Customs Duty Explained
Customs duty is a kind of tax that is levied on international trade. Government imposes customs duties on the import and export of goods. The government utilizes these customs to upraise revenue and regulation of goods. For example – If Xyz limited imports machinery from the USA. Then the firm is liable to pay a specific amount to the government through tax as a customs duty. The worth of customs duties levied on a specific or ad valorem basis, which says it also depends on the value of goods. The customs duty rates also lean on the materials goods of and the country which made the goods. The customs duty is defined under Customs Act 1962 in India. All the affairs related to customs duty are handled by (CBEC) the Central Board of Excise and Customs.
Types of Custom duty
1. Basic Customs Duty (BCD) –
In Basic custom duty, the goods imported into India are chargeable under the customs act
of 1962. BCD rates for imports are indicated in the schedule of the customs tariff act
Generally, Basic Customs Duty (BCD) is levied at the standard duty rate. But if certain
conditions are satisfied (below), the importer can avail of the benefit of a preferential
duty rate on imported goods.
Conditions for availing benefits of preferential –
Specific claims for preferential rates must be made by the supplier.
The import must be from preferential are as notified by the central government.
The goods should be produced/ manufactured in such a preferential area.
The origin of the goods shall determine under rules made under the customs tariff act.
2. Integrated goods and services tax (IGST)- It is equal to IGST as leviable under section 5 of the IGST act 2017 on a like article on its supply in India. It is leviable on any imported article. The maximum rate is 40 percent.
3. Goods and Services Tax Compensation Cess – a. Under the GST regime, Compensation Cess will be charged on luxury products like high-end cars and demerit commodities like pan masala, tobacco, and aerated drinks to compensate the state for the loss of revenue. Common points for integrated tax and compensation cess are as follows –
Assessable value for computing integrated tax and GST compensation cess: Rupees
Value under section 14(1)/ tariff value determined under section 14(2) : (XXXX)
Add: Basic Custom duty: (XXXX)
Assessable value : Total- (XXXX)
4. Protective Duties – It includes the following duties :
Revenue duties – Revenue duties are those which are levied to raise customs revenue.
Protective duties – A duty imposed on imported goods for the protection of interest of any industry established in India on the recommendation of Tariff Commissions. It is effective only and exclusion the date if any specified in the first schedule of the Tariff. Factors to be considered while giving protection through protective duties:
a. The protective duties should not be very stiff to discourage imports.
b. It should be sufficiently attractive to encourage imports.
5. Safeguard Duty – Safeguard duty is the duty payable on the import of goods that are already being manufactured in India, but the cost of which is high compared to the import price. It is imposed by the central government on goods so that the Indian manufacturers do not suffer due to the import of cheaper goods from outside.
Duties must be paid on goods shipped with household articles to the country if the articles cannot
be considered a part of the actual household inventory.
These goods can be, for example :
Objects and equipment for commercial use.
Vehicles that are subject to registered, motorized vehicles for sailing or flight.
Objects are usually fixed to the walls or floor of people’s residences, e.g. fixtures and wood flooring.
Food and beverages, including alcohol.
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