Customs Duty

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Note: Custom Duty has been replaced by the Goods and Services Tax(GST) starting 1 July 2017

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  • The elimination of outdated exemptions through the rationalisation of the structure of customs duty.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.
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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.

  • 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.

  • 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.

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)

  1. What is basic customs duty?
  2. 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.

  3. What is customs duty exemption?
  4. 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.

  5. What is the customs duty on mobiles in India?
  6. 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%.

  7. Where can I pay custom duty in India?
  8. 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.

  9. Who imposed customs duty in India?
  10. 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.

News About Custom Duty

  • Government extends customs duty exemption on COVID-19 equipment till 30 Sept

    The exemption of customs duty and health cess for import of Covid-19 items has been extended till 30 September by the Ministry of Finance. The list of additional items which are exempted from being charged the custom duty are vaccine and oxygen-related equipment. This will be the second time, the exemption on the said items has been extended.
    Earlier the deadline for the relief was 31 August which has now been extended to 30 September 2021.
    The relief on duty was announced after the second wave of coronavirus created a huge financial impact in India, with the country struggling to meet the demands for oxygen. The government then decided to exempt vital Covid-19 items such as oxygen equipment, vaccinations, and other important items exempted from being charged custom duty and cess.

    31 August 2021

  • Import duty on soya and sunflower oil reduced

    The Central Government has decided to cut the import duty on refined soyabean and sunflower oils by 7.5% to keep the price in check ahead of the festival season.
    The Central Bureau of Indirect Taxes and Customs (CBIC) in a notification stated that the customs duty on crude soyabean and sunflower oils have been reduced from 15% to 7.5%, and duty on refined soyabean and sunflower oils cut to 37.5% from 45%. The new customs duties are already in force coming into effect last Friday and will be in force till 30 September.
    The custom duty on edible oils were forced to be reduced by the Government after their prices rose in the global market.
    According to SEA data, groundnut oil is currently retailing at Rs.1.5 lakh a tonne, rapeseed oil at Rs.1.54 lakh, sunflower oil at Rs.1.43 lakh, RBD palmolein at Rs.1.28 lakh, crude palm oil at Rs.1.2 lakh, and degummed soyabean oil at Rs.1.37 lakh.
    Groundnut oil is currently retailing at Rs.175.48 a kg, mustard oil at Rs.172.49, soyabean oil at Rs.155.56, sunflower oil at Rs.172.37, and palm oil at Rs.132.95.

    30 August 2021

  • No custom duty on seven items for tackle Covid-19

    Temporary custom duty exemption is been given on seven organic chemicals used to fight Covid-19 by the Indian Government. Exemptions on custom duty will also be provided on raw materials for manufacturing of covid test kits.
    The Central Board of Indirect Taxes and Customs (CBIC) issued a notification announcing that the six of the chemicals including egg lecithin and cholesterol HP are available till end of August and will be exempted from being taxed. The raw materials for production of covid test kits is available till end of September and will not be taxable.
    The government has previously exempted various items used in covid prevention and treatment including diagnostic (marker) kits and blood gas reagents from being taxed. The government had also temporarily exempted customs duty on covid-19 vaccines, oxygen, related gear and oxygen transportation equipment in order to cut down the cost of these items and increase supplies.

    19 July 2021

  • Delhi High court allows duty free import of Amphotericin B for treating black fungus patients

    On Thursday, the Delhi High Court allowed duty free import of Amphotericin B, which is used primarily for treatment of patients who are diagnosed with black fungus. The drug can be imported on furnishing a bond, which states that if the import duty is not waived by the government, importers shall pay the duty fee. It needs to be mentioned here that the central government is yet to take a decision on whether to waive off the customs duty on it. A bench comprising of Justices Vipin Sanghi and Jasmeet Singh while stating that the medicine was required to save lives of those suffering from Mucormycosis urged the government to take a decision on ‘war footing’. The demand and supply gap for Amphotericin B is widening by the hour, the high court noted.

    21 June 2021

  • Customs duty on vaccines, oxygen imports waived for three months

    The Government of India announced that the import of Covid-19 vaccine will be exempted from basics customs duty including the basic customs duty and health cess on the import of medical grade oxygen and other instruments required to provide oxygen to patients, for a period of ninety days.

    The Prime Minister of India took this decision at a meeting to review steps taken to increase the availability of oxygen in India. The meeting was also attended by the Finance Minister Nirmala Sitharaman, Commerce and Industry Minister Piyush Goyal, Health Minister Harsha Vardhan and AIIMS director Randeep Guleria.

    There will be no custom duty levied on on Remdesivir and its active pharmaceutical ingredients.

    28 April 2021

  • Retail sector seeking a cut in customs duty on furniture

    The industry body, that is the Confederation of Indian Industry or CII has recently put forward a number of recommendations ahead of the upcoming Union Budget which is scheduled for the month of February 2021. The recommendations have come on behalf of the retail sector.

    The recommendations include the likes of reduction in the custom duties on furniture imports, overhauling of local testing facilities for the import of items such as toys, implementation of a system for the pan India return of goods in stores, and so on. The pre-budget memorandum of the CII for the fiscal year 2021-22 listed a number of pointers which will benefit the retail trade of the country.

    05 January 2021

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