Customs duty aims to create a level playing field for domestic producers by making imported goods relatively more expensive. It also serves to monitor and regulate the movement of controlled items, ensuring compliance with national and international trade laws.
What is customs duty?
Customs duty is a tax imposed on goods transported across international borders. This levy is enforced by the government to control the flow of goods in and out of the country, protect domestic industries, and generate revenue. When products are imported or exported, customs authorities evaluate them and impose charges based on various factors, including the nature of the goods, their value, and the applicable customs regulations.
Objective of custom duty
- Revenue generation: Customs duties are a significant source of revenue for governments, helping to fund public services and infrastructure.
- Protection of domestic industries: By imposing duties on imported goods, domestic industries are shielded from foreign competition, promoting local businesses and employment.
- Regulation of trade: Customs duties help control the import and export of goods, ensuring compliance with national and international trade regulations.
- Prevention of illegal trade: Imposing customs duties discourages smuggling and the illegal trade of restricted or prohibited items.
Types of customs duty
| Type of customs duty | Description |
| Basic Customs Duty (BCD) | A standard rate applied to goods imported into the country, calculated as a percentage of the value of the goods. |
| Countervailing Duty (CVD) | Levied on imported goods to counterbalance the impact of subsidies provided by foreign governments to their exporters. |
| Anti-Dumping Duty | Imposed on goods imported at prices lower than their normal value, aimed at protecting domestic industries from unfair competition. |
| Safeguard Duty | Temporarily applied to protect domestic industries from a sudden surge in imports that cause or threaten to cause serious injury. |
| Integrated Goods and Services Tax (IGST) | Collected on all imports into India, IGST is similar to the Goods and Services Tax (GST) applied to domestic transactions. |
| Social Welfare Surcharge | A levy on the aggregate of customs duties, aimed at funding social welfare schemes of the government. |
What are the factors affecting the calculation of customs duty?
- Nature of goods: The type of goods being imported or exported significantly influences the duty rates, with different rates applied to different categories of products.
- Value of goods: Customs duty is often calculated as a percentage of the goods' value, determined based on the transaction value, market value, or a customs-assessed value.
- Country of origin: The country where the goods are manufactured or from which they are exported can affect duty rates, especially under trade agreements or preferential tariff schemes.
- Trade agreements: Bilateral or multilateral trade agreements between countries can lead to reduced or exempted customs duties on certain goods.
- Purpose of import/export: The intended use of the goods, whether for personal use, commercial purposes, or industrial use, can influence the applicable duty rates.
How to calculate customs duty in India?
- Determine the assessable value: The assessable value is the cost of the goods plus insurance and freight charges (CIF). This value forms the basis for calculating customs duty.
- Apply Basic Customs Duty (BCD): Calculate the BCD as a percentage of the assessable value. The rate varies depending on the type of goods and their classification under the Customs Tariff Act.
- Add Social Welfare Surcharge: Calculate the Social Welfare Surcharge as a percentage of the BCD. This surcharge funds various social welfare schemes.
- Calculate IGST: Determine the Integrated Goods and Services Tax (IGST) based on the total of the assessable value plus BCD and Social Welfare Surcharge. The IGST rate aligns with the GST rates applicable to similar goods within India.
- Include other applicable duties: If necessary, include Countervailing Duty (CVD), Anti-Dumping Duty, or any other applicable duty based on the specific nature and classification of the goods.
How to pay customs duty online?
- Access the ICEGATE portal: Visit the official ICEGATE website, which facilitates online payment of customs duties.
- Register or log in: Create an account or log in if you already have one, ensuring you have the required credentials and documentation ready.
- Select e-payment option: Navigate to the e-payment section of the portal and select the customs duty payment option.
- Enter details: Fill in the necessary details, including the Bill of Entry number, Importer Exporter Code (IEC), and the duty amount to be paid.
- Choose payment method: Select a preferred payment method, such as net banking, credit/debit card, or other available options.
- Confirm and pay: Review the entered details and confirm the payment. Once the payment is processed, you will receive a confirmation receipt, which you should save for future reference.
Latest custom duty rates in India
| Goods Category | Customs Duty Rate |
| Electronics | 20% |
| Automobiles | 25% |
| Textiles | 15% |
| Agricultural products | 10% |
| Pharmaceuticals | 5% |
Conclusion
Customs duty plays a crucial role in regulating international trade, protecting domestic industries, and generating government revenue. Understanding its objectives, types, calculation factors, and payment methods is essential for businesses engaged in import and export activities. Staying updated on the latest customs duty rates can help businesses make informed decisions and comply with regulations effectively.
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