Customs Duty on Imported Goods

CA Ruby Bansal , Last updated: 14 December 2023
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Customs duty is a indirect tax which is imposed on goods when they cross international borders. It serves to protect a country's economy, jobs, environment, and residents by regulating the movement of goods. This type of indirect tax applies to both imports and certain exported items. Import tariffs and export duties are terms used for taxes on imported and exported goods, respectively. Customs duties can be based on the value of goods, weight, or other criteria.

Budget 23 Update

Key points regarding the customs duty changes announced in the Union Budget 2023:

The concessional duty on lithium-ion cells will be extended for another year. This measure aims to support and promote the use of lithium-ion cells, which are commonly used in batteries for various electronic devices.
The custom duty on camera lenses has been reduced to 2.50%.
The custom duty on open cells of LED TV panels has been decreased to 2.50%.
Custom duty for camera lenses used in mobile phones has been reduced.
Denatured ethyl alcohol has been exempted from basic customs duty.
Basic customs duty has also been reduced on acid grade fluorspar and crude glycerin.
Basic customs duty on seeds used in the manufacture of Lab Grown Diamonds has also been reduced.
National Calamity Contingent Duty on specified cigarettes has been revised upwards by about 16%
The basic customs duty on crude glycerin for use in manufacture of epicholorhydrin is proposed to be reduced from 7.5% to 2.5%.

Types of Customs Duty levied on all goods imported

Customs duty calculation is governed by the Customs Act, 1962. The Central Board of Indirect Taxes and Customs (CBIC) administers customs duty and related taxes. The type of Customs Duty levied on all goods imported are :

Basic Customs Duty (BCD)

BCD is the most common type of customs duty.
Calculated as a percentage of the assessable value of imported goods.
Assessable value includes the cost of goods, insurance charges, and freight charges for transporting the goods to India.

Additional Customs Duty (ACD) or Countervailing Duty (CVD)

ACD is levied on certain imported goods produced in India.
Charged at the same rate as the excise duty applicable to similar goods produced domestically.

Other Customs Duties

Education Cess and Secondary and Higher Education Cess are additional charges on the total customs duty payable.
Education Cess is 2%, and Secondary and Higher Education Cess is 1% of the total customs duty.

Anti-Dumping Duty

Imposed on certain imported goods priced lower than their normal value in the country of origin.
Aims to protect the domestic industry from unfair competition.

Step to calculate customs duty

Step-by-step guide to calculating customs duty are :

Determine Assessable Value

Add the cost of goods, insurance charges, and freight charges to find the assessable value.
Accurate information is crucial to avoid penalties.

Identify Customs Duty Rates

Consult the customs tariff schedule to find rates based on goods type, origin, and HSN classification.

Calculate Basic Customs Duty

Primary duty, calculated as a percentage of the assessable value.
Rate found in the customs tariff schedule.

Calculate Additional Customs Duty (CVD)

Also known as Countervailing Duty (CVD).
Levied to offset domestic taxes and subsidies.
Calculated as a percentage of assessable value plus basic customs duty.
0% to 12% (depends upon the goods)

Calculate Education Cess and Other Charges

Education cess is a 2% surcharge on the total customs duty payable.
Some goods may attract additional charges like Anti-dumping Duty (ADD), Safeguard Duty (SGD), or Special Additional Duty (SAD).

Apply Exemptions and Concessions

Consider eligibility for customs duty exemptions or concessions based on import category or country of origin.

Published by

CA Ruby Bansal
(Finance Professional)
Category Custom Report