Customs Duty and its Various Types and Role in India

Basics customs duty: Basic customs duty is a duty which is imposed on the goods importing India. It may be at the standard rate or at the preferential rate. All goods importing India are chargeable to Basic Customs Duty under the Customs Act, 1962, and they are known as customs import. The rates of this duty are indicated in the first schedule of the Customs Tariff Act, 1975.

Countervailing duty (CVD): A duty equivalent to the amount of subsidy granted by the government is imposed on such subsidized good which is known as countervailing duty. These duties are also known as anti-subsidy duties. They are imposed to neutralize the negative effect of subsidies, as goods can be imported and exported at a price lower than the original price based on the subsidy given by the government.

Additional customs duty: Additional customs duty is a duty which is levied on goods produced or manufactured in India. It’s a subset of countervailing duty and is imposed on imported goods in order to equalize imports with local taxes like service tax, VAT. This duty is leviable on the assessable value + basic customs duty. Generally, the CVD rate is 16%.

Safeguard duty: It’s a duty which is imposed to safeguard the interest of the local domestic industries so that no harm or loss is faced by the domestic producers and their productivity. It is calculated on the basis of loss suffered by the local industries.

Anti Dumping Duty: It’s a duty which occurs when a manufacturer exports a product to another country at a price rate either below the price rate in his/her home market or below its cost of production. The Purpose of this duty is to increase the foreign share or sometimes to expose off their excess stock. In order to avoid such dumping, the Central government imposes an anti-dumping duty under section 9A of the Customs Tariff Act, 1975, if goods are sold at a value less than the normal value.

Education Cess: This duty is levied at a rate of 2% for secondary Cess and 1% for higher education cess. No cess would be levied, if the goods are fully exempted from duty or are cleared without payment of duty under the prescribed procedure.

National calamity contingent duty: National calamity contingent duty is a duty which is imposed on goods like tobacco, pan masala or any other good which is injurious to health. The rate of tax under this duty varies from 10% to 45% and different rates are applicable to different situations.

Protective duties: It is a tariff which is formulated with the aim of protecting domestic industries or domestic producers. Protective custom duty can be imposed at the rate recommended u/s 6 of the Customs Tariff Act. It is valid till the date prescribed in the notification.