Customs duty, in its simplest terms, is the tax levied on goods when they cross international borders. Far from being just a piece of bureaucratic red tape, the customs duty is a pivotal factor in the costing structure of international trade.
The key to understanding the customs duty and tax web lies in its various types, each serving a specific purpose—from protecting domestic industries to generating revenue for social causes. These charges can offer actionable insights into optimising your trade operations when decoded.
That’s precisely what this blog aims to do: offer you a comprehensive, in-depth guide to the different types of customs duties in India.
Here are the Different Types of Customs Duty in India
Basic Customs Duty
Basic Customs Duty, abbreviated as BCD, is the primary tax on imported goods entering India. The Indian Customs Tariff Act defines the rate of BCD based on the type of imported commodity, which ranges between 5% to 40% and can significantly impact the total landed cost of the imported items.
Additional Customs Duty or Special CVD
Additional Customs Duty is also called Special Countervailing Duty (CVD). This form of duty is unique in its alignment with Central Excise Duty, a tax imposed on goods manufactured within India. Essentially, Additional Customs Duty levels the playing field, ensuring that imported goods don’t enjoy an unfair advantage over domestically produced ones.
Countervailing Duty (CVD)
This is not to be confused with the Special CVD we just discussed. Countervailing Duty is specifically designed to counteract the subsidies provided by foreign governments on exported goods, which otherwise would have had a detrimental effect on the domestic industries in the importing country. It’s a safeguard to ensure foreign countries cannot “game the system” by subsidising their exports to gain an unfair advantage.
Anti-dumping duty is imposed on foreign goods exported to India at a price lower than their “normal value” in the home country. The primary objective is to shield domestic industries from unfair competition and potential devastation. When a foreign country is found to be “dumping” its products at rock-bottom prices into India, the Indian Government can levy Anti-Dumping Duty on those imports to level the playing field.
Education Cess is an additional charge imposed on customs duties to fund educational initiatives within India. As a developing nation, India recognises the importance of education. Therefore, the rate of Education Cess is generally 2% on the aggregate customs duties.
National Calamity Contingent Duty
National Calamity Contingent Duty, or NCCD, is levied to build up resources that can be deployed quickly during natural disasters or other large-scale national calamities.
NCCD is typically applied as a percentage of the value of the imported goods. The Government prescribes the rate, and can vary depending on the type of commodity and the prevailing social or environmental necessities.
Under Section 8B of the Customs Tariff Act, Safeguard Duty protects domestic industries from a sudden and unexpected import surge. This duty is a bulwark, providing the domestic industry time to adjust and stand tall against external market pressures.
Protective Duties, as the name suggests, these duties are meant to protect indigenous or nascent industries from foreign competition. The Indian Government usually prescribes these duties after thoroughly investigating the market dynamics, competitive landscape, and the potential impact on domestic industry.
Social Welfare Surcharge on Imported Goods
Social Welfare Surcharge is levied on the aggregate duties of customs, replacing the earlier Education Cess and Secondary and Higher Education Cess. This duty aims to raise revenue for the Government’s social welfare initiatives, be it healthcare, education, or poverty alleviation.
If you’re starting an import and export business, staying ahead of the competition necessitates optimising the costs of importing goods. Understanding these customs duties can provide you with that edge, potentially saving you substantial money in the long run. You can also go with a high-end freight forwarding service, like NimbusPost FF+, which can plan the movement of your products seamlessly through customs clearance and international borders.
So, as you unfurl your venture out into the global trade, let NimbusPost serve as your go-to partner, steering you clear of customs duty and treacherous currents.
As now you’re aware of different customs duties, you would also like to know different export incentives, so read about Types of Export Incentives Schemes.
Which are the types of exemption from customs duty?
There are several types of exemptions from customs duty in India, including:
- Exemptions to Oil and Natural Gas Corporations Limited (ONGC)/ Oil India Limited (OIL)
- Imports of secret goods by the Government
- Imports for India’s defense needs relating only to military hardware and software or for R&D units under the DRDO
- Imports by Central Policy Organisation for equipping their forces
- Exemption to goods from Customs duty only when imported against an Advance License (without Actual user condition)
- Crude and petroleum product
- Raw materials for the manufacture of CRGO Steel, ferrous scrap, and nickel cathode
What is an example of an anti-dumping duty?
The best example of an anti-dumping duty is India imposed an anti-dumping duty on Chinese products, such as aluminum products and certain chemicals, to protect local manufacturers from competing against cheap imports.
How can I Pay my customs duty online?
To pay your customs duty online in India, you can use the ICEGATE e-payment gateway, which offers a seamless payment process and allows payment of multiple challans in a single transaction. Here’s how:
- Visit the ICEGATE website and log in using your credentials.
- Navigate to the e-payment section and select the appropriate duty type from options like SEZ Customs Duty, ECCS, Central Excise/Service Tax, ICES Customs Duty, or Top Up.
- After choosing the duty type, select the relevant document type.
- Ensure you have net banking enabled with one of ICEGATE’s designated banks.
- Follow the prompts to make the payment.
How do I check my customs duty?
You can use the ICEGATE portal, which stands for Indian Customs Electronic Commerce/Electronic Data Interchange (EC/EDI) Gateway, to check your customs duty in India. This official platform provides E-Filing services for customs duties and is widely used by trade and cargo carriers.
What are the three importance of customs?
Customs play a crucial role in taxation, security, and trade facilitation.
What are the 4 main responsibilities of customs?
Customs have four main responsibilities:
- Preparing and processing import and export documentation
- Classifying and appraising imported merchandise
- Determining tariffs and duties to be paid
- Examining and inspecting merchandise to prevent the introduction of prohibited items