Types of Duties

Introduction
Internationally, all import and export shipments originating or entering in a country are regulated through
the customs laws and regulations of respective country. In India, all import and export shipments are
cleared through various customs check points as per provisions contained in the Indian Customs Act (ICA)
1962.
PROCEDURE FOR IMPORT OF GOODS INTO INDIA
Any firm intending to venture into import or export activity is required to obtain an Importer
Exporter Code (IEC No.) from the Regional Licensing Authorities (RLAs) of the Directorate General
of Foreign Trade. To facilitate the above process, the DGFT has 41 RLAs spread over across the
country indicating the areas under jurisdiction of each RLA. The IEC No. allotted to a firm is valid
for all its branches/offices/units.
REQUIREMENT OF IMPORT AUTHORISATION
As discussed above, no license or permission is required from DGFT for import of goods into India,
except those listed as prohibited, canalized, or restricted items in Schedule II of Indian Trade
Classification (Harmonised System) ITC (HS). The ITC (HS) volume published by the Directorate
General of Commercial Intelligence & Statistics (DGCI&S) details the classification of items of
import or export into 99 chapters – each chapter covering a specific product group category.

Custom Duty in India
Custom duty is a kind of an indirect tax that is imposed on both exported and imported goods and services.
The tax imposed on the import of goods is known as the import duty. Whereas, the tax imposed on the
export of goods is known as the export duty.
The government charges these taxes to raise money and/or to shield the domestic establishments from the
competitors from other countries.
In the past few months, the government of India brought a major change in the tax systems of the nation.
They introduced GST (Goods and Services Tax), a new tax collection system
Earlier, the tax system was complex. Multiple taxes such as service tax, value added tax, state tax, central
excise, etc. were imposed on various goods and services. Under GST, these multiple taxes have been
replaced by just one tax – GST.
GST has three categories – CGST (Central Goods and Services Tax), SGST (States Goods and Services Tax)
and IGST (Integrated Goods and Services Tax). Both CGST and SGST are applicable on the intra-state
transactions whereas the IGST is applicable on the inter-state transactions.
The custom duty is now replaced by IGST, which means that instead of the custom duty, IGST tax is
applicable (along with other applicable custom duties) on every import and export of goods and services.
Let’s read further to understand it better.

Custom Duty in India
GST for Importers (IGST)
The IGST Act 2017 defines the import of goods as bringing merchandises into India from anywhere outside
of India. All the imports will be regarded as the inter-state supplies and integrated tax will be imposed on
them along with other applicable custom duties.
Before IGST was enforced, custom duty was levied on all export and import of goods and services. Also,
innumerable taxes such as basic custom duty, anti-dumping duty and safeguard duty, etc were imposed on
every import of goods and services. When GST came, it shook the entire tax system by holding all indirect
taxes such as central excise duty, service charges, state-level tax and introduced a single tax known as IGST
(Integrated Goods and Services Tax). On the import of goods, only the integrated tax along with the basic
custom duty* will be chargeable.
*Basic Duty is a type of duty or tax imposed under the Customs Act (1962). Basic Customs Duty varies for
different items from 5% to 40%. The duty rates are mentioned in the First Schedule of the Customs Tariff
Act, 1975 and have been amended from time to time under the Finance Act.

Custom Duty in India
Import of Services under IGST
The import of services as per the IGST Act 2017 is the supply of a service by a service provider who is from a
place outside the country but the receiver of those services is from India, and the place at which the service
is being given is also within India. In simple terms, the services that are imported without consideration will
not be considered as a supply. However, the business test is not obligatory for the imported services to be
deemed as a supply.
GST for Exporters
Before GST, duties were imposed even on the export of goods and services. However, as per the new tax
system, the export of goods and services from India to any other place outside the country are to be
treated as ‘zero-rated supplies’. This means that no GST is applicable for the exporters. The registered
taxable individuals that are exporting goods or services to places outside the country can claim refund.

Custom Duty in India
THE CUSTOMS ACT, 1962 (ACT NO. 52 OF 1962)
• An Act to consolidate and amend the law relating to Customs.
• BE it enacted by Parliament in the Thirteenth Year of the Republic of India
• It extends to the whole of India
• It shall come into force on such date as the Central Government may, by notification in the Official
Gazette, appoint
The Customs Act, 1962 is the basic statute which governs entry or exit of different categories of vessels,
aircrafts, goods, passengers etc., into or outside the country. The Act extends to the whole of the India.
Customs Act, 1962 just like any other tax law is primarily for the levy and collection of duties but at the
same time it has the other and equally important purposes such as:
(i) regulation of imports and exports;
(ii) protection of domestic industry;
(iii) prevention of smuggling;
(iv) conservation and augmentation of foreign exchange and so on.
Section 12 of the Custom Act provides that duties of customs shall be levied at such rates as may be
specified under the Customs Tariff Act, 1975 or other applicable Acts on goods imported into or
exported from India

Custom Duty in India
THE CUSTOMS TARIFF ACT, 1975, (ACT NO. 51 OF 1975)
• This Act may be called the Customs Tariff Act, 1975.
• It extends to the whole of India.
• It shall come into force on such date as the Central Government may, by notification in the Official
Gazette, appoint.
• Custom Tariff Act, 1975 has two schedules. Schedule I prescribes tariff rates for imported goods, known
as “Import Tariff” and Schedule II contains tariff for export goods known as “Export Tariff”
• Some of the duties under the Custom Tariff Act, 1975 are as follows:

Custom Duty in India

Foreign Trade (Development and Regulation) Act, 1992

Excise Duty in India
Excise duty refers to the taxes levied on the manufacture of goods within the country, as opposed to
custom duty that is levied on goods coming from outside the country.
GST has now subsumed a number of indirect taxes including excise duty. This means excise duty,
technically, does not exist in India except on a few items such as liquor and petroleum. The information
given below pertains to the functioning of Excise Duty in India before the implementation of GST regime.
Excise Duty is a form of indirect tax which is generally collected by a retailer or an intermediary from its
consumers and then paid to the government. Although this duty is payable on manufacture of goods, it is
usually payable when the goods are ‘removed’ from the place of production or from the warehouse for the
purpose of sale. There is no requirement for the actual sale of the goods for imposing the excise duty
because it is imposed on the manufacture of such goods. The Central Board of Excise and Customs (CBEC)
is responsible for collecting excise duty.

Excise Duty in India
Acts and Rules Governing Excise Duty in India
The legal framework around Excise Duty is majorly governed by the two acts-
• Central Excise Act, 1944
• Central Excise Tariff Act, 1985
The two acts underline the laws related to the levying of excise duty that extends to the whole of India. The
rates of Central Excise Duty are defined by the Central Excise Tariff Act, 1985. The Central Excise Act majorly
provides the definitions related to excise while the Central Excise Tariff Act includes an elaborate schedule
of excisable goods and the tariffs on them. The CBEC, which functions under the leadership of the Finance
Minister, administers the levy of excise and custom laws in the country.

Excise Duty in India
Types of Excise Duty in India
There are three types of excise duties in India:
• Basic Excise Duty- Sometimes referred to as Central Value Added Tax (CENVAT), this type of excise duty is
imposed on goods classified under the first schedule of the Central Excise Tariff Act, 1985. This duty is
imposed under Section 3(1) (a) of the Central Excise Act, 1944 and levied on all excisable goods in the
country except salt
• Additional Excise Duty- According to the Section 3 of the Additional Duties of Excise (Goods of Special
Importance) Act, 1957, this duty is levied on goods listed in Schedule 1 of the given act. Such duty is
levied on some specific goods and is charged by the central and state government as a substitute of the
sales tax. The Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 also provide for a
similar legislation
• Special Excise Duty- This kind of duty is levied on special goods specified under the Second Schedule to
the Central Excise Tariff Act, 1985.

Physical Examination of Export Cargo
• Export goods are transported into the shed, after completing port formalities
• The exporter/agent presents the following documents to Dock Appraiser along with check List. (i)
Packing List (ii) Invoice (iii)ARE-Forms (Application for removal of excisable goods for export) (iv) Agmark
Certificate (certification mark employed on agricultural products in India, assuring that they conform to
approved set of standards)
• The shed Appraiser/Examiner conducts physical examination of goods as per the examination order
• If the examination is satisfactory, the shed Appraiser/Examiner records the report of physical
examination on the shipping bill through the computer system
• The Appraiser also signs and stamps the original & duplicate copies of SDF (Statutory Declaration
Form)*. He returns exporter copy and second copy of SDF to exporter or his agent

Physical Examination of Export Cargo
• In case of any variation between the declaration in the Shipping Bill and physical
documents/examination report, the Appraiser may mark Electronic Shipping Bill to the Assistant
Commissioner/Deputy Commissioner of Customs (Exports).
• Documents once entered and submitted are then reviewed by different officers of the Custom House at
various stages of processing and final clearance is accorded on the computer system after all formalities
are over for physical examination of goods at the Sheds
• In case, exporter agrees with the views of Department, the Shipping Bill is processed accordingly.
Where, however, the exporter disputes the view of the Department, principles of natural justice are
required to be followed, before finalization of the issue.

Electronic Data Interchange (EDI)
• Electronic Data Interchange (EDI) is may be defined as the interchange of electronic data between
computer system through standard interfaces. It is simply the sending of files/data electronically.
• EDI system is operating at customs offices for smooth handling international trade operations.
• The main benefits of EDI are its capability to reduce the cost and time required for reproducing
information that the Exporters or Importers used to give on paper.
• This gives ability to the Customs Department to concentrate its resources in core activities, such as
inspecting the consignments for illegal Imports / Exports, smuggling, evasion of Duty etc.
• In short, the Import / Export clearances, which once took many days to clear and make hassle to
shippers, can be processed now in minutes with the aid of EDI with easiness.

Electronic Data Interchange (EDI)
Advantages of EDI include the following:
• Speed: EDI System is fully-automated, quick and paperless. This facilitates improved customs clearance
and inspection procedures. Notifications of releases are speeded up as a result of the electronic releases
being generated automatically.
• Removes processing delays.
• Time and Cost Savings.
• Certainty and Fairness
• Round the Clock Facility
• Fewer Errors and Duplications made by human interpretation of data
• Reduces paper handling, filing, storage and mailing costs
• Transparency of the movement of the documents.
• Harmonised business relationships with other bodies such as Ports, DGFT Airlines, Container Depots etc.

Custom Operations
If you are developing your supply chain internationally, facing customs requirements is undoubtedly one of
the phases that can most impact the efficiency of your trade. Very often seen as a challenge, customs, if
properly considered, can represent an opportunity to optimise costs and flows.
While it is clear that the customs process of an international shipment begins in the country of origin and
ends up in the destination country, it is often not so clear which are the main aspects to be taken into
consideration. Following are the points that must absolutely be taken into consideration in the context of
an international shipment:
• CLASSIFICATION of goods for customs purposes: Identifying the correct customs heading for each
imported/exported item allows to know the correct tariff treatment (duties, VAT, border surcharges,
etc.) and associated trade policy measures (limitation of import quantities, products subject to
controls/restrictions or requiring certificates). It is also essential to determine the preferential or non-
preferential origin of the products.
• ORIGIN (PREFERENTIAL AND NON-PREFERENTIAL): A central theme in customs matters, determination
of the origin, based on an exact customs classification, has the purpose of identifying applicable
measures and correct payment of duties owed. Identifying the specific preferential origin and issuing
the related documentation allows the consignee of the goods, where preferential treatment is provided
for, to see the duty payable reduced partially or completely, rendering competitive the sale of its
products.

Custom Operations
• VALUE: Together with classification and origin, this is one of the core pillars of correct customs
management of imports/exports. Identifying the right value to declare at customs allows to correctly
calculate the duties owed, which is why it is identified as sensitive information. If not calculated
correctly, it can result in costly penalties.
• CUSTOMS PLANNING (certificates/agreements): Analysing the required import/export certifications
before a shipment, or at the beginning of a trade, is essential to avoid surprises at customs
• INCOTERMS: Using the correct Incoterms can really make a difference, not only in terms of transport,
but also with regard to customs matters
• CUSTOMS CHECKS AND CONTROLS: The customs offices perform physical and documentary checks on
import and export operations, using algorithms that consider the critical points identified
• DOCUMENTS: A preliminary but essential phase when carrying out customs operations is the
verification of documents to issue/receive, such as invoices, packing lists, free import/export
declarations and any documentation required for import/export to the destination