UNIT-5

CUSTOM DUTY
 CUSTOM DUTY
Custom Act provides for
levy and collection of
duty, import or export
procedure, prohibitions
on importation and
exportation of goods,
penalties, offences etc.
 CUSTOM ACT 1962
 This is the main Act. It provides
for levy and collection of customs
duty. Besides it provides
import/export procedures,
prohibitions on importation and
exportation of goods, penalties,
offences etc.
CUSTOM TARIFF ACT 1975
 The act contains two schedules
 Schedule 1: Gives classification & rate of duties

for imports.
 Schedule 2: Gives classification & rate of duties

for exports.
 In addition the CTA 1975 makes provisions

for duties like additional duty (CVD),

preferential duty, antidumping duty, protective
duty, etc.
 Objectives:
 Regulation of imports and exports
 Governing the import and export

activities
 Prevention of smuggling
 Protection against dumping
 Collection of revenue in the form of

custom duty
 Laying down the procedure for export

and import
 Imposing penalties and punishment for

offences
 Meaning
 Export sec 2(18): means goods taken
out of India to a place out of India

 Importsec 2(23): means goods

brought into India from a place
outside India

 India
sec 2(27): includes territorial
waters of India
Goods sec 2(22)
 Vessels, aircraft and vehicles
 Stores
 Baggages
 Currency and negotiable
instruments
 Any other kind of movable

property
Dutiable goods sec 2(14)
 Meansany goods which are
chargeable to duty on which duty
has not been paid.

 Custom duty is leviable on re-

import goods
Types of custom duty
 The different types of custom
duties are as follows
 Basic Custom Duty: It is the duty

levied on import or export of

goods. The custom duty rates are
different for different
commodities and keeps changing
from time to time.
 Countervailing Duty: Additional custom duty is
referred to as Countervailing duty. It is the
duty levied to counter balance the excise duty,
which is leviable on similar goods if
manufactured in India. CVD is imposed so as
to place the home producer on an equal
footing with the importer of foreign goods. If
excise duty in India for any product is nil, then
CVD on it is also nil. CVD is levied on
assessable value + basic custom duty + any
other sum chargeable on the article.
 General rate is 10% + EC @2% + S& H CESS

@1%
 Special Additional Duty: It is the special CVD
which is charged to counter balance the sales
tax, VAT, local tax or other charges leviable
on purchase or transportation of such similar
goods in India. Cenvat credit can be availed
against special CVD. SAD is not leviable on
those goods which are wholly exempt from
basic custom duty and CVD.
 SAD @ 1% is payable on assessable value +

basic custom duty + CVD

 Protection Duty: duty levied to
protect the interest of Indian
industry as recommended by the
custom tariff act from time to
time. The notification for the same
should be passed in the form of
bill in the parliament and this duty
is valid till the date prescribed in
the notification.
 Anti Dumping Duty: Large
manufactures selling goods at very
low prices compared to prices in the
domestic market so as to dispose of
their excessive stock or to cripple the
domestic industry is called dumping.
Anti dumping duty is the duty levied
on margin of dumping on such
articles.
 Safeguard Duty: If the import of certain goods
are causing or expected to cause any threat
to domestic industry, the central government
has the power to impose safeguard duty.

 National Calamity Contingent Duty (NCCD): It

is the duty which is paid to protect the people
during times of natural calamities. It is
imposed on the products such as panmasal,
chewing tobacco, cigarettes etc.
 Import of Goods
 Import of Goods – The import of
goods has been defined in the
IGST Act, 2017 as bringing goods
into India from a place outside
India. All imports shall be deemed
as inter-state supplies and
accordingly Integrated tax shall
be levied in addition to the
applicable Custom duties.
 Import of services
 Import of services – The import of
services has specifically been
defined under IGST Act, 2017 and
refers to supply of any service
where the supplier is located
outside India, the recipient is
located in India, and the place of
supply of service is in India.
 Import of Goods
1. All imports shall be deemed as inter-state
supplies and accordingly Integrated tax
shall be levied in addition to the applicable
Custom duties.
2. With the introduction of GST, Import of
goods would have no impact on levy of
Basic Customs duty, Education Cess, Anti-
dumping duty, Safeguard duty and the like.
3. However, Integrated Goods and Services
Tax(IGST) will replace the Additional duties
of Customs, which are in common parlance
referred to as Countervailing Duty (CVD)
and Special Additional duty of Customs
(SAD), barring a few exceptions.
 The integrated tax on goods shall
be in addition to the applicable
Basic Customs Duty (BCD) which
is levied as per the Customs Tariff
Act.
 In addition, GST compensation

cess, may also be leviable on

certain luxury and de-merit goods
under the Goods and Services Tax
(Compensation to States) Cess
Act, 2017.
 Imports & Input Tax
Credit 
 Importer being a registered person under
GST can utilize the integrated tax charged
to him on import of goods as input tax
credit.
 This input tax credit can be utilized for

payment of taxes (SGST/CGST/IGST) on his

outward supplies of goods.
 Input tax credit of integrated tax (IGST) and

GST Compensation Cess will be available to

the importer and then will be transferred to
the recipients in the supply chain.
 However, the credit of basic customs
duty (BCD) will not be available.
 But if importer wants to avail input tax

credit of IGST & GST Compensation

Cess, he needs to mandatorily declare
GST Registration number (GSTIN) in
the Bill of Entry.
  Provisional IDs issued by GSTN can be

used during the transition period. But

importer are advised to complete their
registration process for GSTIN.
 As Input tax credit will be available based on
GSTIN declared in the Bill of Entry. Input tax
credit shall be availed by a registered person
only if all the applicable particulars as
prescribed in the Invoice Rules are contained in
the said document, and the relevant
information, as contained in the said document,
is furnished in FORM GSTR-2 by such person.
 Customs EDI system would be interconnected

with GSTN for validation of ITC. Further, Bill of

Entry data in non-EDI locations would be
digitized and used for validation of input tax
credit provided by GSTN.
 Duties at the time of import  
 In the GST regime, IGST and GST
Compensation cess will be levied on imports
by virtue of sub-sections (7) &(9) of Section 3
of the Customs Tariff Act, 1975.
 Barring a few commodities such as pan
masala, certain petroleum products which
attract levy of CVD, majority of imports would
attract levy of IGST.
 Further, a few products such as aerated
waters, tobacco products, motor vehicles etc,
would also attract levy of GST Compensation
Cess, over and above IGST.
 IGST and GST Compensation cess,
wherever applicable, would be levied on
cargo that would arrive on or after 1st
July, 2017.
 Note : It may also be noted that IGST

would also be levied on cargo which

has arrived prior to 1st July but a bill of
entry is filed on or after 1st July 2017.
 Similarly ex-bond bill of entry filed on

or after 1st July 2017 would attract

IGST and GST Compensation cess, as
applicable.
 Inthe case where cargo arrival is
after 1st July and an advance bill
of entry was filed before 1st July
along with the payment of duty,
the bill of entry may be recalled
and reassessed by the proper
officer for levy of IGST and GST
compensation Cess, as applicable.
 GST Compensation Cess

 GST compensation Cess is leviable only

on  55 item descriptions (of supply).
Different rates have been notified for
the same.
 Mostly Compensation cess rates are ad

valorem. But for some exceptional

items specific rates and for a few
others mixed rates have been
prescribed. For eg. Coal  attract
specific rates; Cigarettes attract mixed
rates (ad valorem + specific).
 Listof goods which are
covered under GST compensation
cess  is available on CBEC website
along with their HSN codes and
applicable cess rates.
 The IGST Rates of Goods, Chapter

wise IGST rate, GST Compensation

Cess rates, IGST
Exemption/Concession are
available on CBEC website for trade
and departmental officers as well.