Customs Law - Types of Duties

 

Indirect Taxation

Customs Law

Types of Duties

 

Following are the different types of customs duties:

1)     Basic Customs Duty (As per Sec 12 of the Customs Act, 1962);

2)     Social Welfare Surcharge (w.e.f. 2nd February, 2018);

3)     Integrated Goods and Services Tax (IGST);

4)     GST Compensation Cess;

5)     Protective Duties;

6)     Safeguard Duty;

7)     Anti-dumping duty.

 

 

1.   Basic Customs Duty

(Sec. 12 of the Customs Act, 1962):

Goods imported into India are chargeable to basic customs duty (BCD) under Customs Act, 1962. The rates of BCD are indicated in I Schedule (for Imports) of Customs Tariff Act, 1975.  Generally, BCD is levied at standard rate of duty but if certain conditions are satisfied (below), the importer can avail the benefit of preferential rate of duty on imported goods. Preferential rate of duty is lower than standard rate of duty.

 

Conditions for availing the benefit of preferential rate of duty:

      i)   Specific claim for preferential rate must be made by    the importer,

 ii)  Import must be from preferential area as notified by the Central Government,

  iii)  The goods should be produced/manufactured in such preferential area.

2.   Social Welfare Surcharge:

   Social Welfare Surcharge @ 10% on the aggregate duties of customs is levied at the time of import. If goods are Gold, Silver including that plated with platinum or in semi-manufactured form or in powder form, SWS shall be calculated @3%.

 

The Social Welfare Surcharge shall be calculated @ 10% on the aggregate of duties and taxes and cesses which are levied and collected by the Central Government u/s 12 of the Customs Act, 1962.

 

The following are excluded while calculating the Social Welfare Surcharge:

i.        The Safeguard duty section 8B and 8C of the Customs Tariff Act,

ii.      The Countervailing duty on subsidized articles Sec 9 of the Customs Tariff Act,

iii.    The Anti-dumping duty section 9A of the Customs Tariff Act,

iv.    The IGST section 3(7) of the Customs Tariff Act,

v.      The Compensation Cess to States section 3(9) of the Customs Tariff Act,

 

3.    Integrated Goods and Services Tax (IGST):

IGST (Integrated Goods and Services Tax) is a component under GST law, which is levied on goods being imported into India from other country. It has subsumed various customs duties including Countervailing Duty (CVD) and Special Additional Duty of Customs (SAD).

 

In the GST regime, IGST will be levied on imports by virtue of sub - section (7) of Section 3 of the Customs Tariff Act, 1975. IGST wherever applicable, would be levied on cargo that would arrive on or after 1st July, 2017. 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, as applicable. In the 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 as applicable.

 

4.   GST Compensation Cess:

Under GST regime, Compensation Cess will be charged on luxury products like high-end cars and demerit commodities like pan masala, tobacco and aerated drinks for the period of 5 years in order to compensate states for loss of revenue.

 

In the GST regime, IGST will be levied on imports u/s 3(9) of the Customs Tariff Act, 1975.

 

GST Compensation cess, wherever applicable, would be levied on cargo that would arrive on or after 1st July, 2017. Similarly ex-bond bill of entry filed on or after 1st July 2017 would attract GST Compensation cess, as applicable. In the 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 GST compensation Cess, as applicable.

 

The value of the imported article for the purpose of levying GST Compensation cess shall be = Assessable value + Basic Customs Duty + Social Welfare Surcharge + Health and Education Cess + Anti – dumping Duty + Safeguard Duty.

 

5.   Protective Duty:

A duty imposed on imported goods for the protection of the interests of any industry established in India on the recommendation of Tariff Commission. It is effective only and inclusive of the date, if any, specified in the First Schedule of the Tariff.

 

6.   Safeguard Duty:

Safeguard duty is product specific. The duty imposed under this section shall be in force for a period of 4 years from the date of its imposition and can be extended with the total period of levy not exceeding 10 years.

 

Safeguard duty shall not apply to articles imported by a 100% EOU undertaking or a unit in a FTZ or in a SEZ unless specifically made applicable.

 

The Central Government may, pending the determination under sub-section (1) of Section 8B, impose a provisional safeguard duty under this sub-section on the basis of a preliminary determination that increased imports have caused or threatened to cause serious injury to a domestic industry;

 

Provided that where, on final determination, the Central Government is of the opinion that increased imports have not caused or threatened to cause serious injury to a domestic industry, it shall refund the duty so collected;

 

Provided further that the provisional safeguard duty shall not remain in force for more than two hundred days from the date on which it was imposed.

 

When shall the safeguard duty under section 8B of the Customs Tariff Act, 1975 be not imposed?

The safeguard duty u/s 8B of the Customs Tariff Act, 1975 shall not be imposed on the import of the following types of articles:

i)           Articles originating from a developing country, so long as the share of imports of that article from that country does not exceed 3% of the total imports of that article into India;

ii)         Articles originating from more than one developing country, so long as the aggregate of imports from developing countries each with less than 3% import share taken together does not exceed 9% of the total imports of that article into India;

 

iii)       Articles imported by a 100% EOU or units in a Free Trade Zone or Special Economic Zone unless the duty is specifically made applicable on them.

 

7.   Anti-dumping duty:

It is imposed on imports of a particular country. Where any article is exported by an exporter to India at less than its normal value (market value in India), then, upon the importation of such article into India, the Central Government, may impose an anti-dumping duty.

 

As per the notification, the anti-dumping duty will be equal to the difference between the Market value of imported goods and the landed value of the commodity as imported.

 

 

Customs Law

Types of Duties

Selected Problems and Solutions

 

Illustration: 1

X Transport company imported Rolls Royce car for the purpose of providing output services by way of transportation of passengers. Following are the cost & other details-

Particulars	Rs
Cost of vehicle (Assessable value)	300,00,000
Custom duty	10%
IGST	28%
Compensation cess	20%

 

X Transport Company Limited is eligible to take Input tax credit and have output IGST liability of Rs 120 Lakh. Calculate tax liability towards Custom duty & GST liability.

 

Illustration: 2

a)        Determine the safeguard duty payable by X Ltd., under section 8B of the Customs Tariff Act, 1975 from the following: X Ltd imported Sodium Nitrite from a developing country from 26th February, 2015 to 25th February, 2016 (both days inclusive) Rs 50 crores. Total imports of Sodium Nitrite (including developing country) is Rs 2,500 crores.

Note: Safeguard duty is @ 30%.

 

b)        Whether your answer is different in case of import of Sodium Nitrite from a developing country Rs 80 crores?

 

Solution: 2

a) Since, import of Sodium Nitrite by X Ltd. from a developing country is only 2% i.e. does not exceed 3% of total import of the same article into India, safeguard duty payable by X Ltd. is nil.

 

b) In this case, import of Sodium Nitrite by X Ltd. from a developing country is 3.2% i.e. more than 3% of total import of the same article into India. Therefore, safeguard duty of Rs 24 crores (i.e. Rs 80 crores × 30%) will be payable by X Ltd.

 

Illustration: 3

Determine the safeguard duty payable by X Ltd., Y Ltd., Z Ltd. and A Ltd. under section 8B of the Customs Tariff Act, 1975 from the following:

 

Imports of Sodium Nitrite from developing and developed countries from 26th February, 2015 to 25th February, 2016 (both days inclusive) are as follows:

 

Importer	Country of Import	Rs (in Crores)
X Limited	Developing Country – 1	70
Y Limited	Developing Country – 2	72
Z Limited	Developing Country – 3	52
A Limited	Developing Country – 4	50
Others	Developed Country	2,256
Total		2,500

 

Note: Safeguard duty 30%.

 

Illustration: 4

Determine the safeguard duty payable by X Ltd., Y Ltd., and Z Ltd. and A Ltd. under section 8B of the Customs Tariff Act, 1975 from the following:

 

Imports of Sodium Nitrite from developing and developed countries from 26th February, 2015 to 25th February, 2016 (both days inclusive) are as follows:

Importer	Country of Import	Rs (in Crores)
X Limited	Developing Country – 1	70
Y Limited	Developing Country – 2	82
Z Limited	Developing Country – 3	52
A Limited	Developing Country – 4	50
Others	Developed Country	2,246
Total		2,500

 

Note: Safeguard duty 30%.

 

Illustration: 5

A commodity is imported into India from a country covered by a notification issued by the Central Government under section 9A of the Customs Tariff Act, 1975. Following particulars are made available:

CIF value of the consignment: US$25,000

Quantity imported: 500 kgs.

Exchange rate applicable: Rs 60=US$1

Basic customs duty: 12%

Social Welfare Surcharge is applicable as per the Finance Act, 2018.

 

As per the notification, the anti-dumping duty will be equal to the difference between the cost of commodity calculated @ US$70 per kg and the landed value of the commodity as imported.

 

Appraise the liability on account of normal duties, cess and the anti-dumping duty.

 

Assume that only ‘basic customs duty’ (BCD) and Social Welfare Surcharge are payable. IGST @12% shall also be applicable.

 

Illustration: 6

A commodity is imported into India from a country covered by a notification issued by the Central Government u/s 9A of the Customs Tariff Act, 1975. Following particulars are made available:

a)         Assessable Value for levying Basic Customs Duty: Rs 12, 62,500.

b)         Quantity imported: 500 kgs.

c)         Basic customs duty: 10%

d)         IGST: 18%

 

As per the notification, the anti-dumping duty will be equal to the difference between the cost of commodity calculated @ US$ 50 per kg (Exchange Rate is 1 US$ = Rs 70) and the landed value of the commodity as imported.

 

Appraise the liability on account of normal duties and the anti-dumping duty.