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Use of tariff to calculate Customs Duty

Duties of Customs :Imports

First Schedule Surcharge Additional Duty
(Equal to Excise Duty)
Special Additional Duty Anti Dumping Duty Other Additional Duties  

Duties of Customs become payable when there is import into India. Accordingly, customs duty would be levied on such goods and the amount of duty has to be determined. There are several types of duties leviable on import and there are prescribed methods of computation of duties. It is useful to consider the following steps in determining the amount of duty payable.

(1) Obtain the Tariff Classification of goods.

(2) Compute the (i) Basic Customs Duty,

    (ii) Surcharge

    (iii) Additional Duty of Customs (equal to excise duty) and

    (iv) Special Additional Duty.

(3) Determine if there are any additional levies under different statutes

(4) Whether there are concessions and exemptions available on the item.

(1) Tariff Classification

Since there are thousands of different goods, which are imported into India, it is not possible to prescribe rates of duty for each type of merchandise. Therefore, all goods are classified into categories (called "headings" and "subheadings") for the purpose of levy of duty. For each sub-heading, a specific rate of duty has been prescribed. The process of assigning the goods to a "headings" or a "subheadings" is known as "Classification of Goods" i.e. determination of heading or sub-heading under which a particular item is covered. The classification is as per the Schedules to the Customs Tariff Act, 1975, commonly referred to as the tariff, and is based on the Harmonized System of Nomenclature (HSN) which has been established by the World Customs Organization.

The import invoice would indicate all items of purchase. If you wish to compute the total duty payable on each of the items, you have to first identify the various types of duties leviable on each of the items. For this purpose, you are required to determine the classification of each of the items of import as given in the import invoice based on your understanding of the item description. The rules of to be followed while determining the classification have been given in the General Rules of Interpretation of the First Schedule to the Customs Tariff Act,1975.

2) Computing the

(i) Basic Customs Duty

(ii) Surcharge

(iii) Additional duty of customs

(iv) Special additional duty

Under the Custom Tariff Act, 1975 and other laws, there are various types of duties which are leviable. As a first step, the following three types of customs duties have to computed:-

(i) Duty which is specified against each Heading or Sub-Heading in the First Schedule to the Customs Tariff Act, 1975. This is usually referred to as Basic Customs Duty. There are different rates of duty for different commodities. You may find these rates in column no. 4 (labeled as "standard rates") of the tariff . There is also a 5th column specifying the "preferential rates". These are different rates of duty for goods imported from certain countries in terms of bilateral or other agreements with such countries--which are called preferential rates of duties. The duty may be a percentage of the value of the goods ( in such cases it is called ad valorem duty) or at a specific rate, which is based on unit of measurement which is specified in the tariff entry. The rate of duty in percentage (in the case of advalorem duties) has to be applied on the Cost Insurance and Freight

(ii)  A Surcharge  at the rate of 10% of the Basic Customs Duty is leviable on imported goods under Section 90 of the Finance Act, 2000 ( unless exempted by a notification).

(iii) Additional duty of customsequal to the, excise duty leviable on like goods produced or manufactured in India. This is levied under Section 3 of Customs Tariff Act, 1975. This is usually referred to as "countervailing duty" (CVD). However, the correct description of this duty is Additional Duty of Customs. In order to determine the applicable rate, you have to obtain the correct classification of the goods under the Central Excise Tariff Act, 1986. The duties under the Central Excise Tariff are on ad valorem basis. However, specific rates have been prescribed for some items. Importantly, the value for the purpose of computing additional duties of  Customs is the total of the assessable value (generally the transaction value - roughly equal to the c.i.f. value) and the basic customs duty.

If you are a manufacturer, importing goods to be used as inputs for manufacture of other goods, you would be generally eligible for obtaining credit (called CENVAT credit) equal to the additional duty of customs paid on the imported goods. This duty amount is eligible for credit under input duty Central Excise Rules, 1944. This credit can be used for paying central excise duties on your manufacture.

(iv) Imported goods are also liable to a Special additional duty at a rate specified in Section 3A of the Customs Tariff Act, 1975. The amount of Special Additional duty is computed by applying this rate on value which is equal to the total of the assessable value, the basic customs duty and the additional duty of customs described above.

(3) Additional Levies

Having computed the above mentioned duties, you have to determine whether there are any additional levies on the particular items you intend to import. Some of the levies are commodity specific and would be applicable regardless of the time of import.  These include cesses under various enactments  as also Additional Duties on specified commodities.

     There are certain other levies which are specific to the country of origin. Please consider the following levies.

    Countervailing Duty on bounty-fed articles is leviable under Section 9, of the Customs Tariff Act 1975. No such duty is however, being levied at present.

    Anti-dumping Duty (under Section 9A, Customs Tariff Act 1975) on specified goods imported from specified countries to protect indigenous industry from injury resulting from dumping of goods. This is notified and published from time to time.

    Safeguard Duty (under Section 8B of the Customs Tariff Act, 1975) is applicable on certain goods at the time of import for specified periods in order to check thier excessivr imports which may be injurious to the Indian industry.

4.  Exemptions:

These exemptions and concessions can be granted in a number of ways.

Some of these exemptions are briefly discussed below :-

Exemption by Notification : The Central Government may notify by publication in the Official Gazette certain exemptions and concessions. Such exemptions or concessions may be conditional or absolute. There are general exemptions given to a variety of items imported under certain conditions These include exemption of imports for promotion of exports, import by UN bodies, defence imports etc.,.. There are also exemptions which are unconditional and are applicable across the board. There are other exemptions based on conditions of end use.

Preferential Rates : Preferential rates of customs duty have been made applicable in respect of imports from certain countries such as Sri Lanka, Mauritius, Seychelles and Tonga provided certain conditions are satisfied. The goods in question must actually be manufactured or produced in such preferential areas. Rules have been framed in order to determine whether the goods have been manufactured or produced in such areas. Determination of origin of the goods is very essential in order to avail of the benefits of such concessional rates of duty.

To ascertain the applicable rate of duty, refer to the Tariff rates of duties along with exemption notification, if any.

First Schedule Surcharge Additional Duty
(Equal to Excise Duty)
Special Additional Duty Anti Dumping Duty Other Additional Duties  

Duties of Customs :Exports

Second Schedule Cesses

Very few items are subjected to customs duties on their export. For details refer to the Second Schedule and the exemption notifications for exports.  However, cesses are leviable on export of several commodities under various Acts.

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