Use of tariff to calculate Customs Duty
Duties of Customs :Imports
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
(1) Obtain the Tariff Classification of goods.
(2) Compute the (i) Basic Customs Duty,
(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
(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
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
(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
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.
These exemptions and concessions can be granted in
a number of ways.
Some of these exemptions are briefly discussed
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.
Duties of Customs :Exports
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.