Customs duty is a type of indirect tax levied on goods imported into India as well as on goods exported from India. Taxable event is import into or export from India. In India, the basic law for levy and collection of customs duty is Customs Act, 1962. It provides for levy and collection of duty on imports and exports, import/export procedures, prohibitions on importation and exportation of goods, penalties, offences, etc. The Constitutional provisions have given Union the right to legislate and collect duties on imports and exports. The Central Board of Excise & Customs (CBEC) is the apex body for customs matters. It is a part of the Department of Revenue under the Ministry of Finance, Government of India. It deals with the task of formulation of policy concerning levy and collection of customs duties, prevention of smuggling and evasion of duties and all administrative matters relating to customs formations.
Basic Customs Duty
Basic custom duty is the duty imposed on the value of the goods at a specified rate on ad-valorem basis. The charge flows from the Customs Act, 1962, whereas the rate is regulated by the Customs Tariff Act of 1975.
Countervailing Duty (CVD)
This duty is imposed by the Central Government in order to counter the negative impact of import subsidies to protect domestic producers are called countervailing duties.
Additional Customs Duty or Special CVD
In order to equalize imports with local taxes which are imposed from time to time, a special countervailing duty is imposed on imported goods. The same is done to promote fair trade & competition practices in our country.
In order to avoid dumping by large manufacturers from other countries, the Central Government has been vested with the power to impose an anti-dumping duty up to margin of dumping on such articles, if the goods are being sold at less than its normal value. Levy of such anti-dumping duty is permissible as per WTO agreement. Anti-dumping action can be taken only when there is an Indian industry producing ‘like articles’.
In order to make sure that no harm is caused to the domestic industries of India, a safeguard duty is imposed to safeguard the interest of our local domestic industries. It is calculated on the basis of loss suffered by our local industries.
A Tariff Commission has been established under Tariff Commission Act, 1951. On the recommendation of the Tariff Commission, the Central Government may form an opinion that immediate action is necessary to protect interests of Indian industry, and therefore, protective customs duty at the rate recommended may be imposed under section 6 of Customs Tariff Act. The protective duty will be valid till the date prescribed in the notification.
Education Cess on Customs Duty
The Cess is levied at the prescribed rate as a percentage of aggregate duties of customs.