Introduction
In today’s globalized economy, businesses are constantly expanding into international markets, making trade an essential component of success. However, understanding the customs duty structure in India is crucial for smooth and compliant import-export operations. Customs duty is a tax imposed by the Indian government on imported and exported goods, acting as a key revenue source while safeguarding domestic industries and regulating trade.
Governed by the Customs Act, 1962, and administered by the Central Board of Indirect Taxes and Customs (CBIC), customs duty is levied based on rates specified in the Customs Tariff Act, 1975. It can be charged as specific duty, ad valorem duty, or a combination of both. Businesses engaged in import and export must be aware of these duties to avoid legal complications and streamline their trade operations.
Types of Customs Duty in India for Imports
Navigating the various types of customs duties applicable to imports can be challenging. Here’s a detailed breakdown:
1. Basic Customs Duty (BCD) – Sec 2 & 12 of Customs Tariff Act, 1975
This is the primary duty levied on nearly all imports into India. The rate is specified in the Customs Tariff Act and varies by product category. Currently, most imported goods are subject to a 7.5% BCD.
2. Social Welfare Surcharge (SWS) – Sec 12 of Customs Tariff Act, 1975
SWS is charged in pla****s.
ce of education cesses and is calculated as a percentage of the Basic Customs Duty. Presently, it is 10% of the BCD, with exceptions for certain exempted goods.
3. Integrated Goods and Services Tax (IGST) – Sec 3(7) of Customs Tariff Act, 1975
Since imported goods are considered inter-state supplies, IGST is levied at the same rate applicable to domestic sales. It is governed by Section 5 of the IGST Act but collected under Section 3(7) of the Customs Tariff Act.
4. GST Compensation Cess – Sec 3(9) of Customs Tariff Act, 1975
Applicable only to luxury and sin goods like tobacco and pan masala, this cess is imposed at the same rate as domestic supply under the GST Act, Section 8.
5. Additional Duty – Sec 3(1) of Customs Tariff Act, 1975
Also known as Countervailing Duty (CVD), this duty ensures that imported goods bear the same excise duty as locally manufactured items. However, with GST replacing excise duty, this is now applicable to a limited range of goods.
6. Countervailing Duty (CVD) – Sec 3(3) of Customs Tariff Act, 1975
This duty is imposed to offset excise duty on raw materials and components used in imported goods, ensuring fair market competition.
7. Countervailing Duty on Subsidized Articles – Sec 9 of Customs Tariff Act, 1975
If a foreign country subsidizes exports, the Indian government levies countervailing duty on such imports to neutralize price advantages and protect domestic industries.
8. Special Additional Duty (SAD) – Sec 3(5) of Customs Tariff Act, 1975
SAD offsets local sales tax, VAT, and other charges on imported goods, with a maximum limit of 4%.
9. Anti-Dumping Duty – Sec 9A of Customs Tariff Act, 1975
If a foreign company sells goods in India at a lower price than in its domestic market, it is considered dumping. The government imposes Anti-Dumping Duty to protect local manufacturers.
10. Protective Duty – Sec 6 of Customs Tariff Act, 1975
Levied to safeguard domestic industries from excessive foreign competition, based on recommendations from the Tariff Commission.
11. Safeguard Duty – Sec 8B of Customs Tariff Act, 1975
If a surge in imports threatens Indian industries, a temporary Safeguard Duty is imposed after an official investigation.
12. Agriculture Infrastructure and Development Cess (AIDC)
This cess funds agricultural development and is levied on specified imports such as coal, urea, and gold.
Conclusion
As India tightens its import regulations to support domestic industries, understanding these customs duties and compliance requirements is crucial for businesses. Along with taxes, new trade regulations such as Import Monitoring Systems (IMS) and Bureau of Indian Standards (BIS) certifications are being enforced. A well-planned approach to customs duties ensures cost efficiency, regulatory compliance, and smooth trade operations.
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