Customs Duty

Customs Duty

A tax levied on imports (and sometimes, on export)by the customs(tax) authorities of the country to raise state revenue. Customs duty is an indirect tax charged on import and export of goods custom duty is governed by entry no.83 of the union list .hence it is levied collected by the central Govt. custom Act.1962 and custom tariff Act. 1975 are the predominant sources of customs law of India.

Objectives of CustomsDuty:

Following are the objectives of customs duty.-

1.It restricts imports with a view to conserving foreign resources.

2.It services as a policy tool to protect imports exports

3.Customs duty can prevent dumping of foreign goods.

4.It intends to protect the domestic industries against the foreign goods.

5.It Restrict Smuggling activities.

Features of Customs Act,1962.

1.Customs Duty is an indirect tax leived on import and export.

2.It is Imposed only on goods and not on services.

3.It is Subject to social welfare charge @10% of on the aggregate of duties.

Taxability Of Imports and Exports

1.Import Of goods :Customs duty +IGSR (Imports of goods treated as inter state supply)

2.Import of Services :No customs duty +IGST Only

3.Exporet of Goods: No customs Duty ,treated as zero rated supply of GST (as per sec 16(1) of IGST Act 17).

4.Export of Services: No custom duty.

Types of Customs Duty

1.Basic Customs Duty(BCD)(Sec 12): It is the duty which is charged on imports and some of the exports made different rates are applied(varies 5% to 40%) Product wise on imports are exports .It is two types:-

A.Standard rate

B-Prefrential rate:-shall be allowed by the central govt if some conditions are fulfilled.

2.Social Welfare Surcharges(SWS): This duty was introduced in the 2018 budget .It is Levied in place of education cess. The rate of SWS is 10% of the vale of BCD.

For Example Mr. Imported goods of Rs.10,00,000. Basic customs duty is charged at 20% and these goods are not liable to any additional duties but the social welfare surcharge is chargeable at 4%. Compute the customs duty payable by Mr.A.

computation of customs duty.

Basic Customs duty (BCD) (10,00,000×20%) =2,00,000

Add:social Welfare Surcharge(200,000×10%)=20,000

Customs duty liability:=2,20,000.00

3.GST Compensation tax (sec3(9)

4. Integrated goods and service tax (IGST):After the introduction of GST ,all imports are deemed to be trented as inter state supply of goods and services.Hens IGST is levied on all Imports U/s 3(7) of thr customs tariff act.IGST is to be calculate on the total vale of assessable value plus the customs duty and sws (up to 40%)

for Examply -Assessable vale of goods imported by Mr.A is Rs.15,00,000.Basic customs duty is charged at 20% and these goods are not liable to any additional duties but health and education cess is chargeable at 4% and IGST is levied at 12%.Copute the customs duty and IGST payable by Mr.A

Computation of customs duty and IGST

Assessable value =15,00,000.00

add:BCD @20% = 3,00,000.00

SWC@10% of BCD (3,00,000×10%) =30,000.00 =3,30,000.00

Total value before IGST = 1,83,0000.00

Add:IGST@12%of 1,83,000. = 21,9600.00

Total Cost =2,04,9600.00

Now Customs duty =30,00,000+30,000.00=3,30,000.00

IGST =Rs.21,9600.00

GST compensation cess(sec 3(9)

After GST, some states may have less collection of revenue in terms of GST. To compensate for that loss.GST compensation less is introduced by the central govt. on import of luxury and sin goods( pan masala, tobacco). It is calculated the total assessable value BCD +SWC.

For Example: The assessable value of goods imported by Mr. A is Rs.15,000.00.Basic customs duty is charged at 20% and these goods are not liable to any additional duties but health and education cess is chargeable at 4%, IGST is levied at 12%, and GST compensation cess is levied at 10%.compute the customs duty, IGST, and GST compensation cess payable by Mr.A.


Assessable value =15,000.00

Add:BCD(15,000×20%) =3000.00

SWS(10%of 3000) =300.00 =3,300.00

Total value Befor IGST and GST Compenssetion

Less =18,300.00

Add:IGST(18,300.00×12%) =2196

GSTCompescession cess (18,300.00×10%)=1830 =4026

Total cess =22,326.00

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