Customs duty, as governed by the Customs Act, 1962 in India, is a pivotal indirect tax levied on goods imported into or exported from the country. It serves as a critical instrument for regulating international trade, protecting domestic industries, and generating government revenue.
Enacted to consolidate and streamline customs laws, the Customs Act, 1962, provides a comprehensive legal framework for the imposition, assessment, and collection of customs duties, administered by the Central Board of Indirect Taxes and Customs (CBIC) under the Ministry of Finance. The Act, along with allied regulations like the Customs Tariff Act, 1975, outlines the procedures for valuation, classification, and clearance of goods, ensuring compliance with trade policies and international agreements.
The Customs Act, 1962, delineates the roles of customs authorities, such as the Commissioner of Customs and Customs Officers, in overseeing the importation and exportation processes. Key procedures include the filing of a Bill of Entry for imports or a Shipping Bill for exports, assessment of duty, and clearance of goods after inspection.
The Act empowers authorities to conduct searches, seizures, and investigations to prevent smuggling and ensure compliance, with provisions for penalties and confiscation under Sections 111 and 112 for violations. Exemptions and concessions are integral to the customs framework, allowing relief from duty for specific goods, such as those imported for public welfare, research, or under free trade agreements.
Recent amendments and digital initiatives have modernized processes, emphasizing faceless assessments and paperless transactions to enhance ease of doing business. By balancing revenue generation, trade facilitation, and economic protectionism, the Customs Act, 1962, remains a cornerstone of India’s fiscal and trade policy, aligning with global standards while addressing domestic priorities.
Types Of Custom Duty In India
Custom duty is a tax that is imposed on goods when they move across international borders. In India, this tax is mainly charged on imports, which means when goods come into India from other countries. However, in some cases, it can also be charged on exports, which is when goods are sent from India to other countries.
The main purpose of custom duty is to protect local industries from foreign competition, to control the import and export of certain goods, and to raise revenue for the government. Custom duty in India is regulated by the Central Government through the Central Board of Indirect Taxes and Customs (CBIC). This board decides how much tax should be charged on different goods. Some goods, like life-saving medicines, fertilizers, and food grains, are either exempt from custom duty or charged at a lower rate to make them more affordable.
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Basic Customs Duty (BCD):
Basic Customs Duty (BCD) is a primary tax levied on goods imported into India under the Customs Act, 1962, as specified in the First Schedule of the Customs Tariff Act, 1975. It is imposed as a percentage of the assessable value of imported goods, determined under Section 14 of the Act, to generate revenue, protect domestic industries, and regulate trade.
BCD rates vary based on the Harmonized System (HS) code of goods, ranging typically from 0% to 100%, with exemptions or concessions for specific items under trade agreements or government notifications. It is calculated on the transaction value (cost, insurance, freight) plus any additional charges, excluding other duties. BCD forms the foundation for additional duties like Countervailing Duty or Social Welfare Surcharge.
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Countervailing Duty (CVD) on Subsidized Articles:
Countervailing Duty (CVD), under the Customs Act, 1962 and Customs Tariff Act,
1975, is an additional customs duty levied on imported goods to offset subsidies provided by the exporting country’s government, ensuring fair competition for domestic industries. Authorized under Section 9 of the Customs Tariff Act, CVD neutralizes the price advantage subsidized imports may have, aligning with World
Trade Organization (WTO) rules. -
Anti-Dumping Duty:
Where any article is exported by an exporter or producer from any country or territory to India at less than its normal value, then, upon the importation of such article into India, the Central Government may, by notification in the Official Gazette, impose an Anti – Dumping Duty.
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Safeguard Duty:
The Central Government may impose Safeguard Duty on specified imported goods, if it is of the opinion that the goods are being imported in large scale and they are causing
injury to the industry in India [Section 8B(1) of the Customs Tariff Act, 1975].This is levied on goods imported into India, when such goods are already manufactured in India, but the costs are higher as compared to import prices. It is levied to ensure that the Indian manufacturers don’t suffer owing to import of cheaper goods from outside and therefore aims to create a level playing field for the Indian manufacturers and importers, thereby with the intent of safeguarding the national interest.
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Protective Duty:
It is a customs duty imposed to shield domestic industries from unfair competition caused by low-priced imports. Authorized under Section 6 of the Customs Tariff Act, it aims to safeguard local producers when imports threaten serious injury to domestic markets. Protective duties are recommended by the Tariff Commission after thorough investigations confirm that imported goods, due to their pricing or volume, harm or could harm domestic industries.
Unlike anti-dumping duties, protective duties focus on general import surges rather than predatory pricing. The duty is temporary, imposed as a specific or ad valorem rate on the assessable value of goods, and is reviewed periodically to ensure it aligns with World Trade Organization (WTO) guidelines.
Conclusion:
Customs duty, governed by the Customs Act, 1962, plays a vital role in shaping India’s economic trade by balancing revenue generation, domestic industry protection, and trade
facilitation. As a key fiscal tool, it contributes significantly to government coffers while regulating the flow of goods across borders.
Various types of customs duties—Basic Customs Duty (BCD), Countervailing Duty (CVD), Protective Duty, Anti-Dumping Duty, and Safeguard Duty—serve distinct purposes. BCD generates revenue and supports local markets, while CVD neutralizes foreign subsidies, ensuring fair competition.
Protective and safeguard duties shield domestic industries from import surges, and anti-dumping duties counter unfairly priced goods, fostering a level playing field. These duties align with World Trade Organization (WTO) norms, promoting equitable global trade.
