Custom Duty

Before starting anything about custom duty, let us know what is meant by custom duty? Well, customs duty is an indirect tax that is imposed on imports and exports of goods overseas. The price of custom duty is either specified or is made by looking at the value of goods. The basic objective behind imposing this duty is to secure the economy, jobs, environment, residents etc of each nation and this is possible by a regular movement of goods and services all over the world. Each good already has a predefined custom duty rate which is determined by many factors like from where the goods were obtained, where the goods were actually made, and what raw material is used in these goods. Also, any good that you bring to India for the first time should be declared as per the custom rules. Export - Connect2india Blog Posts

Custom Duty In India

We define the custom duty in India under the Customs Act 1962. According to this act, the government can impose the duty on export and import, prohibit the business of export and import of goods, methods for export and import and offences, penalties etc. All the matters that are related to import duty come under the central board of excise and customs (CBEC). The CBEC, in turn, is a division of the Department of Revenue of the Ministry of Finance. CBEC has a duty of formulating the policies related to the collection and imposition of customs duties, customs evasion, smuggling prevention and administrative decisions which are related to custom formations. CBEC has got divisions that look and take care of the field work as the commissioner of customs, Customs preventive and Central Excise Zones, Central Revenues Control Laboratory and Directorates etc. It also sees tax administration for foreign and inland travel.

Types of Custom Duty

  • Basic customs duty:

    Basic custom duty is a type of duty that is imposed on the value of the goods at a specific rate. This duty is fixed at a specific rate at the ad valorem basis (tax whose amount is based on value of transaction or of property, instead of by a fixed rate, or by weight or quantity). It was imposed after the customs duty act of 1962 and is amended if needed. The central government still has the right to remove any good from the tax.
  • Countervailing duty (CVD):

    This duty is imposed by the central government when a country pays a subsidy to those exporters who export their goods to India. The amount of duty and subsidy remains the same. It is applicable under section 9 of the customs tariff act.
  • An additional customs duty or special CVD:

    This tax is used to equalise imports with local taxes for example service tax, VAT and other domestic taxes that are imposed from time to time and thus, in other words, we can call it a special countervailing duty. This is basically used to bring up the imports on the same level and balance it. This is basically used to promote fair trade practices in a country.
  • Safeguard Duty:

    A safeguard duty is specially made to ensure the interest of our local domestic companies. It is mainly used to make sure that no harm is caused to the local market in India.
  • National calamity contingent duty:

    Section 129 of the finance act imposed this duty. This duty is imposed on goods like tobacco, pan masala etc that are harmful to the body. The custom rate varies from 10% to 45% approximately.
  • Anti-Dumping Duty:

    This duty is based upon the dumping margin(difference between the export price and the normal price). This type of duty is imposed when the goods that are imported are below the fair market price.

Calculating Custom Duty

It is done via custom duty calculator or we can say import duty calculator. Well in order to see how to compute custom duty, let us take an example. Suppose that the assessable value of tobacco that is imported in India is INR 100/-. The rates of tobacco are – Basic custom duty 37.5%, IGST rate 25%, Compensation Cess 60%. Calculation of total import Duty on tobacco – A) Basic Customs Duty: 37.5% of 100 = INR 37.5/- B) IGST: 28% of (A.V. + Basic Custom Duty) = 28% of (100 + 37.5) = 28% of 137.5 = INR 38.5/- C) Compensation Cess: 60% of (A.V. + Basic Custom Duty) = 60% of (100 + 37.5) = 60% of 137.5 = INR 82.5/- D) Total Taxes:  [Basic Custom Duty + GST + Compensation Cess] = 37.5 + 38.5 + 82.5 = INR 158.5/- So this is how custom duty calculator or we can say import duty calculator works. Well other than calculation, there are many various factors that affect custom duty and these factors are custom duty rates, land labour and capital, trade policies, exchange rates, foreign currency reserves, inflation, demand etc. Many reasons are listed in the article to elaborate the importance of customs duty such as, it is an important source of revenue, protects the domestic industry, reduces the deficit in the balance of trade of import and export, helps to control smuggling, saving the foreign exchange etc. Thus the nature of customs duty and importance remains the same.

Payment of Custom Duty

In today’s world of internet, the custom duty payment procedure or calculating the custom charges is not a difficult task. It can be easily paid by following the simple steps. Let us now know how to pay customs duty online? Keep in mind that this is the only custom duty payment procedure that is reliable and easy to operate. One more thing that comes in the mind of a business person is that is GST payable on the customs duty or not? The answer is yes, you have to pay the GST in addition to Compensation Cess.
    • Get access to e- payment portal of ICEGATE.
    • Enter the import-export code or log in with the details that are given by ICEGATE.
    • Click on e-payment.
    • It will show you all your e-challans.
    • Click on the challan you wish to pay and choose the payment method.
    • You will be redirected to the payment gateway of the bank.
    • Put the payment.
When the payment is done, it will take you to the ICEGATE payment portal.
  • Lastly, you have to print the payment copy and it’s done.

Objectives of Custom Duty

The following are the objectives of imposing a duty tax on import and export of the goods:
  • In order to restrict the imports so that the foreign exchange is reserved.
  • Reducing the dumping of goods.
  • To save the revenue of the resources used.
  • To regulate the export.
  • The main objective of imposing the duty tax on the goods is to save the domestic market.
  • India does not get into unfair trade competition.
  • To reduce the smuggling of goods.

Recent Developments

Increase in basic Customs Duty

The Indian government has increased the basic customs duty from 27 th September 2018 on particular items that include refrigerators, air-conditioners, footwear, washing machines, furniture fittings, tableware, jewellery and many more. This was done as an effort to uphold the falling rupee. This was initiated with an aim to control imports of specified imported items. With the increase in duty, the prices of such goods are likely to rise, diminishing their demand, lowering the imports and then concomitantly assisting the domestic manufacturers.


In recent years, India witnessed betterment in the taxation system via digitalization. From Income Tax to GST, almost each and every thing is available online. For ensuring ease of doing business, the CBIC (Central Board of Indirect taxes and Customs) launched e-SANCHIT. It enables registered people to file their customs related documents online. Only the ICEGATE registered users are authorized to use the e-SANCHIT application by accessing e –Sanchit Link. With this new scheme, hard copies of the documents are not required to be produced to the assessing officers. The main objective is to minimize the physical interface between the customs agencies and trade and to maximize the quickness of clearance. [social_warfare]

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