The Government of India levies a Customs Duty on all the imports within and some of the exports from the country. The amount to be paid as customs duty can be determined by several factors such as value, weight, dimensions, etc. of the item in question.
Note: Custom Duty has been replaced by the Goods and Services Tax(GST) starting 1 July 2017
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What is Customs Duty?
Customs 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 an export duty. Countries around the world levy customs duties on the import/export of goods as a means to raise revenue and/or shield domestic institutions from predatory or efficient competitors from other countries.
Customs duty is levied as per the value of goods or dimensions, weight, and other such criteria according to the goods in question. If duties are based on the value of goods, then they are called ad valorem duties, while quantity/weight-based duties are called specific duties. Compound duties on goods are a combination of value as well as various other factors.
Customs Duty in India
Customs duty in India is defined under the Customs Act, 1962 and enables the government to levy duty on exports and imports, prohibit export and import of goods, procedures for importing/exporting and offenses, penalties, etc. All matters related to customs duty fall under the Central Board of Excise & Customs (CBEC). The CBEC, in turn, is a division of the Department of Revenue of the Ministry of Finance. CBEC formulates policies that concern the collection or levying of customs duties, customs duty evasion, smuggling prevention, and administrative decisions related to customs formations.
CBEC has various divisions that take care of the fieldwork including Commissionerate of Customs, Customs, Customs (preventive and Central Excise Zones, Central Revenues Control Laboratory and Directorates, etc. CBEC also oversees proper tax administration for foreign and inland travel.
Customs Duty Update in Union Budget 2021
Finance Minister Nirmala Sitharaman has recently announced the Union Budget 2021 on 1 February 2021. In the latest budget speech, the Finance Minister has announced a few changes concerning customs duty. The following proposals have been made:
- The elimination of outdated exemptions through the rationalisation of the structure of customs duty.
- Decrease in the customs duty charged on precious metals like gold and silver. The rate has been cut down to 7.5% from the current rate of 12.5% for both metals.
Types of Customs Duty
Customs 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.
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Basic Customs Duty:
Basic customs 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.
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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.
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Protective Duty:
Protective duty may be imposed to shield the domestic industry against imports at a rate recommended by the Tariff Commissioner.
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Education Cess:
This duty is levied at 2% and higher education cess at another 1% of aggregate of customs duties.
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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).
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Safeguard Duty:
Safeguard duty is levied if the government feels that a sudden increase in exports can potentially damage the domestic industry.
Customs Duty Calculations
Customs duties are calculated on a 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.
In case there are no quantifiable or objective data regarding the valuation factors, valuation conditions aren’t satisfied, or there are doubts regarding the accuracy or truth of declared value as per Rule 12 of Valuation Rules 2007, valuation of items has to be done through other means as per the following hierarchy,
- 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 the 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.
Shipping and airline agents can file manifests through this portal, while cargo logistics and custodians can interact with customs EDI for logistics and cargo-related information. Apart from e-filing, this portal allows e-payment, document tracking, online registration for IPR, IE code status, verification of DEPB/EPCG/DES licenses, PAN-based CHA data etc. There is a 24x7 helpdesk for all the trading partners to solve issues and collect information.
Custom Duty Payment Online
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
eSanchit
eSanchit is stood for e-storage and Computerised Handling of Indirect Tax Documents. It was launched by the Central Board of Indirect Taxes and Customs (CBIC) in a bid to digitize the taxation system in India.
It streamlines trading across borders by facilitating customs-related documentation online. It allows for the uploading of supporting documents and paperless processing of customs documents. Importers and exporters in India who are registered users of ICEGATE can use the eSanchit facility. They can do this by visiting the eSanchit portal on the ICEGATE website (https://www.icegate.gov.in/eSANCHIT.html). ICEGATE is the Indian Customs and Central Excise Electronic Commerce /Electronic Data Interchange (EC/EDI) Gateway. This offers e-filing services to the Customs and Central Excise Department’s clients.
The CBIC has extended the eSanchit facility to Participating Government Agencies too (PGA) so that they can provide the necessary clearances to importers and exporters in the certificate format through the facility of uploading documents online.
eSanchit eliminates the need for submitting hard copies of documents to assessing officers. Not only is the speed with which clearances are given optimized, but the physical interface between traders and customs agencies is minimized as well.
Custom Duty Calculator
You can access the custom duty calculator in the ICEGATE portal. Once you access the calculator, you will be required to enter the HS Code (CTH Code) of the good you are planning to import. Enter description within 30 characters and select the country of origin (for antidumping or preferential duty). Click on Search and you will see a list of goods that match your search criteria. Select one and you will be able to access a chart with all information related to the customs duty on a selected item. This is a dynamic chart and you can enter values to check the exact custom duty you are liable to pay.
Latest rates for Customs Duty
These are the Latest Rates for Basic Customs Duty (BCD) tariffs:
| Item | Tariff Code (HSN) | Basic Customs Duty | |
|---|---|---|---|
| From | To | ||
| Air conditioners | 8415 | 10 | 20 |
| Aviation turbine fuel | 2710 19 20 | 0 | 5 |
| Bath, sink, shower bath, wash basin, etc., made of plastic | 3922 | 10 | 15 |
| Colored gemstones that are cut and polished | 71 | 5 | 7.5 |
| Compressors for refrigerators and air conditioners | 8414 30 00/8414 80 11 | 7.5 | 10 |
| Diamonds which are broken, half-cut, or semi-processed | 71 | 5 | 7.5 |
| Diamonds that are lab grown | 71 | 5 | 7.5 |
| Footwears | 6401 to 6405 | 20 | 25 |
| Household refrigerators | 8418 | 10 | 20 |
| Jewlery articles and their parts, either of metal clad with precious metal or of precious metal | 7113 | 15 | 20 |
| Miscellaneous plastic articles such as furniture fittings, office stationary, statuettes, decorative sheets, bangles, beads, etc. | 3926 | 10 | 15 |
| Plastic articles for packing and conveyance such as bottles, containers, cases, insulated wares, etc. | 3923 | 10 | 15 |
| Radial car tyres | 4011 10 10 | 10 | 15 |
| Silversmith/goldsmith wares/articles and their parts made of metal clad with precious metal or of precious metal | 7114 | 15 | 20 |
| Tableware, household plastic items, kitchenware | 3924 | 10 | 15 |
| Trunks, executive cases, suitcases, briefcases, travel bags, other bags, etc. | 4202 | 10 | 15 |
| Speakers | 8518 29 100 | 10 | 15 |
| Washing machines that are less than 10kg | 8450 | 10 | 20 |
Frequently Asked Questions (FAQs)
- What is basic customs duty?
- What is customs duty exemption?
- What is the customs duty on mobiles in India?
- Where can I pay custom duty in India?
- Who imposed customs duty in India?
Basic customs duty is a type of tax imposed under the Customs Act, 1962. The basic customs duty charged differs from item to item, and the Central Government of India has the right to exempt or reduce any item from being taxed the basic customs duty.
Customs duty exemption means that the Central Government of India has the right to not allow any custom duty to be charged on a particular item under the Customes Act, 1962. This can be done for good which are of strategic or secret nature or is intended to be used for charitable purposes.
The customs duty charged on mobiles in India is 10% service welfare cess over and above the existing 20% basic customs duty. The customs duty for mobile chargers and motherboard are 20%.
You can pay your customs duty by visiting the ICEGATE website where you will have to login to the portal by entering your login credentials. You will find the e-payment link, click on it and select the mode of payment. You can then follow the steps to complete the payment of your customs duty.
The customs duty is imposed by the Government of India under the Indian Customs Act formulated in 1962 under the Constitution of India under Article 265.
