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What is Customs Duty in India: Types and Calculations

Customs duty refers to the tax levied on the import and export of goods. It is an indirect tax that the Government imposes on goods when they cross international borders. Any kind of tax is revenue for that Government, so is Customs duty. The Indian Government utilises this tax to regulate movements of goods (especially prohibited goods) in and out of the country and to protect domestic industries.

The Central Board of Indirect Taxes and Customs (CBIC) is the governing body that designs all policies regarding Customs Duty in India and is responsible for all the matters related to it.

[Source]

Read on to know more about Customs duty in India.

Team Digit

What Are Different Types of Customs Duties in India?

There are different types of Customs duty in India. They are:

Basic Customs Duty (BCD)
Protective Duty
Countervailing Duty (CVD)
Additional Customs Duty or Special CVD
Anti-dumping Duty
Cesses
Integrated Goods and Services tax (IGST)
Social Welfare Surcharge (SWS)

[Source]

Who Is Responsible for Paying Customs Duty?

The importer or exporter of goods is liable to pay Customs Duty only, not everyone.

Any owner or beneficial owner of the goods being imported is called the importer of the goods. A person holding himself to be the importer is also considered as an importer. Similarly, any owner or beneficial owner of the goods being exported is called the importer of the goods.

[Source]

What Are the Types of Exemptions Available in Customs Duty?

The Central Government imposes a Customs duty on the import and export of goods. However, there are certain items that are exempted from Customs duty. The Central Government grants exemption by issuing and passing notification in the official gazette.

There are two types of exemptions from Customs duty. These are as follows:

1. General Exemption

When the Central Government understands the necessity of exempting Customs duty for the public interest, it does so by issuing notification in the Official Gazette (either fully or as per requirement).

2. Special Exemption

When the Central Government understands the necessity of exempting Customs duty for the public interest does so by special order. These types of exemptions occur only under exceptional circumstances.

[Source]

How to Calculate Customs Duties?

The calculation of Customs duty occurs on an ad valorem or specific basis. To be precise, the value of goods determines the value of Customs duty. These goods are valued as per the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.

There are four methods of calculating the accurate value of goods. These are as follows:

Comparative Value Method (Rule 4 and 5)

This method follows and compares the transaction value of item, identical goods or similar goods..

Deductive Value Method (Rule 7)

This method uses the sales price of identical or similar goods sold in the importing country at the same time or around that time. Commissions, transport costs, and custom duties are deducted from the sales price to arrive at an accurate figure.

Computed Value Method (Rule 8)

Under this method, the calculation occurs on costs related to materials, fabrication, and profit in the producing country.

Residual Method (Rule 9)

If the value cannot be calculated using any methods mentioned above, it is calculated using any reasonable means based on the available information. However, the method used should be consistent with all customs laws and rules.

[Source 1]

[Source 2]

How to Pay Customs Duty Online?

Importers and exporters can pay Customs duty by following the steps mentioned below.

Step 1 – Visit the official website of ICEGATE.

Step 2 – Log in with credentials provided by ICEGATE.

Step 3 – Click on the ‘e-payment’ option under the Financial Services tab. Taxpayers can now see all the unpaid tax challan.

Step 4 – Select the challan (s) that you want to pay from the list of unpaid challans and choose a payment mode or bank. Complete the transaction. Taxpayers will be redirected to the ICEGATE portal.

Step 5 – Click on ‘Print’ to save the payment receipt.

[Source]

The Indian taxation system has benefited massively from digitisation.

Wondering how? Read the following section!

What is e-SANCHIT?

The Central Board of Excise and Customs launched e-SANCHIT to streamline works related to Customs duty. On this online platform, importers and exporters of goods can file customs-related documents online.

Note: ICEGATE registered users can access this portal. Under this scheme, importers and exporters of goods need not provide hard copies of already uploaded documents to respective officers. This initiative by the Central Government aims to reduce the interface between trade and Customs officers and increase clearance for importers and exporters.

[Source]

What Are the Latest Rates for Customs Duty?

Refer to the table mentioned below to learn about the latest rate for Basic Customs Duty.

Type of Item	Tariff Code (HSN)	Basic Customs Duty
Type of Item	Tariff Code (HSN)	Previous	Current
Aviation turbine fuel	2710 19 20	10%	5%
Diamonds that are cut and polished	71	7.50%	5%
Footwears	6401 to 6405	25%	35%
Miscellaneous plastic articles such as furniture fittings, office stationery, statuettes, decorative sheets, bangles, beads, etc.	3926	10%	15%
Air conditioners	8415	10%	20%
Compressors for refrigerators and air conditioners	8414 30 00/8414 80 11	7.50%	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%
Washing machines (less than 10kg)	8450	10%	20%
Silversmith/goldsmith wares/articles and their parts made of metal clad with precious metal or of precious metal	7114	15%	25%
Household refrigerators	8418	10%	20%
Jewellery articles and their parts, either of metal clad with precious metal or of precious metal	7113	15%	25%
Trunks, executive cases, suitcases, briefcases, travel bags, other bags, etc.	4202	10%	15%
Bath, sink, shower bath, wash basin, etc., made of plastic	3922	10%	15%
Diamonds that are lab grown	71	5%	0%
Tableware, household plastic items, kitchenware	3924	10%	15%
Speakers	8518 29 10	10%	20%

What is the Penalty if You Do Not Pay Customs Duty?

In case of non-levy or short-levy of customs duty, the responsible people must pay interest on the duty not paid or short-paid till the payment at rate not less than 10% but not exceeding 36%.

[Source]

Changes in the Union Budget on Customs Duty in 2022

In the Union Budget for 2022-23, the Finance Minister of India, Nirmala Sitharaman, brought certain changes in Customs duty on various items.

There will be a price cut on chemicals like ethyl alcohol.
Customs duty will decrease to 5% in the case of cut and polished diamonds and gemstones.

[Source]

With such a detailed discussion, we have reached the end of this piece on Customs duty in India. Read the details carefully and pay Customs duty online without any hassle.

Frequently Asked Questions

All

Does the CBIC provide the Participating Government Agencies with the e-SANCHIT facility?

Yes, the CBIC provides the Participating Government Agencies with the e-SANCHIT facility.

What factors decide the Customs duty of an item?

Factors like weight, value, and dimension decide the Customs duty of an item.

Can I calculate Customs duty with an online calculator?

Yes, you can calculate Customs duty by using the online calculator available at the ICEGATE portal. Individuals need to have the HS Code of a good, provide a description within 30 characters and select the country of origin (in case of Anti-dumping or Preferential Duty).

Is there any exemption on custom duty for items used for charitable purposes?

Yes, there are exemptions on custom duty for items used for charitable purposes.

[Source]

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