Introduction Import duty Export duty Constitutional Provision Basis of determining the duty Types of customs duty Format Notes Case study problems Solution of problem Valuation

1. INDIRECT TAX LAW & PRACTICE
Customs Duty
HARISH HN
Assistant Professor of Commerce
GFGCW, MG Road Hassan.
Mail : hariravi2006@gmail.com

4. INTRODUCTION
 Customs duty refers to the duty levied
on the Import of the goods as well on
the export of the goods,
 Duty imposed on the good imported in
to the country is called Import duty
and the duty levied on the goods
exported out of the country is called
Export duty.
 The Customs Act,1962.
 The Customs Tariff Act,1975.

5. Constitutional Provisions
 Article 245 of the constitution –
Parliament may make laws for the
whole or any part of the territory of
India, and state too.
 Article 246
List I – referred as Union List
List II – referred as State List
List III – referred as Concurrent List

6. Basis of determining the Duty
 Specific Duty
 Ad Valorem Duty
 Combined Duty or Compound
Duty

7. Types of Customs Duties
1) Basic Customs Duty
All Goods imported into India are
chargeable to a duty u/s 12 of
Customs Act, 1962. The rates of this
duty, popularly known as Basic
Customs Duty.
Two types Basic Customs Duty
1) Standard Custom Duty
2) Preferential Rate

8. 2. Integrated goods and services
tax (IGST):
 It is a component under GST law,
which is levied on goods being
imported into India from other country.
It has been subsumed various
Customs Duties including
Countervailing Duty (CVD) and
Special Additional Duty of Customs.
(SAD)
 Rates – NIL, 0.25%,3%,5%,12%,18%
& 28%.

9. 3) GST Compensation Cess – on Pan
Masala, Tobacco, Coal, Motor cars &
other supplies as notified from time to
time.
4) Additional Customs Duty(ACD) or
CVD
5) Special Additional Duty (SAD) or
Special CVD
6) Safeguard Duty – is imposed for
protecting the interests of any
domestic industry in India and it is
product specific.
7) Special Safeguard Duty – any article

10. 8) Anti-dumping Duty
9) CVD on subsidized Articles
10) National Calamity Contingent
Duty(NCCD) – it is levied on Pan
masala, chewing tobacco & cigarettes
at different rates.
11) Export Duties
12) Social Welfare Surcharge(SWS) – it
has been levied on the aggregate of
all Duties of Customs. The rate of
SWS is 10%.

11. Format for determination of Customs
Duty
Particulars Amount Total
Duty
Assessable Value xxx
Add : BCD on AV xxx xxx
Add : NCCD (if any) on (AV+BCD) xxx xxx
Add : CVD (if any) on (AV+BCD+NCCD) xxx xxx
SUB TOTAL (A) XXX XXX
Add : Social Welfare Surcharge @ 10% on
(BCD+NCCD+CVD)
xxx xxx
Add : Safeguard Duty on AV xxx xxx
Protective Duties on AV xxx xxx
Anti-dumping Duty on AV xxx xxx
SUB TOTAL (B) XXX XXX
Add : IGST on Subtotal (B)
Add : Compensation Cess on Subtotal (B)
xxx
xxx
xxx
xxx
Total Custom Duty Payable XXX

12. Notes
1) IGST shall not be considered while
calculating compensation cess and
vice-versa.
2) In case where imported goods are
liable to Anti-dumping duty or
safeguard duty would be as per the
respective notification issued for levy
of such duty.

13. Case study (problems on
customs Duty)
1) Assessable value of the tobacco
products imported into India is Rs.
10,000. The rates of the taxes of such
product are Basic customs Duty
@37.5%, IGST @28%, NCCD @ 1%,
CVD @12.5%, and Compensation
Cess @ 60%. Caluclate Customs
Duty Payable.

14. Solution: Computation of Customs duty
Payable.
Particulars Amount(Rs) Total Duty
in (Rs)
Assessable Value 10,000
Add : BCD @37.5% on AV 3,750 3,750
13,750 3,750
Add :NCCD @ 1% on AV+BCD
(13759*1%)
138 138
13,888 3,888
Add : CVD @ 12,5% 0n AV+BCD+NCCD
(13,888*12.5%)
1,736 1,736
SUB TOTAL (A) 15,624 5,624
Add : SWC @ 10% on BCD+NCCD+CVD
(5,624*10%)
562 562
SUB TOTAL (B) 16,168 6,186
Add : IGST@28% on
Subtotal(B)(16,168*28%)
4,532 4,532
Add:Compensation Cess@60% on
subtotal(B)
9,712 9,712

15. 2) Compute Customs duty payable
Assessable Value is Rs. 10,00,000.
Basic Customs Duty – 10%
Safeguard Duty – 25%
Anti-dumping Duty is Rs 10 per kg of
Imported goods.
Total imported goods 10,000 kgs.
IGST tariff on similar goods in India is 12%
What is the cost of imported goods ?

16. Solution
Particulars Cost of
Import
Total duty
Assessable Value 10,00,000
Add : BCD @ 10% on AV (
10,00,000*10%)
1,00,000 1,00,000
Total ( A ) 11,00000 1,00,000
Add : SWS @ 10% ( 1,00,000 * 10% ) 10,000 10,000
Safeguard Duty @ 25% on AV
( 10.00,000* 25%)
2,50,000 2,50,000
Anti-dumping duty @ Rs 10 per kg
( 10,000* Rs 10)
1,00,000 1,00,000
Total ( B ) 14,60,000 4,60,000
Add : IGST @ 12% on Total B
( 14,60,000*12%)
1,75,200 1,75,200
Total Customs Duty payable 6,35,200
Cost of Import 16,35,200

17. Levy of Customs Duty
 Sec 12(1) of the Customs Act 1962
 The provision of sub-section (1) shall
apply in respect of all goods, belonging to
the Govt. as they apply in respect of goods
not belong to the Govt.
 The payment of Import Duties is
dependent on the mode of clearance of
goods from the customs area i.e., goods
cleared for home consumption or
warehousing of goods.

18. Valuation of Customs Goods for
Assessment –Sec 14(1)
 In case of goods imported by Aircraft:
the date of filing Bill of Entry or the date
of arrival of aircraft whichever is later.
 In case of goods imported by vessel: the
date of filing Bill of Entry or the date of
entry inwards to the vessel whichever is
later.
 The provision of this section shall not
apply to baggage and goods imported by
post.

19. Date for determination of rate of Duty and
tariff Valuation of Export Goods – Sec 16
 In the case of goods entered for export u/s
50, on the date on, which the proper
officer makes an order permitting
clearance and loading of the goods for
exportation u/s 51.
 In the case of any other goods , on the
date of payment of Duty.

20. Rate of Exchange for Customs Valuation
 Section 14 states that price shall be
calculated with reference to the rate of
exchange as in force on the date on which
a Bill of Entry is presented u/s 46.
 The rate of exchange will be determined
by central board of indirect taxes and
customs. ( CBE&C)

21. Important basic terms used in Import and
Export of Goods & Services
 Ex-factory Price: It means sale price at the
factory gate of manufacturer.
 FOB (Free on Board) Price: it is the price at
which the goods will be loaded on board of the
ship. (FAS Price + Loading Charges)
 FAS(Free Alongside): Seller must arrange for
the goods purchased to be delivered next to a
particular vessel in order to be transfer to a
waiting ship.
 CIF( Cost, Insurance & Fright )Price

22. Computation of Assessable Value of Goods
Particulars Amount Amount
1. Purchase Price of Goods XXXX
2. Commission and Brokerage ( Except buying
Commission )
xxx
3. Cost of Packing xxx
4. Material and Services provided by the Importer xxx
5. Royalty and License xxx
6. Design and Development Charges of Importer xxx (+) XXX
FOB Value of Goods XXXX
7. Transportation Cost (Actual cost or up to 20%
of FOB Value . w.e.l)
xxx
8. Insurance premium ( up to 1.125% of FOB
Value)
xxx (+) XXX
Assessable Value being CIF Value of
Goods
XXXX
Assessable value of Goods in Foreign Currency *
Rate of exchange.
Total*rate
of

23. Case study – problems on AV & Customs Duty
Payable.
1) Lakshitha Ltd., imported Tobacco products
from UK by air. You are required to
compute the Assessable Value for the
purpose of determination of Customs Duty
under the Customs Act,1962 from the
following information.
a) FOB value of goods - 8,000 UK Pounds
b) Fright paid – 2500 UK Pounds
c) Design and development charges paid in
UK – 500 pounds
d) Commission payable to local agent @ 2%
of FOB

24. e) Date of Bill of Entry – 24.10.2020 (Rate of
BCD @ 20%, IGST@18%, Exchange rate as
notified by CBEC Rs. 60 per UK Pound)
f) Date of entry inward – 20.10.2020 (Rate of
BCD @ 18%, IGST@18%, Exchange rate as
notified by CBEC Rs. 58 per UK Pound)
g) Insurance charges are paid, but details are not
available.
h) Apart from BCD and IGST tobacco product
also attract 12% as CVD and 30% as
compensation Cess.
i) As per notification issued by the Govt. of India,
safeguard duty has been imposed on these goods
@ 25% ad valorem.

25. Particulars UK Pounds Amount in
Rs.
FOB Value 8,000 4,80,000
Add: Design and development charges 500 30,000
FOB value for customs 8,500 5,10,000
Add: Freight charges [restricted to 20% of
FOB 5,10,000 * 20% ]
1,02,000
Add: Insurance @ 1.125% on 5,10,000 5,738
Add: Commission payable to local Agent @
2% on 5,10,000
10,200
Assessable Value 6,27,938
Computation of Assessable Value
(Exchange Rate 1UKP = Rs
60 )

26. Notes
1) The relevant exchange rate for
customs valuation is the rate which is
specified by CBEC on the date of
BOE i.e 1 UK Pound = Rs.60.
2) Since product is imported by air,
freight is to be restricted to 20% of
FOB.
3) Since insurance is not given, it has to
be ascertained @ 1.125% of FOB
Price.

27. Computation of Customs duty Payable
Particulars Amount
in Rs.
Total duty
in Rs
Assessable Value of Product 6,27,938
Add: BCD @ 20% on AV 1,25,588 1,25,588
7,53,526 1,25,588
Add: CVD @12% on AV+BCD (7,53,526 *
12% )
90,423 90,423
Sub Total (A) 8,43,949 2,16,011
Add: SWS @ 10% on 2,16,011 21,601 21,601
Add: Safeguard Duty @ 25% on AV (6,27,938
* 25% )
1,56,985 1,56,985
Sub Total (B) 10,22,535 3,94,597
Add: IGST @ 18% on sub total (B)
10,22,535*18%
1,84,056 1,84,056
Add: Compensation Cess @ 30% on Sub total 3,06,761 3,06,761
Total Value of Product 15,13,352

28. Notes
1) Rate of duty relevant in case of goods by
air is the rate on the date of filing Bill of
Entry or date of arrival of Aircraft
whichever is later. Hence, rate of BCD
in this case is 20% which is prevailing
on BOE.
2) Safeguard duty @ 25% has been
calculated on the AV.

29. 2) Sri Digital Lab has imported a new film processing unit from
Konica, Singapore. Following are the details of import
transaction.
a) Cost of Film Processing Unit $ 40,000
b) Cost of spare parts and accessories $ 300
c) Packing Charges (including durable packing $ 50): $250
d) License fees payable to Konica Japan: $5,000
e) Air Fright : $ 600.
f) Insurance Rs. 40,000
g) Installation charges payable to Konica India, Bengaluru Rs.
25,000.
h) Commission to their agent in Singapore $ 400
i) Unloading and handling charges Rs. 30,000
j) Fright from airport to business premises Rs.10,000
k) Date of entry inwards 02.02.2020, exchange rate $1=Rs 66
l) Date of submission of Bill of entry 30.01.2010, exchange
rate $1=65
m) Calculate AV and Customs duty payable if GST on similar
product is 18%

30. Computation of Assessable Value
(Exchange Rate 1$=Rs 65)
Particulars Amount
in $
Amount in
Rs.
Cost of Film Processing Unit 40,000 26,00,000
Add: Cost of spare parts and accessories 300 19,500
Packing charges 250 16,250
license fees to koinca 5,000 3,25,000
Commission to agent 4,00 26,000
FOB Value 29,86,750
Add: Air fright (20% of FOB or Actual cost w.e.l
)
39,000
Add: Insurance 40,000
Assessable Value 30,65,750

31. Computation of Customs Duty payable
Particulars Total
Value in
Rs.
Total Duty
in Rs.
Assessable Value 30,65,750
Add: BCD @ 10% (30,65,750 * 10% ) 3,06,575 3,06,575
Total ( A ) 33,72,325 3,06,575
Add: SWS @ 10% (3,06,575 * 10% ) 30,658 30,658
Total ( B ) 34,02,983 3,37,233
Add: IGST @ 18% on Total ( B ) 34,02,983 *
18%
6,12,537 6,12,537
Cost of Import and customs duty
Payable
40,15,520 9,49,770

32. Notes
1) Cost of durable packing should be included in
assessable Value, since it is not returnable.
2) Rate of exchange is the rate on the date of
submission of BOE.
3) Installation charges, unloading, handling
charges, and fright from airport to business
premises are post import cost. Hence, they
should not be included in AV.
4) Since machine has been imported through air
mode, freight should be 20% of FOB value or
actual cost of fright, w.e.l to be considered.