Customs duty on an import is an indirect tax charged on import and export of goods and other manufactured products. In India, we want to import any good from outside countries, or likewise, if we want to export any product to another country then a tax is being charged by the central government. Taxes have been divided into two parts of which one is a direct tax and another one is an indirect tax. Initially, there were a lot of things in in-direct tax but nowadays for most sales, GST is being applied, but customs duty on import has not immersed in GST. Custom duty is governed by entry number 83 in the union list, hence it is lived and collected by the central government. Custom act 1952 and custom tariff tac 1975 are the predominant sources of customs laws in India.
The objective of custom duty on import
We listen on daily basis about a recent trade war in China and the USA, and we observe that if we import too much quantity of good from other countries then we are very powerful. Because for other countries we are the biggest market to sell their products and services to us. If we have some industries in our country but some user still wants the foreign products then what about the sales of our own country’s industry. Let us take the example of any research lab machinery. We are a great medical equipment hub here in our country but some users or researchers still want the machinery being manufactured in foreign countries this is based on the quality and accuracy in their research. As the economy is open then it will happen here without any other restriction than what about our industries. Their growth will stop. This will further impact our GDP. Hence Government raised a tax on imported products which increase the cost of that product. Some time production of a specific good in industry increase and at that time government raise tariff so that most of the customers should go with their own country’s product. If sometimes the production is less then these tariff gets low so that one can easily import the goods from other countries. All these kinds of stuff are being controller by custom duty India.
- It restricts imports intending to conserve foreign resources.
- A policy tool has been served by custom duty just to protect imports and exports.
- Custom duty Indiacan impact the dumping of foreign goods.
- It intends to protect the domestic industries against foreign goods.
- It restricts the smuggling activities too.
Features of Custom Duty on import
- It is an indirect tax levied on imports and export.
- Custom duty is applied only on goods or products and not on services.
- It is subjected to a social well-fare charge which is 10% of the aggregate of duties.
Types of custom duties :
- Basic Custom Duty– Also called BCD custom duty on importis being charged and also in some of the export done. Here different rates are applied, which varied between 4% to 40% according to the product which is being exported or imported.
- Social welfare surcharge– This duty was introduced in the 2018 budget. It is levied in place of education. The rate of SWS is 10% of the value of BCD.
- Integrated goods and service taxwhich is also called IGST. After the announcement of GST in India, all imports are deemed to be treated as an inter-state supply of goods and services. Hence IGST is levied on all the imports which are up to 40%.
- GST compensation Cess – After GST some states may have less collection of revenue in terms of GST. To compensate for the loss, The GST compensation cess is introduced by the central government on the import of luxury & sin goods.
Custom duty India for goods and services
- If the one is importing the goods then both custom duty and IGST will be applied to the goods.
- For importing of services, there will be no custom duty on importand no IGST as well.
- Same for the export of goods, a customs duty will be applied as the goods will be rated as the supply of the GST.
- Also for exporting of goods, no custom duty Indiaas well as IGST will be applied.
This was all about custom duty, Here we have seen very clearly that how custom duty India is playing a vital role in exporting and importing the goods and other needful products in India. While doing any shipment, a customs duty specialist is always there, Who does the complete verification of the products as well as the documents related to that. This verification is being done by checking the HSN code of the product in the system. Then he/she does analyze the product physically. Also the verification of all the applied taxes done there. After getting complete details and verification, the customs duty specialist gives clearance to the department and allows for the shipment process if exporting is there and entry of the goods if importing is there. If full detailed documents have not been provided at the customs office then shipment will get hold there and then the manufacturer and exporting partner has to face the consequences of the same. So, the manufacture and importer have to be well-aware of t8he role of custom duty on import and also have to be updated about the taxes and customs clearances before going through any import and export process.