Customs Duty is a type of indirect tax levied on goods imported into India as well as on goods exported from India. Taxable event is import into or export from India. India includes the territorial waters of India which extend upto 12 nautical miles into the sea to the coast of India. In India, the basic law for levy and collection of customs duty is Customs Act, 1962. It provides for levy and collection of duty on imports and exports, import/export procedures, prohibitions on imports and exports of goods, penalties, offences, etc. The Central Board of Excise & Customs (CBEC) is the apex body for customs matters.
Custom duty besides raising revenue for the Central Government also helps the government to prevent the illegal imports and illegal exports of goods from India. The Central government has emergency powers to increase import or export duties whenever necessary after a notification in the session of Parliament.
Custom Duty - Objectives
The customs duty is levied, primarily, for the following purpose:
- Restricting Imports for conserving foreign exchange.
- Protecting Indian Industry from undue competition.
- Prohibiting imports and exports of goods for achieving the policy objectives of the Government.
- Regulating exports.
- Prevent Smuggling.
- Facilitate implementation of laws relating to Foreign Trade Act, Foreign Exchange Regulation Act, Conservation of Foreign Exchange, Prevention of Smuggling Act, etc.
Types of Custom Duties
1.Basic Customs Duty
All goods imported into India are chargeable to a duty under Customs Act, 1962. The rates of this duty, popularly known as basic customs duty, are indicated in the First Schedule of the Customs Tariff Act, 1975.
2.Additional (Countervailing) Duty
This countervailing duty is leviable as additional duty on goods imported into the country and the rate structure of this duty is equal to the excise duty on like articles produced in India.
Under Customs Act, 1962, goods exported from India are chargeable to export duty. The items on which export duty is chargeable and the rate at which the duty is levied are given in the customs tariff act, 1975. However, the Government has emergency powers to change the duty rates and levy fresh export duty depending on the circumstances.
Tariff Commission has been established under Tariff Commission Act, 1951. If the Tariff Commission recommends and Central Government is satisfied that immediate action is necessary to protect interests of Indian industry, protective customs duty at the rate recommended may be imposed under section 6 of Customs Tariff Act. The protective duty will be valid till the date prescribed in the notification.
5.Countervailing Duty on Subsidized goods
If a country pays any subsidy (directly or indirectly) to its exporters for exporting goods to India, Central Government can impose Countervailing duty up to the amount of such subsidy under section 9 of Customs Tariff Act.
6.Anti Dumping Duty on dumped articles
Large manufacturers from abroad may export goods at very low prices compared to prices in their domestic market. Such dumping may be with the intention to cripple domestic industry or to dispose of their excess stock. In order to avoid such dumping, Central Government can impose, anti-dumping duty up to the margin of dumping on such articles.
7. Safeguard Duty
Central Government is empowered to impose 'safeguard duty' on specified imported goods if Central Government is satisfied that the goods are being imported in large quantities and under such conditions that they are causing or threatening to cause serious injury to domestic industry. Such duty is permissible under WTO agreement. Safeguard duty is to provide need-based protection to domestic industry for a limited period, with the objective of restoring free and fair competition.
8.National Calamity Contingent Duty
A National Calamity Contingent Duty (NCCD) of customs is imposed under section 129 of Finance Act, 2001.
Education cess on customs duty
The Education Cess of 2% and Secondary & Higher Education Cess of 1% of the aggregate duty of customs excluding safeguard duty, countervailing duty, Anti Dumping Duty is applicable w.e.f. 01.03.2007.