Icfai University Tripura

ICFAI UNIVERSITY TRIPURA
NAME:DHANMAYA THAPA
ID:20IUT0360033
COURSE:B.COM(2 n YEAR)
TOPIC:-INTRODUCTION OF CUSTOME DUTY)
SUBMITTED TO: DR.SUNIL KUMAR
INTRODUCTION
• Customs duty is on import into India and export out of India. As per ancient custom, a
merchant entering a kingdom with his goods had to make a suitable gift to the King. In the
course of time, this ‘custom’ was formalised into ‘Customs Duty ’. This is collected on imports
and occasionally on exports too. The word ‘Customary ’ is derived from ‘customs’, which
indicates that it is a very old tax. Taxes on goods were levied on various goods right from the
Veda period. Customs Duty as we understand today has its origin in British period. British
established its first Board of Revenue in 1786 at Calcutta. New Board of Trade was
established in 1808. A uniform Tariff Act was introduced in 1859 all over India. General rate
of import duty was 10%, which was reduced to 7.5% in 1864. Customs duty in India is linked
with history of textile industry. British manufacturers wanted to export their products to
India and due to their pressure, duty on coarser varieties of cotton goods was abolished in
1877. In the meanwhile, Sea Customs Act was passed in 1878. In 1882, all import duties
were abolished. Indian Tariff Act was passed in 1894. Import duty on cotton goods @ 5% was
introduced in 1894. At the same time, excise duty on Indian cotton goods was imposed,
which was bitterly resented in India and it was finally abolished in 1925. General rate of
customs duty was later increased to 7.5%. Land Customs Act was passed in 1924.
MEANING OF CUSTOM DUTY
• Customs Duty refers to the tax imports on the goods when they are
transported across the international borders in other words it is a
kind of indirect tax which is levied on goods of international
trade.
• Duties levied in relation to imported goods are referred to as
import duty and duties levied on the export goods are called
export duty.
OBJECTIVES OOF CUSTOM DUTY
• Customs duty is applied to provide protection to the
local developing industries against multinational
companies by charging them some amount for a fixed
period of time.
• It provides a fair and equal opportunity to both entities
to expand for their market.
• It proves a source of revenue for the government.
• It promotes the export of the country.
• It saves foreign exchange.
NATURE OF CUSTOM DUTY
• Customs duty is applied to the m o v e m e n t of goods
irrespective of sales or purchase
• Customs duty is a tax which is applied indirectly by
government
• Customs duty is applicable only on goods, not on
services
• Education cess is applied to it too.
TYPES OF CUSTOM DUTY
• Basic Customs Duty
• Basic custom duty is the duty imposed on the value of the goods at a specific rate. The duty is fixed at
a specified rate of ad-valorem basis. This duty has been imposed from 1962 and was amended from
time to time and today is regulated by the Customs Tariff Act of 1975. The Central Government has the
right to exempt any goods from the tax
• Additional Customs Duty or Special CVD

• In order to equalize imports with locals taxes like service tax, VAT and other domestic taxes which are
imposed from time to time, a special countervailing duty is imposed on imported goods. Hence,
is imposed to bring imports on an equal track with the goods produced or manufactured in India.
This is to promote fair trade & competition practices in our country.
• Safeguard Duty
• 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.
Additional Customs Duty or Special CVD
In order to equalize imports with locals taxes like service tax, VAT and other domestic taxes which
are imposed from time to time, a special countervailing duty is imposed on imported goods.
Hence, is imposed to bring imports on an equal track with the goods produced or manufactured
in India. This is to promote fair trade & competition practices in our country.
Safeguard Duty
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.
Anti Dumping Duty

Often, large manufacturer from abroad may export goods at very low prices compared to
prices in the domestic market. Such dumping may be with intention to cripple domestic
industry or to dispose of their excess stock. This is called ‘dumping’. In order to avoid such
dumping, Central Government can impose, under section 9A of Customs Tariff Act, 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’.
National Calamity Contingent Duty
This duty is imposed by Sec 129 of the Finance Act. The duty is levied on goods like tobacco, pan masala
or any items that are harmful for health. The rate of the tax varies from 10% to 45% and different rates
are applied for different reasons.
Education Cess on Customs Duty

At the prescribed rate is levied as a percentage of aggregate duties of customs. If goods are fully
exempted from duty or are chargeable to nil duty or are cleared without payment of duty under
prescribed procedure such as clearance under bond, no cess would be levied.
Protective Duties
Tariff Commission has been established under Tariff Commission Act, 1951. If the Tariff Commission
recommends and Central Government is satisfied that immediate action is necessary to protect interests of
Indian industry, 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.
HOW CUSTOM DUTY CALCULATED
• Custom duty can be calculated on either a specific or an ad valorem basis. The
value of goods, for the latter, is determined by Rule 3(i) of the Customs Valuation
Rules, 2007. If there is no quantifiable data w.r.t. valuation factors, then the
valuation of the items is done using other means based on a system of hierarchy,
as follows:
• Comparative Value Method: This method compares transaction values of items
similar in nature (Rule 4)
• Comparative Value Method: This method compares transaction values of items
similar in nature (Rule 5)
• Deductive Value Method: This method uses the sale price of items in the
importing country (Rule 7)
• Comparative Value Method: This method uses costs related the fabrication,
materials as well as profit in the production country (Rule 8)
• Fallback Method: This method is based on the earlier methods that offer higher
flexibility (Rule 9)
REFERENCES
• CA Dr K M Bansal ,GST and customs.
https://www.adityabirlacapital.com ›
https://www.business-standard.com › what-is-customs-duty
CONCLUSION
• At last,
• It increases the national price of a good . • Reduces the welfare of
internal consumers . • Inceases the welfare of internal producers . •
Creates a net loss in term of a welfare .
THANK YOU

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• Additional Customs Duty or Special CVD

Anti Dumping Duty

Education Cess on Customs Duty

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