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Custom Duty

The Government of India levies a Custom Duty on all the imports within and some of the exports from the country. The amount to paid as custom duty can be determined by several factors such as value, weight, dimensions, etc. of the item in question.
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What is Custom Duty?

Custom 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 export duty. Countries around the world levy custom duties on 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 as 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.

Custom Duty in India:

Custom 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 offences, penalties etc. All matters related to custom 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 collection or levying of custom duties, custom duty evasion, smuggling prevention and administrative decisions related to customs formations.

CBEC has various divisions that take care of the field work 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.

Custom Duty
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Types of Custom Duty:

Custom 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.

  • Basic Custom Duty:

    Basic custom 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.

  • 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.

  • Protective Duty:

    Protective duty may be imposed to shield the domestic industry against imports at a rate recommended by the Tariff Commissioner.

  • Education Cess:

    This duty is levied at 2% and higher education cess at another 1% of aggregate of customs duties.

  • 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).

  • Safeguard Duty:

    Safeguard duty is levied if the government feels that a sudden increase in exports can potentially damage the domestic industry.

Custom Duty Calculations:

Custom duties are calculated on 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 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 are able to 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:

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

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 custom duty on selected item. This is a dynamic chart and you can enter values to check the exact custom duty you are liable to pay.

Custom Duty Rates:

Custom duty rates can be specific (rupees per unit) or ad valorem (percentage of value). In general, duty varies anywhere from 0% to 150%, with the average rate lying around 11.90%. There is also a list of goods that are exempted from custom duty.

Other fees related to custom duties include:

  • Landing Charge (LC) – 1% CIF
  • Countervailing Duty (CVD) – (0%, 6% or 12% (CIFD + LC))
  • CEX (Education and Higher Education Cess) – 3% CVD
  • CESS (Education + Higher Education) – 3% (Duty + CEX (Education and Higher Education Cess) + CVD)
  • Additional CVD – 4% (CIFD + LC + CVD + CESS + CEX)

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News About Tax Custom Duty

  • Flyers caught sneaking in iPhones in Ahmedabad

    The release of the latest Apple iPhone 7 and 7 plus only just launched 2 days ago but custom officials in Ahmedabad have said that they caught plenty of flyers sneaking the phones into the city.

    Custom officials, who didn’t want to disclose their names, said that they were catching at least 2 or 3 individuals over the last few weeks every day, who were sneaking in new iphone 7 and its bigger sibling iphone 7s.

    They also said that these phones are usually being sold at price as high as Rs. 67,000 in the black market for the 32GB variant.

    This is however considered flouting the rules because, every passenger is allowed to carry a maximum of 2 phones and carrying anymore would mean that they would have to pay 34% of the bill as excise duty. The officials further said that flyers carrying extra phones were usually asked to pay up the duty and if they failed to, they would confiscate the phones right away.

    18 October 2016

  • Domestic Stainless Steel Industry looks to increase Customs Duty

    In a move to discourage and plug the inflow of cheaper imports coming in through China, the domestic steel industry has requested the government to increase import duty on imports coming in from the neighbouring country. The Steel Minister for India, Chaudhary Birender Singh met the various stainless steel associations on Thursday where he was informed of all the issues plaguing the industry including a 3.1 Trillion Rupee debt that the industry already has and how demands were falling due to cheap imports from China that have caused 27% of the loans in the industry to become distressed.

    While the domestic steel industry is pushing for an increase in import duty from existing 7.5% to 12.5%, the Indian government is contemplating increasing the import duty from products from china to protect Indian manufactures and counter the subsidies offered by the Chinese government to its steel manufacturers.

    30 September 2016

  • How to check the status of your ITR-V sent by post to CPC

    The Central Board of Direct Taxes has confirmed that 7.53 million taxpayers have used e-verification of income tax returns till August 5th 2016, which was the last date for filing ITR this assessment year(AY). However, a large number of taxpayers still send the signed ITR-Vs to the Centralized Processing Center. If you prefer this mode, then you need to track the acknowledgement.

    After sending the ITR-V to CPC, you can check whether it has been received by logging on to the income tax department’s e-filing website, incometaxindiaefiling.gov.in

    • Under ‘Services’, the e-Filing tab will have the option ‘ITR-V Receipt Status’. Here you need to enter your PAN and the relevant AY.
    • If the signed ITR-V has been received by CPC, it will reflect in the status.
    • If the status does not reflect this, and the time limit of 120 days has not lapsed, then you can either e-verify or resend the signed ITR-V again.
    • If you fail to do so, your return will be invalidated.

    23 August 2016

  • DoT Urged Not To Charge Import Duty on 4G Smartphones

    Handset owners have requested the telecom department (DoT) to classify import duty charges of 4G phones and 4G/LTE telecom equipment to custom authorities, in order to avoid being charged the BCD (basic custom duty). The ICA (Indian Cellular Association) representing reputed phone brand such as Apple, LG, Samsung and Micromax has urged DoT to interfere into this matter.

    This incident happened after the case of Bengaluru customs charging 10% BCD on 4G smartphones, as levied on 4G gear imports. The BCD was charged on top of CVD (Countervailing duty) of 12.5%. The ICA wrote the letter to DoT to avoid any such incidents in the future.

    1 August 2016

  • Government may increase Import Duty on Aluminium by 2.5%

    The Central Government is considering increasing the import duty on aluminium products by 2.5 percent, according to Balvinder Kumar, mines secretary. A meeting was held this week with primary aluminium producers to discuss this move.

    The 2016 Budget increased the basic customs duty on primary aluminium from 5 percent to 7.5 percent, and that on aluminium products from 7.5 percent to 10 percent.

    The proposed hike in import duty on aluminium products comes after the Parliamentary Committee on Public Enterprises raised concerns over the impact of cheap aluminium imports on the state-owned producers of the metal such as Nalco, Vedanta Aluminium and Hindalco. Because of low import duty, aluminium is being imported from countries like China instead of being domestically sourced.  

    15 July 2016

  • Extended period for Minimum Support Price of Steel

    The current Minimum Support Price for steel in the country can be extended by another 6 months. This price was to expire on 31st August this year. However, the primary steelmakers of India have requested the Prime Minister to extend the timeline for applicability of Minimum Support Price of steel. Experts believe that had the MSP not been imposed, the survival of the steel industry would have been jeopardized.

    Managing Director at Tata Steel, Shri TV Narendran said that MSP for steel should continue since the international market is currently going through a turmoil. MSP stops companies from selling steel at a loss in India; before MSP most companies were selling steel at a loss in the domestic market. The idea behind MSP for steel is to provide relief to the domestic industry which is suffering under stress of imports from nations like China and other surplus countries

    7 July 2016

  • 20 Per Cent Export Duty On Sugar In Bid To Control Prices

    A 20 per cent export duty has been levied on all sugar exports in a bid to increase domestic supply as well as to keep prices in control. With sugar prices surging to record highs at Rs. 40 per kilo from around Rs. per kilo six months ago, the move has been welcome from all quarters at a time when prices have drastically increased all across the board for a number of commodities such as tomato, wheat and pulses. The Finance Ministry stated in a release that in order to keep the domestic prices of sugar at bay, the government took the decision to implement a custom duty of 20 per cent on all exports of raw sugar, white or refined sugar. The decision has been notified by the Central Board of Excise and Customs (CBEC) as well. While the duty imposed was done to check exports due to rising global prices, it is still 25 per cent lower than what the Food Ministry had initially proposed.

    27 June 2016

  • CBEC works on new customs clearance framework for expats

    Expats in the UAE can now bring along a lot more gold to India without worrying about increased excise duty. CBEC, Central Board of Excise and Customs is setting new rules and guidelines to ease the process of carrying gold from UAE to India. This, however, holds true only for gold that is being carried for personal use. Currently, there is a long process involved in carrying gold to India from UAE or any other country.

    Male expats are allowed to carry just 18 grams of gold while for female expats the limit is 36 grams. However, CBEC is now looking into new norms to facilitate carrying of jewelry in case of weddings etc.when the amount that needs to be carried is greater than the set limit.

    9 June 2016

  • Payment of Customs Duty by card is the most preferred way

    Most customers landing at the Mumbai airport prefer to pay their customs duty by credit or debit card, a survey held at the Chhatrapti Shivaji Airport revealed. The survey also pointed out that most passengers who are returning from abroad have no clue as to the customs duty norms or payment amount. Only a handful of passengers are bothered about finding out customs duty information before boarding their flight. The rest of the passengers make enquiries only when stopped by a customs duty official.

    A whopping 73 per cent of passengers who landed at the Mumbai airport were ignorant of the customs duty norms for various goods and services. Jewelry items and television sets remain the two goods which clash with the customs duty officials the most. Around 60 per cent of flying passengers are not bothered to learn or enquire about customs regulation till the last hour.

    27 May 2016

  • Government withdraws Customs Duty on Mobile Accessories

    The government has withdrawn the 10% customs duty imposed on battery, charter and headsets for mobile phones. The local manufacturers had sought this rollback after pleading lack of domestic suppliers of these items.

    Apart from the customs duty that was brought down to 0 from 10%, special additional duty of 4% charged on these items has also been taken away. But the counter-valuing duty (CVD) of 12.5% will continue to be imposed on mobile accessories.

    The government also rolled back the 2% customs duty set on imported printed circuit boards (PCBs) necessary for mobile phone manufacture.

    19 May 2016

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