Customs Duty, basics, types and calculations

 

Calculation of customs duty payable is as follows, w.e.f. 17-3-2012      
Seq. Duty Description Duty % Amount Total Duty
 (A) Assessable Value Rs   1,000  
 (B) Basic Customs Duty 10 100.00 100.00
 (C) Sub-Total for calculating CVD ‘(A+B)’   1,100.00  
 (D) CVD  ‘C’ x excise duty rate 12 132.00 132.00
 (E) Sub-total for edu cess on customs ‘B+D   232.00  
 (F) Edu Cess of Customs – 2% of ‘E’ 2 4.64 4.64
 (G) SAH Education Cess of Customs – 1% of ‘E’ 1 2.32 2.32
 (H) Sub-total for Spl CVD ‘C+D+F+G   1,238.96  
 (I) Special CVD u/s 3(5) – 4% of ‘H’ 4 49.56 49.56
 (J) Total Duty     288.52
 (M) Total duty rounded to Rs.   289
         
- Notes – Buyer who is manufacturer, is eligible to avail Cenvat Credit of D and I above. 
  A buyer, who is service provider, is eligible to avail Cenvat Credit of D above. .  
  A trader who sells imported goods in India after charging     
  Vat/sales tax can get refund of Special CVD of 4% i.e. ‘I’ above    

Basics of Customs Duty

 

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.
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. 
Taxable event in imports In case of imports, taxable event occurs when goods mix with landmass of India – Kiran Spinning Mills v. CC1999(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).
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).
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’.
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

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.
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.

 

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/
Education Cess Education cess of customs @ 2% and SAH Education cess of 1% is payable.
Total duty Total import duty considering all duties plus education cess on non-agricultural goods is generally 26.85%
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.
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.
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.