stay informed about the payment procedures and compliance requirements to ensure smooth clearance and hassle free trade operations.
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