Import Tax in India

Goods as well as services bought from the foreign countries are subjected to import tax in India.
Recently, the special duty exemption scheme has released the importers from the burden of
paying import duty for those import items which will facilitate production of export goods.

Certain input norms and output norms have been developed for approximately 4,200 items and
these norms have been formulated to decide the quantity of duty-free inputs to be imported for
the production of a specific export item. The Export Promotion Capital Goods Scheme (EPCG)
is the latest addition in the import tax structure which serves to provide deductions in import duty
on capital goods. But the deductions under the Export Promotion Capital Goods (EPCG) Scheme
are available only after conforming with the export obligations like providing a statement of
exports as per Appendix-10 C of the scheme and the statement is required to be certified by a
Chartered accountant.

Certificates issued by jurisdictional excise authorities as a proof of the import of goods, a

statement or certificate from the respective bank of the importer, confirming that the foreign
exchange is accepted through a proper banking channel. The importer needs to receive a
certificate proving that the export obligation has been discharged from the licensing authorities
to carry on import activities. The Export Promotion Capital Goods (EPCG) Scheme facilitates
varied sectors like the air cargo sector, the tourism as well as its associated sectors, the hotel
industry, the tertiary sector. Under the Export Promotion Capital Goods (EPCG) Scheme, most
of the import items related to the above mentioned industries are exempted from the payment of
any amount towards import duties.

The category of Import tax in India also include basic duty which is zero for certain import
items, however, the maximum basic duty imposed on an imported item is 65 %. Countervailing
duties, excise duties and regulatory duties in addition to basic duty also form apart of the Import
tax in India. The total import tax levied on luxury items may rise as high as 150 %.

Import Tax in India also includes tariffs that are applied to foreign goods. Tariffs are charged by
customs official to allow the landing of the imported goods in the port. The purpose behind
levying tariffs is mainly to protect the domestic industries from foreign competition. Tariffs
serve to protect the domestic industries through-the revenue tariffs and the protective tariff. The
revenue tariffs contain certain set rates to apply on the imports to increase the revenue earning of
the government. Whereas protective tariffs serve to superficially amplify the cost of the imported
goods so that the buyer has to pay more money for the purchase of an imported good which can
be purchased at a lesser price from an indigenous manufacturer.

Tariffs are of 2 kinds - the ad valorem tariffs and the specific tariffs. The ad valorem tariffs
comprise of a pre-decided rate on the price of the imported goods. The ad valorem tariffs offer
the advantage of earning more revenues with the increase in the price of the imported goods. The
specific tariffs are those which maintain the payment of a fixed sum of money for imported
goods. Indian tariffs are categorized as per the Harmonized Commodity Description and Coding
System. The Customs Act acts as the guideline for the application of tariffs on imported goods
and also for formulating rules for the valuation of customs. The Customs Tariff Act provides
guidance as to the rates of tariffs, anti-dumping, as well as countervailing duties.

India levies import tax on a wide range of articles and some of the significant commodities are as
follows: