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Basics of Customs Duty
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Customs duty on imports and
exports |
Customs duty is on imports into
India and export out of India.
Section 12 of Customs Act,
often called charging section, provides that duties of customs
shall be levied at such rates as may be specified under ‘The Customs
Tariff Act, 1975', or any other law for the time being in force,
on goods imported into, or exported from, India. |
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Similarity between excise
and customs |
There are many common
provisions and/or similarities in provisions Central Excise and
customs Law. Administration, Settlement Commission and Tribunal are
common. Provisions of Tariff, principles of valuation, refund,
demands, exemptions, appeals, search, confiscation and appeals are
similar. |
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Taxable event in imports
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In case of imports, taxable
event occurs when goods mix with landmass of India -
Kiran Spinning Mills
v. CC 1999(113) ELT 753 = AIR 2000 SC 3448 (SC 3 member
bench).
In
case of warehoused goods, the goods continue to be in customs bond.
Hence, 'import' takes place only when goods are cleared from the
warehouse - confirmed in UOI v. Apar P Ltd. 112 ELT 3 =
1999(6) SCC 118 = AIR 1999 SC 2515 (SC 3 member bench).- followed in
Kiran Spinning Mills v. CC 1999(113) ELT 753 = AIR 2000
SC 3448 (SC 3 member bench). |
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Taxable event in exports |
In case of exports, taxable
event occurs when goods cross territorial waters of India - UOI
v. Rajindra Dyeing and Printing Mills (2005) 10 SCC 187 = 180
ELT 433 (SC). |
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Territorial waters and
exclusive economic zone |
Territorial waters of India
extend upto 12 nautical miles inside sea from baseline on coast of
India and include
any bay, gulf, harbour, creek or tidal river. (1 nautical mile =
1.1515 miles = 1.853 Kms). Sovereignty of India extends to the
territorial waters and to the seabed and subsoil underlying and the
air space over the waters.
‘Exclusive
economic zone' extends to 200 nautical miles from the base-line.
Area beyond that is ‘high seas’. |
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Indian Customs Waters |
Indian Customs waters extend
upto 12 nautical miles beyond territorial waters. Powers of customs
officers extend upto 12 nautical miles beyond territorial waters. |
Type of Customs Duties
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Basic customs duty |
Basic
customs duty levied u/s 12 of Customs Act is generally 10% of
non-agricultural goods, w.e.f. 1-3-2007. |
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Countervailing Duty (CVD) |
·
CVD equal
to excise duty is payable on imported goods u/s 3(1) of Customs Tariff
Act to counterbalance impact of excise duty
on indigenous manufactures, to ensure level paying field.
·
CVD is payable equal to excise duty
payable on like articles if produced in India. It is payable at
effective rate of excise duty.
·
General
excise duty rate is 10.30% w.e.f. 27-2-2010 (10% basic plus 2%
education cess and SAH Education cess of 1%).
·
CVD is payable on assessable value
plus basic customs duty. In case of products covered under MRP
provisions, CV duty is payable on MRP basis as per section 4A of
Central Excise.
·
CVD can be levied only if there is
‘manufacture’.
·
CVD is neither excise duty nor basic
customs duty. However, all provisions of Customs Act apply to CVD.
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Special CVD |
Special CVD is payable @ 4% on imported goods u/s 3(5) of Customs
Tariff Act. This is in lieu of Vat/sales tax to provide level playing
field to Indian goods. Traders importing goods can get refund. CVD is
not payable if goods are covered under MRP valuation provisions/ |
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Education Cess |
Education cess of customs @ 2% and SAH Education cess of 1% is
payable. |
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Total duty |
Total
import duty considering all duties plus education cess on
non-agricultural goods is generally 26.85% |
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Other duties |
NCCD has been imposed on a few
articles. In addition, on certain goods, anti-dumping duty, safeguard
duty, protective duty etc. can be imposed. Cess is payable on some
goods imported/exported. |
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Safeguard duty |
Safeguard duty can be imposed
if large imports are causing serious injury to domestic industry. In
addition, product specific safeguard duty on imports from China can be
imposed. |
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Anti dumping duty |
 | Antidumping duty is
leviable u/s 9A of Customs Tariff Act when foreign exporter exports
his good at low prices compared to prices normally prevalent in the
exporting country. |
| Dumping is unfair trade
practice and the anti-dumping duty is levied to protect Indian
manufacturers from unfair competition. |
| Margin of dumping is the
difference between normal value (i.e. his sale price in his country)
and export price( price at which he is exporting the goods). |
| Price of similar products
in India is not relevant to determine ‘margin of dumping’. |
| ‘Injury margin’ means
difference between fair selling price of domestic industry and
landed cost of imported products. Dumping duty will be lower of
dumping margin or injury margin. |
| Benefits accruing to local
industry due to availability of cheap foreign inputs is not
considered. This is a drawback. |
| CVD is not payable on
antidumping duty. Education cess and SAH education cess is not
payable on anti-dumping duty. |
| In case of imports from WTO
countries, antidumping duty can be imposed only if it cause material
injury to domestic industry in India. |
| Dumping duty is decided by
Designated Authority after enquiry and imposed by Central Government
by notification. Provisional antidumping duty can be imposed. Appeal
against antidumping duty can be made to CESTAT. |
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Calculations of customs duty
General
customs duty rate for non-agricultural goods s 10%. Total customs duty
payable w.e.f. 27-2-2010 is 26.85% as excise duty rate is generally 10%
Assessable value =
CIF Value of imported goods converted into Rupees at exchange rate
specified in notification issued by CBE&C plus landing charges 1% (plus
some additions often arbitrarily and whimsically made by customs).
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Calculation of customs duty payable is as follows - |
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Duty % |
Amount |
Total Duty |
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(A) |
Assessable Value Rs |
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10,000 |
|
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(B) |
Basic Customs Duty |
10 |
1,000.00 |
1,000.00 |
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(C) |
Sub-Total for calculating CVD '(A+B)' |
|
11,000.00 |
|
|
(D) |
CVD 'C' x excise duty rate |
10 |
1,100.00 |
1,100.00 |
|
(E) |
Education cess of excise - 2% of 'D' |
2 |
22.00 |
22.00 |
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(F) |
SAH Education cess of excise - 1% of 'D' |
1 |
11.00 |
11.00 |
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(G) |
Sub-total for edu cess on customs 'B+D+E+F' |
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2,133.00 |
|
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(H) |
Edu Cess of Customs – 2% of 'G' |
2 |
42.66 |
42.66 |
|
(I) |
SAH Education Cess of Customs - 1% of 'G' |
1 |
21.33 |
21.33 |
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(J) |
Sub-total for Spl CVD 'C+D+E+F+H+I' |
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12,196.99 |
|
|
(K) |
Special CVD u/s 3(5) – 4% of 'J' |
4 |
487.88 |
487.88 |
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(L) |
Total Duty |
|
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2,684.87 |
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(M) |
Total duty rounded to |
Rs |
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2,685 |
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Notes – Buyer who is manufacturer, is eligible to avail Cenvat Credit
of D, E, F and K above. |
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A buyer, who is service provider, is eligible to avail Cenvat Credit
of D, E and F above. . |
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A trader who sells imported goods in India after charging
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Vat/sales tax can get refund of Special CVD of 4% i.e. ‘K’ above |
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