Custom duty is a type of indirect tax that is levied on all the goods that are imported to the country as well as some goods exported from the country. The duty levied on the former is referred to as import duty while that on the latter is referred to as the export duty. To simplify it, any tariff that is introduced on goods across national borders is referred to as custom duty.
The duty levied depends on the value of the goods, its dimensions and weight along with a lot of other criteria. While value-based duties are called valorem duties, quantity-based duties are called specific duties. On the other hand, duties on values plus other factors are called compound duties.
Custom Duty in the country falls under the Customs Act, 1962. As per this act, the government levies duties on both import and export of goods along with their procedures, prohibitions, penalties etc. Matters pertaining to this duty fall under the CBEC (Central Board of Excise and Customs), a division of the Department of Revenue of the Ministry of Finance.
The CBEC helps in formulating policies w.r.t. the collection and imposition of custom duties including custom duty evasions, prevention of smuggling etc. It oversees the tax administration of inland and foreign travel. It has different divisions to take care of field work such as the Commissionerate of Customs, Central Revenues Laboratory and Directorates etc.
Custom duties are levied on nearly all goods that are imported into the nation. While export duties are levied on goods as specified by the Second Schedule, import duties are not levied on certain items like fertilizers, food grains, lifesaving drugs etc. Custom duty can be classified into the following types:
Basic Customs Duty: This duty is imposed on the value of goods at a specified rate as it is fixed on an ad-valorem basis. After being amended time and again, it is currently regulated by the Customs Tariff Act, 1975. The Central Government, however, holds the rights to exempt specific goods from this tax.
Countervailing Duty: CVD or Additional Customs Duty is levied on imported goods that fall under Section 3 of the Customs Tariff Act of 1975. It is the same as the Central Excise Duty which is levied on similar goods that are produced in India.
Education Cess: The cess used to be levied at 2% and an additional 1% of the aggregate of customs duties.
Protective Duty: This duty is imposed in order to shield the domestic industry against the imports at rates that are recommended by the Tariff Commissioner.
Safeguard Duty: As the name suggests, this duty serves as a means of safeguarding the rise in exports. Sometimes, if the government feels that a rise in exports can damage the existing domestic industry, it may levy this duty.
Anti-Dumping Duty: This duty is based on the dumping margin, i.e. the difference between the export price and the normal price. It is only imposed when the goods that are imported are below the fair market price.
Custom duty can be calculated on either a specific or an ad valorem basis. The value of goods, for the latter, is determined by Rule 3(i) of the Customs Valuation Rules, 2007. If there is no quantifiable data w.r.t. valuation factors, then the valuation of the items is done using other means based on a system of hierarchy, as follows:
Comparative Value Method: This method compares transaction values of items similar in nature (Rule 4)
Comparative Value Method: This method compares transaction values of items similar in nature (Rule 5)
Deductive Value Method: This method uses the sale price of items in the importing country (Rule 7)
Comparative Value Method: This method uses costs related the fabrication, materials as well as profit in the production country (Rule 8)
Fallback Method: This method is based on the earlier methods that offer higher flexibility (Rule 9)
The portal that contains online custom duty is the ICEGATE or Indian Customs Electronic Commerce/Electronic Data Interchange (EC or EDI) Gateway. It allows the clients of the Customs Department an e-filing service that includes trade and cargo carriers, which is collectively known as Trading Partner. Through ICEGATE, one can do an electronic filing of Bill of Entry and shipping bills along with messages between the trading partner and customs through email, web upload or FTP. This portal particularly helps airline and shipping agents who file their manifests. Additionally, cargo logistics as well as custodians are able to have interactions with customs EDI for pieces of information related to cargo and logistics. Besides e-filing, document tracking, e-payment, online registration of IPR, PAN based CHA data, code status and verification of certain licenses can be done too. For any queries and issues, the 24*7 helpdesk can be contacted by trading partners.
In the world of the internet, payment of custom duty hasn’t been left far behind. It can easily be paid online with a few simple steps:
First, access the e-payment portal of ICEGATE
Then, enter the import or export code or simply key in the login credentials given by ICEGATE
Finally, click on e-payment
You will be able to check all the e-challans that are in your name
You can then select the challan which you have to pay and choose the payment method or select the bank
You will be redirected to the payment gateway of the bank
Initiate the payment
Once it is done, you will be redirected to the ICEGATE portal
The last step would be to click on the print button and save the payment copy.
This calculator serves as a simple tool for calculating the custom duty you have to pay. You can gain access to it at the ICEGATE portal. Upon accessing the custom duty calculator, you will have to enter the CTH or HS Code of the goods that you plan to import. You will have to enter a description of maximum 30 characters and then select the country of origin, be it for preferential duty or antidumping. If you want to see the list of goods, then simply click on the search tab and the list matching your criteria will appear. You can choose the right one and then gain access to a chart loaded with relevant information. In this dynamic chart, you can enter the values to check the exact custom duty you ought to pay.
These rates can either be specific or ad valorem. The duty, in general, varies from the range 0-150%. The average rate, however is 11.90%. There is a list to refer to for goods that are exempted from this duty.
There are other types of fee that are applicable to custom duty. Thy include:
LC: Landing charge – 1% CIF
CVD: Countervailing Duty – 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)
To pay custom duty online, you can follow the steps below:
Access the e-payment portal of ICEGATE
Enter the import/export code or simply key the login credentials given by ICEGATE
Click on e-payment
Check all the e-challans that are in your name
Select the challan which you have to pay and choose the payment method
You will be redirected to the payment gateway of the bank
Initiate the payment
You will be redirected to the ICEGATE portal
Click on the print button and save the payment copy
The ICEGATE is an e-Commerce Portal of Central Board of Excise & Customs. It provides services such as e-filing to the cargo and trade carriers. Various importer and exporter services can be availed here too.
Some of the factors that affect customs duty are the value of the goods, their dimensions, weight etc.
If custom duties are levied as per the quantity or weight of goods, they are called specific duties, whereas if they are levied on the basis of the value of goods, they are termed as ad valorem duties.
A compound duty is a type of an import tax which consists of both the specific as well as ad valorem duties. Thus, it’s calculation is done on the basis of the value of goods as well as the weight or quantity.
It is a kind of tax that is levied on the imports by customs authorities of a particular country in order to raise revenue and protect the domestic industry from competitors abroad.
