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Meaning: Customs Duty

Customs duty refers to taxes imposed on goods transported across international borders. It is levied by governments on both imports and exports. The primary purposes of customs duty are to raise government revenue and protect domestic industries from foreign competition. Customs duty is calculated based on factors like the good's value, weight, material, and place of origin or acquisition. Duties can be value-based, quantity-based, or a combination. India's customs duties are regulated by the Customs Act of 1962 and administered by the Central Board of Excise and Customs.

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321 views2 pages

Meaning: Customs Duty

Customs duty refers to taxes imposed on goods transported across international borders. It is levied by governments on both imports and exports. The primary purposes of customs duty are to raise government revenue and protect domestic industries from foreign competition. Customs duty is calculated based on factors like the good's value, weight, material, and place of origin or acquisition. Duties can be value-based, quantity-based, or a combination. India's customs duties are regulated by the Customs Act of 1962 and administered by the Central Board of Excise and Customs.

Uploaded by

SOBICA K
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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CUSTOMS DUTY

MEANING
Customs Duty refers to the tax that is imposed on the transportation of goods across
international borders. It is a kind of indirect tax that is levied by the government on the
imports and exports of goods. Companies that are into the export-import business need to
abide by these regulations and pay the customs duty as required.
Put differently, the customs duty is a kind of fees that are collected by the customs
authorities for the movement of goods and services to and from that country. The tax that is
levied for the import of products is referred to as import duty, while the tax levied on the
goods that are exported to some other country is known as export duty. To simplify it, any
tariff that is introduced on goods across national borders is referred to as custom duty.

The primary purpose of customs duty is to raise revenue, safeguard domestic business,
jobs, environment and industries etc. from predatory competitors of other countries.
Moreover, it helps reduce fraudulent activities and circulation of black money.

The duty levied depends on the value of the goods, its dimensions and weight along
with a lot of other criteria. While value-based duties are called valorem duties, quantity-based
duties are called specific duties. On the other hand, duties on values plus other factors are
called compound duties.

Custom Duty in India


Custom Duty in the country falls under the Customs Act, 1962. As per this act, the
government levies duties on both import and export of goods along with their procedures,
prohibitions, penalties etc. Matters pertaining to this duty fall under the CBEC (Central Board
of Excise and Customs), a division of the Department of Revenue of the Ministry of Finance.

The CBEC helps in formulating policies w.r.t. the collection and imposition of custom
duties including custom duty evasions, prevention of smuggling etc. It oversees the tax
administration of inland and foreign travel. It has different divisions to take care of field work
such as the Commissionerate of Customs, Central Revenues Laboratory and Directorates etc.

On what factors is the customs duty calculated?


The customs duty is calculated based on various factors such as the following:
 The place of acquisition of the good.
 The place where the goods were made.
 The material of the goods.
 Weight and dimensions of the good etc.
Moreover, if you are bringing a good for the first time in India, you must declare it as per the
customs rule.
FEATURES OF CUSTOM DUTY

TYPES OF CUSTOM DUTY


Custom duties are levied on nearly all goods that are imported into the nation. While
export duties are levied on goods as specified by the Second Schedule, import duties are not
levied on certain items like fertilizers, food grains, lifesaving drugs etc. Custom duty can be
classified into the following types:

 Basic Customs Duty: This duty is imposed on the value of goods at a specified rate
as it is fixed on an ad-valorem basis. After being amended time and again, it is
currently regulated by the Customs Tariff Act, 1975. The Central Government,
however, holds the rights to exempt specific goods from this tax.

 Countervailing Duty: CVD or Additional Customs Duty is levied on imported goods


that fall under Section 3 of the Customs Tariff Act of 1975. It is the same as the
Central Excise Duty which is levied on similar goods that are produced in India.

 Education Cess: The cess used to be levied at 2% and an additional 1% of the


aggregate of customs duties.

 Protective Duty: This duty is imposed in order to shield the domestic industry
against the imports at rates that are recommended by the Tariff Commissioner.

 Safeguard Duty: As the name suggests, this duty serves as a means of safeguarding
the rise in exports. Sometimes, if the government feels that a rise in exports can
damage the existing domestic industry, it may levy this duty.

 Anti-Dumping Duty: This duty is based on the dumping margin, i.e. the difference
between the export price and the normal price. It is only imposed when the goods that
are imported are below the fair market price.

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