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What Is Custom Duty? Research Team | Posted On Saturday, November 03,2018, 03:25 PM

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What Is Custom Duty?



It is a type of indirect tax, levied on the goods that are imported or exported from a country. Taxes are levied by the customs authority of a country and usually depend on the value of goods imported, its dimensions and weight along with some other criteria. Customs duties are levied on import/ export of goods, as a means to raise revenue and shield domestic institutions from efficient competitors from other countries.

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What is custom duty?

Types of Customs Duty:

Customs duties are a kind of tax that has to be paid before importing goods from a nation. The import duties are levied on all goods that are imported into a Nation, while the export duties are levied on specific goods. Listed below are the different types of customs duties:

1. Basic customs duty: (BCD)

Imported goods are charged a Basic Customs Duty on the assessable value. BCD is a type of duty or tax imposed under the Customs Act, 1962. The duty may be fixed on a specific rate basis. The Central Government has the power to reduce or exempt any goods from these duties.

2. Education cess:

This is a tax that is levied by the government to finance basic education in the country. The Cess is levied at 2% and an additional 1% of the aggregate of the customs duties.

3. Countervailing duty:

This is a type of additional customs duty, levied on goods that fall under Section 3 of the customs tariff act 1975. It is the same as central excise duty levied on smaller goods produced in India.

4. Protective duty:

Protective tariffs are taxes or duties placed on foreign goods by a National or State Government, in order to protect domestic products and markets.

5. Safeguard duty:

The safe guard duty is a type of tax, aimed at safeguarding the rise in exports. The safeguard taxes are levied on goods when the government feels that the rise in exports can damage the existing domestic market.

6. Anti-dumping duty:

Dumping means exporting goods in a foreign market at a price which is less than their cost of production or below their "fair" market value. Dumping offers hard competition to a domestic goods manufacturer. To counteract dumping, the Indian government has formulated certain guidelines and policies. Imposing duty on imported goods is also one of them and is known as Anti-Dumping Duty.

Calculating customs duty:                                                                                                    

Customs duties are calculated on the value of goods on specific rate basis. The value of the goods are determined by the rule 3 (j) of the custom valuation rules 2007. The rule pegs the value of imported goods at the transaction value that has been adjusted according to the provisions under rule 10.

If there is no significant or objective data regarding valuation factors, then the valuation conditions are not satisfied. So, the valuation of items has to be done through other means as per the following hierarchical system:

  • Comparative Value Method which compares the transaction value of similar items (Rule 4)
  • Comparative Value Method which compares the transaction value of similar items (Rule 5)
  • Deductive Value Method which uses the sale price of items in the importing country (Rule 7)
  • Computed Value Method which uses the costs related to fabrication, materials and profit in production country (Rule 8)
  • Fallback Method which is based on the earlier methods with higher flexibility (Rule 9)

Custom Duty Online:

Online customs duty can be paid through ICEGATE portal that stands for Indians customs electronic commerce/electronic data interchange gateway. Custom Duty Payment can be made online using ICEGATE e Payment Gateway; you can get the facility of payment of bill of entry, shipping bills or pay through multiple challans, in a single transaction. Any person who has net banking facility in the designated bank can make Online Customs Duty payment. This portal allows e-filing services to clients of Customs Department including trade and cargo carriers, collectively known as Trading Partners.  Apart from e-filing, this portal allows e-payment, document tracking, online registration for IPR, IE code status, verification of DEPB/EPCG/DES licenses, PAN based CHA data and so on. There is a 24x7 helpdesk for all trading partners to solve issues and collect information.

Payment of Custom Duties:

The ICEGATE payment process is given below in detail:

  • Visit the Icegate online portal

  • Enter the ICE code
  • Select the location code
  • Click on e-payment
  • Click on the banks list to see the list of bank associated with icegate e-payment gateway
  • On clicking submit, the following page will be displayed

You can see the Unpaid Challans. On the left side of the above page, you can find the menu options like Unpaid Challans, Incomplete Transactions, and Transaction Summary.

  • Click on the check box to select Challans and click on ‘Pay’ button to proceed with the Custom Duty Payment. 
  • You can reset the selected Challans by clicking on Reset button.
  • List of selected Challans is displayed on the screen.
  • Click on confirm button.
  • The next page where you can select the Bank will be displayed.
  • Select Your Bank from the List of Banks.
  • After selecting a bank, you will be redirected to the Bank portal for Icegate e Payment.
  • Complete the transaction with the bank gateway.
  • After the completion of a transaction, you will be redirected to the ICEGATE Portal.

After completing the transaction on the bank portal, you will be re-directed to ICEGATE transaction status page. Depending on success or failure of the transaction, respective screens will be displayed. It is advised to visit this site between 4 AM to 9 PM only. Users having an account with other banks are advised to use the old ICEGATE e-payment gateway by clicking on the link given on the first page of the e-payment portal.

Custom duty calculator:

A user can use the customs duty calculator to calculate the amount of duties or taxes to be paid. The duties can be paid online through the e-payment portal of ICEGATE. To use the calculator, you have to enter the CTH code of the goods that you plan to import. You have to provide a description of a maximum of 30 characters and select the country of origin. Click on the search tab to see the list of goods. A list matching your criteria will appear. Choose the product that suits your criteria. Look at the chart loaded will relevant information. Thereafter in the dynamic chart, you can enter the values to check the exact custom duties that you have to pay.

SEE ALSO: What Is Debenture? 

Custom Duty Rates:

The rates of the custom duties generally vary from 0% to 150%. The average rate is 11.90%. There are other types of fees that are applicable to customs duty:

  • Lending charge of 1%
  • Countervailing charges of 0%, 6% or 12%
  • Education cess of 3% and education CEX of 3% CVD
  • Additional CVD of 4%

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