INDIAN CUSTOM DUTY

Questions: There will be one or two 6 marks theory questions, one 6 marks problem or
theory, one 15 marks problem and may be 15 marks theory. In total minimum 25 marks
questions Past questions
Q. What is import?
Q. What is safeguard duty?
Q. What baggage?
Q. What is anti dumping duty?
Q. What is duty drawback?
Duty Drawback is an export incentive scheme where the duties paid on any exported materials or excisable
materials which are used in the manufacture/processing/carrying out any operations on the goods that are
exported outside India is allowed as refund to the exporter
Q. What do you understand by transaction value of imported goods? Outline the adjustments
to be made.
Q. Explain the provisions relating to baggage? What are general prohibitions?

Constitutional Provision:
Entry 83 of the Union List of the Seventh Schedule to the Constitution of India is empowered to levy
the customs
duty by the Central Government of India.
The term customs is not new for us. It was customary for a trader who brings the goods to a
particular kingdom to
offer gifts to the king for allowing him to sell his goods in that kingdom. The gifts given by the dealer
to the king was nothing but a customary practice in those days. In the modern days, these gifts are
collected by the Government of India in the form of Customs Duty from the importer who imports
the goods from a country outside India and from an exporter who exports the goods to a country
outside India.
The Customs Act, was enacted by the Parliament in the year 1962, as per the List I of the Union List
Parliament has an exclusive right to make laws. The Customs Act regulates import and export,
protecting the Indigenous industry from other countries and so on. The Central Government of India
has power to make rules under section 156 of Customs Act, 1962, and also has the power to issue
Notifications from time to time for the purpose of smooth functioning and effective administration
of the Act.
Customs is a duty on import and export. It is one of the major indirect tax in India. Customs
Act 1962, Customs Tariff Act 1975, now GST Act 2017 & Rules framed under these Acts are the major
customs laws in India. There are many common links between Customs & Central excise. Both are
under the administrative Control of CBI&C. Many times CEOs will be in charge of Customs.
Classification Tariffs of both are based on HSN and principles are identical. Both are principally
based on transaction value for determining the duty.
FUNCTIONS OF CUSTOMS DEPARTMENT
 Customs duty is levied and collected on imports to India and exports out of India. The
customs department is responsible for levy and collection of duty.
Indian customs handle various tasks. The important task of them are as follows :
1. Collection of customs duties on imports and exports.
2. Enforcement of various customs provisions of Customs Act governing imports and exports,
baggage, postal articles and arrival and departure of vessels, air crafts etc.
3. Discharge of various agency functions and enforcing various prohibitions and restrictions on
imports and exports.
4. Prevention of smuggling including inter….. of narcotics drug trafficking.
5. International passenger processing.
NATURE OF CUSTOMS DUTY
Customs duty is one of the indirect tax. The power to levy customs duty is derived from
constitution and Union Government is empowered to levy customs duty. Sec. 12 of Customs Act
provides that duties of customs shall be levied at such rates specified under Customs Tariff Act, 1975
on goods imported into India or exported from India.
Taxable event : The taxable event for import duty is import into India and taxable event for
export duty is export from India.
Meaning of certain terms
1. Export (Sec. 2(18) : It means taking out of India to a place outside India.
2. Import (Sec. 2(23) : It means bringing into India from a place outside India.
3. Territorial waters : It means a portion of the sea which is adjacent to the shores of the
country. Territorial water of India extended upto 12 nautical miles (22.236 kms) inside sea
from the coast of India and include any bay, harbor, creek or tidal water. Sovereignty .of India
extends to the territorial waters of India.An import is completed when goods enters territorial
waters of India.Similarly export is completed when goods crosses territorial waters of India.
4. Indian Customs Water Sec. 2(28) : It means the waters extending into the sea upto 12 nautical
miles (22.236 kms) beyond territorial waters of India. Effectively waters extending into the sea
upto 24 nautical (44.472 kms miles insides sea from the coast of India constitute the Indian
Customs water. Customs Officers have the power in Indian customs water.
5. Goods: Customs duty is on goods Sec. 2(22) defines goods as it includes vessels ; aircrafts and
vehicles, stores, baggages, currency and negotiable instruments and any other kind of
moveable property.
6. Dutiable goods : Sec. 2(14) defines dutiable goods as any goods which are chargeable to duty
and on which duty has not been paid.
7. Duty Sec. 2(15) It means a duty of Customs leviable under Customs Act.
8. Imported goods : Sec. 2(25) defines that it means any goods brought into India from a place
outside India. Once Customs authorities clears, it is no longer remain as imported goods (In
practice it is referred as imported every time).
9. Exported goods ; Sec. 2(19) It means any goods which are to be taken out of India to a place
outside India.
TYPE OF CUSTOM DUTIES
 1. Basic Customs Duty (BCD) : It is levied u/s 12 of the Customs Act as a % on customs value.
The rates vary for different items. Basic Customs Duty varies for different items from 5% to 40%.On
liquor it is 150%. But general rate is 10% on non-agricultural goods at present. The duty may be
fixed on ad valorem basis or specific rate basis. The Central Government has the power to reduce or
exempt any good from these duties.
2. Integrated goods and service tax (IGST) Now CVD and Additional duty u/s 3(5) (SAD or
Special CVD) are replaced by IGST w.e.f.1.7.2017 when GST is introduced in India.on all goods
imported except on few for which still excise duty is applicable. Under GST law import and export
also treated as inter state supply. Hence liable for IGST in India. IGST is payable on the total of
Assessable value and basic customs duty. IGST is not levied on baggage Rate of IGST is as specified
under GST law.For example suppose an inter state supply of goods produced in India is liable for 18%
IGST.If same goods are imported it is liable for 18% IGST.
3. GST Compensation cess Sec 3(9): GST Compensation Cess is an additional cess levied on
certain notified imported goods w.e.f 1.7.2017..The rate is same as applicable to similar supply of
goods in India.GSTCC is introduced with the objective of compensating the states against loss of
revenue on account of introduction of GST. Thus the revenue collected ftro GSTCC will be distributed
to the states to cover the revenue loss. GSTCC is calculated on Assessable value plus Basic customs
duty (BCD).
4. Social Welfare Surcharge (SWS): It is introduced u/s 110 of Finance Act of 2018on all goods
specified in the First Schedule of CTA,1975 imported into India. The general rate is 10%.It is
calculated on Basic Customs Duty(BCD) SWS is to fulfill the commitment of the Government to
provide and finance education,health and social security.
5. Additional Customs duty (CVD) : It is often called countervailing duty. This duty is equal to
excise duty levied on like product imported . It is levied to counter balance impact of excise duty. It
is calculated on Assessable value plus BCD plus NCCD of customs.But when GST is introduced it is
applicable only on those goods for which Central excise is applicable.
6. Road and infrastructure cess: It is payable on specified imported goods.
7. Education Cess:It is applicable on aggregate of customs duty at 34%.But now abolished.
8. Additional duty u/s 3(5) (SAD or Special CVD) : It is levied to counter balance sales tax, VAT
or local taxes levied on sales in India. It is levied on the aggregate of A.V, BCD, CVD and additional
duty U/s 3(3). But now it is applicable only on few goods after introduction of GST
9. Protective Duties : As per the recommendation of Tariff Commission protective duties can
be levied by Central Government. The purpose of this duty is to protect the interest of Indian
industry. Such duties will be levied for a temporary period only. The rate of duty also will be
recommended by the commission.
10. Countervailing Duty on Subsidized goods : If a country gives subsidy to its exporters
for exporting goods to India Government can impose countervailing duty upto the amount of such
subsidy u/s 9 of CTA. The purpose of such duty is to give protection to Indian market.
11. Anti-dumping duty : This duty is levied to protect the interest of the Indian market
against the impact of dumping. Dumping means export of goods to India at a very low price to
dispose off their excess stock. The amount of duty will be equal to margin of dumping or injury
margin, whichever is less. Margin of dumping means difference between normal price and export
price to India.
Injury margin means the difference between fair selling price of domestic industry and
landed cost of imported product.

12. Safeguard duty : It may be levied by the Government on specified imported goods if
it is satisfied that such import is causing injury to domestic industry. Safeguard duty provides a need
based production.
 13. NCCD on Customs : Natural Calamity Contingent Duty of customs has been imposed
by Government on cigarettes, pan masala, motor cars etc.
Export Duty : Since Government actively encourages export duty is levied on very few exports
i.e. onlyon the goods mentioned in the IInd schedule to the CTA. At present, export duty is imposed
on luggage leather, hides, skins and leather etc.

VALUATION FOR CUSOTMS DUTY: Customs duty is payable as a % of value called Customs Value or
Assessable Value. Such value may be either Tariff value U/s 14(2) or Value as defined u/s 14(1)
of Customs Act.There are two methods.
1) Tariff Value : Tariff value can be fixed by CBE & C U/s 14(2) of CA. For any class of imported goods
or export goods. Duty is payable as a % of this value. This method is used very rarely. Tariff
value for crude palm oil, RBD palmolin, palm oil, brass scrap and crude soyabean oil has been
fixed by notification.
2) Customs Value as per Sed. 14(1) : It is popularly known as Transaction value method: Value fixed
u/s 14(1) is widely used to fix the amount of customs duty value for purpose of duty is deemed
value. Normally, ordinary price of goods in international market at the time and place of
importation or exportation, when price is sole consideration and buyer and sellers are
unrelated is the basic criteria for valueation. In other words transaction value of imported
goods or export goods is the basis of valuation. Sec. 14(1) provides following criteria for
deciding the value
1. Price :Price at which such or like goods are ordinarily sold or offered for sale. This signifies
that price at which goods are being sold under an invoice is not the sole criteria for deciding the
value. Price of such goods or like goods as the case may be, is relevant.
2. Price for delivery at the time and place of importation or exportation. Thus price means
inclusive of all expenses upto the destination port including freight, insurance. So price taken for
ascertaining assessable value is C.I.F. Value of goods imported.
3. Price should be in course of International trade. The value must be fixed considering the
international price.
4. Buyer and Seller must unrelated. Transaction value can be accepted only if buyer and seller
should not have interest in business of each other or one of them has no interest in the other.
5. Price must be the sole consideration. Otherwise transaction value is not relevant. Such
other consideration should be added back to the transaction value.
6. Rate of exchange : The payment is to be made in the currency of exporter’s country. So rate
of exchange must be as fixed by CBE and C. Other exchange rates like RBI rate or inter Bank
exchange rates are not relevant.
Thus, the principle of transaction value can be the basis of valuation only if above conditions
are satisfied.

INCLUSIONS /EXCLUSIONS IN CUSTOMS VALUE

 CIF ( cost,insurance and freight )value of goods imported is the basis for deciding Assessable
value. Customs valuation Rules are applied for fixing the A.V.

INCLUSIONS : Rule 9 states that if following costs are not included in the price, the same must
be added to the invoice price.

1. Commission and brokerage except buying commission.

2. Cost of packing including material and labour for packing.
3. Cost of container forming part of the goods. But cost of returnable and durable containers are
not added.
4. Materials, parts, components, etc. used in production supplied by importer free of charge to be
included.
5. Engineering, development designs, work plans, etc. to be included in the price.
6. Royalties and license fees related to imported goods that buyer required to pay to be included.
7. Value of proceeds if subsequent resale or disposal or use of goods that accrues to seller.
8. All other payments to seller as a condition of sale.
9. Freight: It is one of the compulsory addition to FOB value Cost of transport upto the place of
importation to be included. In case of sea or land transport actual freight is to be added to FOR
price. In case of air transport 20% of FOB price or actual air freight whichever is less to be
taken. In the absence of freight information 20% of FOB price is included towards cost of
transport.
10. Cost of insurance : It is one of the compulsory addition to FOB value Actual
insurance is includible. In case insurance is not traceable 1.125% of FOB is to be added towards
insurance.

EXCLUSIONS
Following are not to be added. Hence excluded from A.V.

(a)Expenses for construction, erection, assembly, maintenance, or technical service undertaken

after
Importation of plant, machinery or equipment.

(b)Cost of transport after importatin.

(c) Duties and taxes in India.
In all post importation costs are not taken.

VALUATION RULES FOR CUSTOMS

Assessable value of imported goods is determined either on specific value basis u/s 14(2) or under
transaction value method u/s 14(1) of Customs Act 1962.In case the any of these methods cannot be
conveniently applied AV is determined as per Customs valuation rules.
The Customs Valuation Rules, 1988, based on WTO Valuation Agreement consist of rules providing
six methods of valuation. These methods have to be applied in sequential order i.e. if first method
can not be applied then method two comes into force and so on. But computed value method can
be used before deductive method :
1) Transaction value of imported goods : It is the first and primary method. Import is made at
a certain price. So the invoice price is the primary basis for determining the Assessable value. Price
actually paid or payable for the goods exported to India will be added with certain expenses like
freight, insurance, landing charges and other inclusions as per Rules 9. The aggregate of price plus
inclusions is the Assessable value. The method can be accepted on when conditions specified u/s
14(1) is satisfied.
2) Transaction Value of identical goods : Rules 5(1) (a) of Customs Valuation Rules provide
that if valuation on the basis of transaction value is not possible, the A.V. will be decided on the
basis of transaction value of identical goods sold for export to India and imported at or about the
same time. Identical goods are those goods which are same in all respects including physical
characteristics, quality, the goods should have been produced in the same country and by the same
manufacturer. The price of such identical goods will be taken for valuing the goods imported making
suitable adjustments if needed.

3) Transaction Value of Similar goods : If first two methods can not be applied then only this

Method can be used. Similar goods means alike in all respects, goods should have been produced in
the same country and produced by same manufacturer. If price of same producer is not available
then the price of other manufacturer of the same country who produced like goods will be
considered. Transaction value of similar goods imported at or about the same time will be the basis
for valuation.

4. Deductive Value Method : This method should be applied if transaction value of identical
or similar goods is not available ; but these products are sold in India and its selling price is available.
A.V. is calculated by reducing all the post importation costs and expenses from the selling price. This
is called deductive value method.

5. Computed Value Method : If valuation is not possible by deductive method computed value
method should be used. Sometimes at the request of importer it can be used before deductive
method also. In this method value is the sum total of cost of material and fabrication, an amount of
profit and general expenses equal to usually reflected in sale of goods of the same class and the cost
of all other expenses under Rule 9(2) i.e. freight, insurance etc.

6. Residual Method : This is the last method similar to the best judgement method. The
valuation officer fixes the value while deciding the value reasonable means consistent with general
provisions of these rules should be the basis and valuation should be on basis of data available in
India. This method can be considered if valuation is not possible by any other method.
Practical problems
Illustration 1:Raja Ltd., imported a machine from England. The FOB price of machinery is 5000
pounds. Other details are as follows :
(a) Freight from England - 300 pounds.
(b) Insurance paid in India - Rs. 3,000
(c) Design and development charges _ 800 pounds
(d) Development charges in India - Rs. 10,000.
(e) Freight paid from Mumbai port to factory at Pune Rs. 5,000.
(f) Rate of exchange as announced by CBE & C Rs. 68 per pound by RBI Rs. 68.68 per pound and
Bank rate Rs. 68.50 per pound.
(g) Commission payable to agent in India 5% of FOB price.
Basic Customs duty payable is at 10%. If similar goods are produced in India IGST payable will be at
18%. Social welfare Surcharge payable at 10%. Calculate Assessable value and customs duty
payable.
 Solution : Calculation of Assessable value .
FOB Value- 5,000 pounds
Freight from England - 300 ”
Design and development charges- 800 ”
Commission payable to agent in India 5% of FOB price 250 ,,
Total (C & F) - 6,350 ”
Total in Rs. @ 68 per pound as announced by CBE & C Rs. 4,31,800
Insurance Rs. 3,000
Total CIF Price Rs. 4,34,800
Assessable Value Rs. 4,34,800
Calculation of duty payable :
A – Assessable value Rs. 4,34,800=00
B – Basic customs duty @ 10% on AV Rs. 43,480=00
C – Total of (A + B) Rs. 4,78,280=00
D – IGST @ 18 % of ‘C’ Rs. 86090=40
E – Social welfare Surcharge @ 10% on B Rs. 4,348=00
F – Total. Customs duty (B+D+E) Rs. 1,33,918=40
Total value of goods (A+F) Rs.5,68,718.40
Notes: 1) Freight and insurance must be compulsory to be added.
2) Expenditures incurred after import spent in India should not be included. Hence
Development charges in India and Freight paid from Mumbai port are not to be taken.
3) Rate of exchange as announced by CBE & C only to be taken.
Illustration 2
An Indian dealer imported 30 machines from America @ 200 Dollars per machine. However,
the following expenses are not included :

i. Packing charges 10 dollars per machine.

ii. Transportation charges to Indian port 100 dollars.
iii. Transit insurance premium 30 dollars.
iv. Brokerage(excluding buying commission) 60 dollars.
The dealer incurred following expenses after delivery at the port :
Transportation charges from port to his godown Rs. 3000.

i. Insurance premium Rs. 500.

ii. Octroi Rs. 2000.
Compute assessable value to determine Customs duty.
Exchange rate is 1 Dollar=Rs. 69.
Solution: Computation of assessable value
(Exchange rate 1 dollar = Rs. 69.) Dollars Rs
Cost of machines(30 x 200) 6000 4,14,000
Packing charges(30 x 10) 300 20,700
Brokerage 60 4,140
FOB Value 4,38,840
Add : Transportation charges 100 6,900
Insurance premium 30 2,070
CIF value being Assessable value 4,47,810

Note : Expenses incurred after taking the goods from Indian port are not included in the value
of goods.
Illustration 3 An Indian dealer imported goods worth 10,000 Dollars. However, the following
expenses are not included : 1.Buying commission paid to an agent of an Indian dealer 200
dollars.
2.Packing charges – Containers 500 dollars; other packing materials 100 dollars; Labour charges 300
dollars
3.Transportation charges to Indian port.
4.Transit insurance premium.
Compute assessable value to determine Customs duty.
Exchange rate:
i. Declared by the R.B.I Rs. 69.20 per dollar;
ii. Notified by the board Rs 69 per dollar.
Solution
Computation of assessable value
(Exchange rate 1 dollar = Rs. 69.)
Dollars Rs
Cost of goods 10,000 6,90,000
Buying commission ----
Packing charges 900 62,100
FOB Value(in INR) 10,900 7,52,100
Add : Transportation charges
(20% of FOB value) 1,50,420
Value Insurance Premium
(1.125% of FOB value) 8,461
CIF value (Assessable value) 9,10,981
Note :
1. Commission on the purchase of the goods is not included in the Assessable value of the goods.
2. If transportation cost is not given then it will be taken as 20% of FOB value.
3. If the amount of Insurance premium is not given then it will be taken as 1.125% of FOB value.
Illustration 4 X Co imported goods from America. From the following information, determine the
Customs duty payable:
i. Cost of goods is $ 15,000.
ii. Packing charges is $ 3,000.
iii. Freight from America to Indian Air port is $ 4,000.
iv. Commission paid in India to the broker of exporter who arranged the deal is Rs. 10,000.
v. Commission paid to agent in USA to the broker of importer $ 100
vi. Importer has supplied technology to exporter in relation to manufacturing of goods
Rs.10,000 free of cost
vii. Insurance premium is not traceable.
viii. Rate of basic Customs duty BCD 10%,
ix. On similar goods the rate of GST payable in India is 18%
Exchange rate:
a) Declared by the R.B.I Rs. 68.50 per dollar;
b) Notified by the board Rs 70 per dollar.
Solution: Computation of assessable value
(Exchange rate is 1 Dollar=Rs. 70 notified by Govt CBI&C only to be taken)
Particulars $ Rs
Cost of goods 15,000 10,50,000
Commission to agent of exporter --- 10,000
 Packing charges 3,000 2,10,000
Material supplied by importer --- 10,000
FOB value –Total 12,80,000
Freight: Least of Actual or 20% of FOB ---- 2,56,000
Insurance premium 1.125% of FOB 14,400
CIF value –Assessable value 15,50,400
Computation of Customs duty payable.
A- Assessable value 15,50,400
B -Basic customs duty @ 10% on A 1,55,040
C –Sub total (A+B) 17,05,440
D- IGST @ 18% ON –C 3,06,979
E- Social Welfare Surcharge @ 10 % on B 15,504
F- Total Customs duty(B+D+E) 4,77,523

Notes: 1) Freight and insurance must be compulsory to be added even if it is not given.
2) In case of air freight Actual or 20 % of FOB to be taken. In this case Actual freight is 4000
dollars= Rs.2,80,000 and 20% of FOB is 2,56,000 which is lesser , so taken.
3) Commission to agent of importer is buying commission not to be added.
4) Rate of exchange as announced by CBE & C only to be taken.
5) FOB: It means free on board the ship flight truck or any vehicle. It is the value including
cost of goods, packing, free material supplied and all other expenses incurred in the country of
exporter to bring the goods on board the ship at the port of departure. Commission not to be
taken
When Freight and insurance compulsorily added the total sum is CIF value.It is the basis for
calculation of duty.
6) 10 % Social Welfare Surcharge cess,IGST and BCD are compulsory.
Illustration 5(M.Com IV Semester,2019) PQR Industries Ltd, has imported certain equipment
from Japan at an FOB cost of 4,00,000 Yen. Other expenses are as follows.
1) Freight to Indian port 20,000 Yen
2) Insurance charges paid in India Rs.10,000
3) Designing charges paid to consultancy in Japan 60,000 Yen.
4) Development activities on machine in India Rs.1,00,000
5) Transport cost from Mumbai port to factory Rs.50,000
6) Rate of exchange as per section 14(a)(i) notified by CBE & C Rs. 0.40 = 1 Yen
7 The company had effected payment based exchange rate 0.0.4150
8) Commission paid in India to the agent of exporter in India 5% of FOB in INR
Compute the assessable value and duty payable. Basic Customs duty payable is at 10%.
If similar goods are produced in India IGST payable will be at 18%.
What is the Cost of Import ?
(A)Solution: Computation of assessable value
Particulars Yen Rs
Rate of exchange notified by CBE & C Rs. 0.40 = 1 Yen
FOB cost 4,00,000
Designing charges 60,000
Freight to Indian port 20,000
Commission paid 5% of FOB 20,000
Development charges in India (Not to be added) ---
Transport charges in India (Not to be added) ---
 Total in Yen and INR 5,00,000 2,00,000
Insurance 10,000
CIF Value –Assessable value 2,10,000

B)Computation of customs duty payable

Duties Rate % Rs Rs.
A Assessable value 2,10,000
B Basic Customs duty 10 21,000 21,000
C Sub total (A+B) 2,31,000
D IGST on C 18 41,580 41,580
E Social welfare Surcharge on B 10 2,100 2,100
F Total customs duty payable -- 64,680
Total Cost of Import ( Assessable value + Customs duty) 2,74,580
Illustration 5(M.Com IV Semester,2018) An Indian dealer imported a computer from London.
Compute the assessable value and duty payable from the following particulars. Rate of
exchange notified by CBE & C Rs.80= 1 Pound.
a) Cost of the computer 10,000 pounds
b) Packing charges 500 pounds
c) Transport charges by air 3,000 pounds
d) Commission paid to the agent of exporter100 pounds
e) Commission paid to his agent to settle the price 100 pounds
f) Amount paid to an employee of exporter for assembling in India 3,000 pounds.
g) Importer has supplied software to exporter in relation to be installed in computer of Rs.1,00,000
free of cost.
h) As per the terms the buyer has to pay a Royalty of 5,000 pounds to IBM Japan
i) Royalty payable for each unit of computers reproduced in India 2,000 pounds
J) Design and development charges incurred outside India 3,000 pounds
k) Insurance charges 500 pounds
l) Transport cost from Mumbai air port to factory and insurance premium Rs.10,000
Basic Customs duty payable is at 10%.If similar goods are produced in India IGST payable is 28%.
GST Compensation cess 15%.
(A) Solution: Computation of assessable value
Particulars Pound Rs
Rate of exchange notified by CBE & C Rs.80 = 1 Pound
Cost of the computer 10,000 8,00,000
Packing charges 500 40,000
Commission paid to exporter agent 100 8,000
Software supplied by importer free of cost --- 1,00,000
Design and development charges 3,000 2,40,000
Royalty to IBM Japan 5,000 4,00,000
FOB Value --- 15,88,000
Air Freight to Indian port(least of actual or 20% of FOB) see note 2,40,000
Insurance 500 40,000
CIF Value –Assessable value 18,68,000
Note: 1) Actual Air freight 3000 pounds =Rs.2,40,000 or 20% of FOB Rs.3,17.600 whichever is less
B)Computation of customs duty payable
Duties Rate % Rs Rs.
A Assessable value 18,68,000
B Basic Customs duty 10 1,86,800 1,86,800
 C Sub total (A+B) 20,54,800
D IGST on C 28 5,75,344 5,75,344
E GST Compensation cess on C 15 3,08,220 3,08,220
F Social welfare Surcharge on B 10 18,680 18,680
G Total -- 10,89,044
2) Assembling in India, Transport charges in India Royalty after production are not allowed
since they are incurred after imports in India and Commission paid to importer’s agent not to
be taken.
3) Social welfare Surcharge is compulsory
PROVISIONS RELATING TO BAGGAGE
Meaning of of baggage: It is the luggage of the passenger travelling from one country to
another.Section 2(3) of Customs Act states that Baggage includes unaccompanied baggage. It
means all dutiable goods imported by a passenger or a member of crew in his/her baggage.
Unaccompanied baggage means luggage dispatched previously or subsequently by the tourist
or passenger to India. Baggage does not inclde: Motor Vehicles, Alcoholic Drinks, goods
imported through courier  and Article imported under an import licence for his own use or on
behalf of others.
Bona fide baggage means a baggage consisting wearing apperal,toilet requisites and other
personal effects. It is exempted from duty.
General prohibitions: Baggage should not consist prohibited goods.Following are general
prohibitions/restrictions: a) Foreign/Indian currency subject to RBI rules. b) Narcotic drugs c)
domestic pets as per rules d) Exotic birds,wild life etc e) endangerd species.
Declaration by owner of baggage
Section 77 of Customs Act provides that owner of any baggage has to make declaration of its
contents to customs officer. Rate of duty and tariff valuation shall be the rate and valuation in
force on the date of declaration. Customs have provided 2 channels at airpot.
Green Channel:
If customer does not have any dutiable goods, he can go through green channel.
Red Channel:
Person carrying dutiable goods should pass through red channel. Any passenger found walking
through green channel with dutiable goods or found mis-declaring quantity, value or
description while going through red channel is liable to penal action of seizure and confiscation.
He can even be arrested.
General Free Allowance( GFA): Passengers coming from out of India are allowed to bring
certain articles without payment of customs duty. it is called Free allowance (GFA). An Indian
resident or a foreigner residing in India or a tourist of Indian origin, not being an infant
arriving from any country other than Nepal, Bhutan or Myanmar, shall be allowed clearance
free of duty articles in his bona fide baggage i.e. used personal effects and travel souvenirs and
articles other than prohibited/restricted and articles mentioned in Annexure I. He is given free
allowance of Rs.50,000.For foreign tourists it is Rs.15,000.
The free allowance of a passenger shall not be allowed to pool with the free allowance of any
other passenger. For example Husband can not get his wife’s GFA.
Tourist: Aperson who is not normally resident in India.A perso who enters India for a stay not
more than six months for legitimate non-immigrant purposes such as touring, recreation,
sports, health, family reasons, study, religious pilgrimage or business is called tourist as per rule
2(1)(iv) of Baggage Rules,2016.
Rate of duty: Customs duty on baggage is 35% of the assessable value. Assessable value is
normally the value declared by the passenger. Social Welfare Surcharge is levied @10% on the
customs duty. Thus effective rate comes to 38.50%.
 Baggage fully/partly exempt: Following are exempt from duty: a) Personal property
reimported.
b) One laptop(note book computer)
c) Food stuffs upto Rs.50,000
d) Samples,price lists
c)News papers etc
Illustration 1( M Com IV Semesster May,2018).Mrs Latika Suraj and Mr Suraj Indian residents
brought the following while returning to India from Paris after 7days of stay on 5.2.2018.
1. Personal effects like clothes etc valued at Rs.1,49,000
2. A personal computer bought for Rs.60,000
3.Two laptop computer bought for Rs.89,000 and Rs.84,000 respectively
4. Household articles Rs.40,000
5.Two litres of liquor Rs.3,600
6.One camera in the name Mrs Latika Suraj Rs.97,400
7.Perfumes costing Rs.60,000
8.One 56 cm TV Rs.40,000
9.Two Motorola mobile sets Rs.19,000 and Rs.14,000 respectively
What is the amount of duty payable?
Solution:
Particulars of goods Mrs Latika Mr Suraj
Rs Rs
Personal effects (bonafide luggage) Exempt -- --
Personal computer -- -- 60,000
Two laptop computer One laptop exempt 40,000 84,000
Household articles -- -- --
Two litres of liquor -- 97,400 3.600
One camera -- -- --
Perfumes -- 40,000 60,000
One 56 cm TV -- 14,000 --
Two Motorola mobile sets -- -- 19,000
Total -- 1,91,400 2,26,000
Less General Free Allowance Concession to each 50,000 50,000
Taxable Value -- 1,41,400 1,76,000
Customs Duty Payable @35% -- 49,490 61,600
Add Social Welfare Surcharge @10% on Customs -- 4949 6,160
duty
Total Customs Duty Payable 54,439 67,760
Notes: 1) GFA is available separately for husband and wife.
2) If an article is in the name of a particular person it should be shown in his account.
3) Other articles to be distributed for which tax planning required.
Illustration 2( M Com IV Semesster May,2018) An Indian resident visiting Germany for 4 months and
brought with him the following items on his return to India:
1. Personal effects like cloth etc valued at Rs.50,000
2.Two litres of liquors.Rs.3,800
3. One camera Rs.64,800
4. Professional equipments worth Rs.65,000
5. A laptop worth Rs.80,000
What is the duty payable?
Particulars of goods Rs
Personal effects (bonafide luggage) Exempt --
One laptop computer One laptop exempt --
Two litres of liquor -- 3,800
One camera -- 64,800
Professional equipments --
65,000
Total -- 1,33,600
Less General Free Allowance Concession 50,000
Taxable Value -- 83,600
Customs Duty Payable @35% -- 29,260
Add Social Welfare Surcharge @10% on Customs -- 2,926
duty
Total Customs Duty Payable 32,186