Indian Custom duty and how to optimize your custom duty
Customs Duty is a form of indirect tax which is imposed every time goods are imported from the other country or Exported from India to some other country.
Customs Act 1962 is the basic law governing the collection of custom duty in India. It lays down the detailed guidelines for imposing and collection of custom duty on imports and exports, import-export procedures, prohibitions on import and export of goods etc.
Central Board of Excise & Customs (CBEC) is the apex government body for customs related matters. It is a part of the Department of Revenue which works under the Ministry of Finance. All the policy matters concerning levy of customs and excise duties, prevention of smuggling, narcotics and evasion of duties etc are taken care of by CBEC through its various regional Offices.
Objectives behind imposing Custom Duties:
Among the various reasons for levying Indian Custom Duty, the following are the major ones:
• Conservation of foreign exchange by restricting the imports of goods.
• Protection to our domestic Industry from overseas competition.
• Regulating imports and exports of goods to attain the policy objectives of the Government.
• Controlling the Imports and exports of commodities, especially restrictive and prohibited goods.
There are 3 ways of levying Customs Duty on goods:
1. Specific Duties: – Specific custom duty is a duty levied on each unit of quantity of product imported or exported from India. For example, Rs.50 on each square meter of cloth imported or Rs.1000 on each LCD set imported. In this method of imposing the duty the value is immaterial.
2. Advalorem Duties: When a custom duty is levied as a percentage on a value of goods Imported or Exported it is called Advalorem duty. An example would 10% of the F.O.B. value of goods imported. In this case, quantity of goods imported or exported is not taken into consideration but the emphasis is paid on the value of commodity imported or exported.
3. Compound Duties: – Sometimes custom duty is levied as a combination of specific and advalorem custom duty. In this case both Quantity and Value is taken into consideration to calculate the duty. For example, 10% of total F.O.B. value plus 10 rupee per unit of quantity of goods imported.
The Harmonized Tariff System (HTS) provides duty rates for all the commodities whether exported or imported. HS code is of 8 digit level and each 8 digit HS code denotes a particular type of commodity. Against each 8 digit HS code custom duty is fixed.
Export Import Data India and Indian Export Data are readily available in the market nowadays and are a reliable source to check the custom duty on your products. It helps you to optimize the custom duty payable on your products by choosing the right HS classification used by other importers to import the goods. By choosing the right HS classification/ product description you can save on the custom duty and become more competitive in the market. It also helps you to see the overall market scenario for your products whether you are an Importer or an exporter, it can serve as one of the cheapest but most strategic decision making tool for your organization.