Understanding the Type of Custom Duties in India

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Understanding the Type of Custom Duties in India

The charge levied on commodities during their international transportation is known as “customs duty.” In India, customs duties are essential for controlling trade and business. They have several uses and are imposed on commodities that are brought into or exported from the nation. The government enforces it for both imports and exports. Every good has a predetermined rate of duty that is established by taking into account a number of variables, including the place of manufacture, the place of acquisition, and the material the good is made of.

Types of Custom Duty

Customs duty categories Customs duties were categorised under a number of headings prior to the implementation of the GST regime, including basic customs duty, additional customs duty, real countervailing duty, protective duty, education cess, and anti-dumping or safeguard duty. A portion of items are now part of the IGST system. The different forms of customs duties and taxes, each with a distinct function—ranging from safeguarding local businesses to raising funds for social causes—are the key to comprehending the intricate web of these charges.

Basic Customs Duty

Standard Customs Duty Basic Customs Duty, or BCD for short, is the main tax on products imported into India. The Customs Act of 1962 establishes Basic Customs Duty, which varies depending on the goods. It is applied as a percentage of the assessable value of all imported products. The sum of the item’s cost, the freight cost for moving the goods, plus the insurance premiums determines the assessable value. The baseline customs duty ranges from 5% to 40% of the imported products’ assessable value.

Additional Customs Duty 

In order to balance imports with local and domestic taxes, imported items are subject to an additional customs or special countervailing duty. It is also referred to as countervailing duty and is assessed at the same rate as excise duty on comparable Indian-produced goods. By charging a comparable tariff rate on imported goods, this charge aims to stop persons from dodging excise duty on locally manufactured goods.

Anti-Dumping Duty

The duty imposed on items that are granted exemptions or subsidies in their country of manufacture is known as an anti-dumping duty. A tax that a government applies to imports that are priced less than fair market value is known as an anti-dumping duty. It seeks to stop unfair trade practices and shield homegrown sectors from dumping.

Education Cess

These cesses are extra charges imposed on the customs value of imported goods in order to finance Indian initiatives pertaining to education. It is assessed at 2% of the total amount of customs charges. In certain situations, a 1% higher education cess may also be used. This sum is utilised to advance India’s educational system.

Safeguard Duty:

The government imposes safeguard duties for a set amount of time when it notices an abrupt rise in imports of a specific commodity. Usually, the importing nation’s World Trade Organisation (WTO) commitments or import tariff reductions are the cause of this increase. Safeguard duties are transient and often eliminated gradually, allowing home industries to adapt and improve their competitiveness. Its purpose is to shield the home industry from unexpected spikes in imports that could jeopardise their sustainability.

Countervailing duty on subsidized articles 

The Central government charges Countervailing Duty (CVD) as an import tax on items that are imported into India in order to level the playing field by offsetting subsidies given to the exporting country’s producers of these commodities. Subsidies provide exporters an unfair edge over rivals in other nations, which can distort international trade. Importing nations like India apply countervailing duties on subsidised goods in order to correct this imbalance.

Protective Duty

Protective duties, at a rate suggested by the Tariff Commissioner, are levied to defend local or domestic industry against imports. Protective Obligations As the name implies, protective tariffs are designed to shield emerging or native businesses from competition from outside sources. Following a thorough investigation of the market dynamics, competitive environment, and potential effects on domestic industry, the Indian government often prescribes these duties.

Social Welfare Surcharge on Imported Goods

In order to fund social welfare projects and programmes, India imposes an additional tariff known as the Social Welfare Surcharge (SWS) on a number of imported items.10% of the total amount of government-imposed customs taxes, tariffs, and cesses is used to compute the Social Welfare Surcharge. A broad variety of imported goods are subject to the surcharge, including as luxury goods, expensive goods, and commodities deemed unnecessary or detrimental to the environment or public health.


Various customs taxes, particularly on imported items, are imposed by the Income Tax Department in order to shield domestic produce from unfair competition. The calculation of customs duties is also influenced by the nation in which the imported items are manufactured. This occurs as a result of India’s many trade agreements with other nations. As per Article 269A of the Indian Constitution, customs duty has been replaced by IGST under the new GST regime that has been in effect since 2017. The IGST statute, 2017 governs the imposition of the IGST on the import of goods and services, as per this statute. In India, one prominent programme related to customs tariffs is the Export Promotion Capital Goods (EPCG) Scheme. In order to encourage exports, exporters can import capital items under this programme at reduced rates of tariff.

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