Customs Laws & Duty Drawback (CA Final/ CS Professional)

What is customs law in India?

Customs law is anIndirect Tax levied by the Central Government, either as a tax or a duty. It gets imposed when products are imported into and exported from the country. Customs Law duty is an obligation for a mandatory payment to the government for imports and exports. Customs Law tax is a fee payable to the government on import/export of goods.

What is customs law in India?

In India, the Customs Law primarily depends on the Customs Act 1962 and the Customs Tariff Act 1975.

Salient Features of The Customs Act, 1962

The Customs Act of 1962 regulated imports and exports and talks about the following, among other things –

1. the levy and collection of duties
2. the protection of domestic industry
3. prevention of smuggling and conservation
4. augmentation of foreign exchange

The Act also states that the basis of rates of such duty shall be the provisions of the Customs Tariff Act, 1975. the Customs Tariff Act 1975 contains two Schedules. The first provides classification and rates of duties for imports, while the second focuses on similar details for exports.

Features of Customs Duty

The features are as follows:

1. It gets applied to any movement of goods – be it import or export.
2. Services are not subject to it.
3. It is subject to Education cess.

Types of Customs Duty

1. Basic Customs duty
2. Additional Customs duty/Countervailing Duty
3. Special duty
4. Safeguard Duty, Protective Duties
5. Anti-Dumping Duty
6. Integrated Goods and repair Tax
7. Goods and Services Tax Compensation Cess
8. Social Welfare Charge

Some of the general customs duties are as follows –

1. Basic Customs Duty

It is the standard rate at which the duty gets levied. In most cases, it is a percentage of the product value, as determined by section 14 of the Act. The general rate is 10%. In some cases, the duty can get exempted by a notification under Section 25.

It can have two rates –

1. Standard rates – It gets levied at the quality rates prescribed within the Schedule.
2. Preferential rates – It is leviable just for those countries laid out in the Schedule.

2. Additional Customs Duty/ Countervailing Duty

To make customs duty comparable with the products produced in India, Additional Customs Duty gets levied. It is also called Countervailing Duty.

It gets levied at a rate equal to the excise duty applied to similar products manufactured in India. Special duty gets levied to counterbalance the effect of the nuisance tax, local tax, value-added tax or other charges.

Thanks to GST, additional customs duty and special duty gets levied only in a few cases.

 3. Safeguard Duty, Protective Duty

A safeguard duty gets imposed on goods of domestic industries to protect their interest.

Protective duty gets imposed on imported goods to cover the interests of any industry in India, as recommended by the Tariff Commission.

4. Anti-Dumping Duty

Some countries export goods to India at a price less than the worth they need to be selling in their country. It is often almost like the dumping of products in our country. Therefore, a protective tariff called Anti-dumping duty gets imposed on such goods to safeguard the interests of local industries.

5. Education Cess

Education cess is imposed at a rate that is a percentage of total customs duties. However, If goods are fully exempted from duty, no cess would be levied.

The rate at which education cess is levied is generally 2% along with higher education cess at another 1% of the aggregate of customs duties.

6. Goods & Services Tax Compensation Cess/ GST Compensation Cess

The Government imposed GST Compensation Cess in accordance with the Goods and Services Tax Act 2017. The government levied this cess to compensate states for the possible loss of revenue due to the implementation of GST on 1st July 2017. This cess is only applicable for five years as stated by the GST Council.

7. Social Welfare Surcharge (SWS)

It is leviable on a mixture of duties, taxes and Cesses leviable on such goods. However, SWS does not get charged on the following –

• Safeguard Duty
• Countervailing duty
• Anti-Dumping Duty
• SWS itself on imported goods
• Integrated goods and services tax
• GST compensation Cess

Objectives of Customs Duty in India

The objectives are as follows:

1. To maintain foreign exchange by import restrictions.
2. To protect domestic industries.
3. To reject exports and imports to align with policies and objectives of the government.
4. To maintain exports.
5. To prevent smuggling.
6. To rightfully implement laws relating to foreign exchange.
7. To improve domestic productivity.
8. To increase exports.

Which governing body regulates Customs Duty?

The Central Board of Excise and Customs (CBEC) is in charge of all customs duties and duties on customs. It regulates customs, central excise, service tax, and narcotics. It is a division working under the Ministry of Finance’s Department of Revenue.

What is the type of goods under customs law?

Under the Indian Trade Classification system, the classification of goods is as follows:

1. Free Goods
   This section of goods includes goods that do not have any duties.

1. Prohibited Goods
   The goods classified under this category are strictly prohibited.

1. Restricted Goods
   Such goods get permitted for import or export subject to the guidelines placed by the authority.

Duty Drawback

Duty Drawback is an option of refund offered by the Government of India on duty previously paid. The refund may be complete or partial. The government undertakes this strategy to encourage the export and import of certain crucial items.

The facility is valid for importers who import raw materials and export final products.

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