Dr Shakuntala Misra National Rehabilitation University, Lucknow

Faculty of Law

(LAW OF TAXATION)

Assignment
“ANALYSIS OF CUSTOM DUTY (An
Overview)”

By :
Shailesh kumar
8th semester
Roll no:164140060

Under the guidance of:

SAGEER SIR

INDEX
 S.NO TITLE PA TEACHER’S
. GE SIGN.
NO.
1 Introduction 1
2 Custom duty in India 1
3 Import procedure and 1
documents
4 Export procedure 4
5 Types of Custom duty 6
6 Calculation of custom duty 7
7 Conclusion 9
8 Bibliography 10
9
10

Acknowledgement

This project is as result of dedicated effort. It gives me immense pleasure to prepare this project report
on “Analysis of custom duty (An Overview)”
I Would like to thank our project guide Sageer sir for consultative help and constructive suggestion
on the matter in this project . I would like to thanks our parents and our colleagues who have helped
me in making this project a successful one.

Thanks

Introduction

‘Customs Duty’ refers to the tax imposed on the goods when they are transported across the
international borders. The objective behind levying customs duty is to safeguard each nation’s
economy, jobs, environment, residents, etc., by regulating the movement of goods, especially
prohibited and restrictive goods, in and out of any country.

CUSTOM DUTY IN INDIA

Custom Duty in the country falls under the Customs Act, 1962. As per this act, the
government levies duties on both import and export of goods along with their procedures,
prohibitions, penalties etc. Matters pertaining to this duty fall under the CBEC (Central Board
of Excise and Customs), a division of the Department of Revenue of the Ministry of Finance.

The CBEC helps in formulating policies w.r.t. the collection and imposition of custom duties
including custom duty evasions, prevention of smuggling etc. It oversees the tax
administration of inland and foreign travel. It has different divisions to take care of field work
such as the Commissionerate of Customs, Central Revenues Laboratory and Directorates etc.

IMPORT PROCEDURE AND DOCUMENTS

 BILL OF ENTRY

Bill of entry is one of the major import document for import customs clearance. As explained
previously, Bill of Entry is the legal document to be filed by CHA or Importer duly signed.
Bill of Entry is one of the indicators of ‘total outward remittance of country’ regulated by
Reserve Bank and Customs department. Bill of entry must be filed within thirty days of
arrival of goods at a customs location.

Once after filing bill of entry along with necessary import customs clearance documents,
assessment and examination of goods are carried out by concerned customs official. After
completion of import customs formalities, a ‘pass out order’ is issued under such bill of entry.
Once an importer or his authorized customs house agent obtains ‘pass out order’ from
concerned customs official, the imported goods can be moved out of customs. After paying
necessary import charges if any to carrier Documents required for import customs clearanceof
goods and custodian of cargo, the goods can be taken out of customs area to importer’s place.
For further read: How to file Bill of Entry online? How to file Bill of Entry manually? Can
Bill of Entry be filed before arrival of goods at destination?

Commercial Invoice.

Invoice is the prime document in any business transactions. Invoice is one of the documents
required for import customs clearance for value appraisal by concerned customs official.
Assessable value is calculated on the basis of terms of delivery of goods mentioned in
commercial invoice produced by importer at customs location. I have explained about the
method of calculation of assessable value in another article in same web blog. The concerned
appraising officer verifies the value mentioned in commercial invoice matches with the actual
market value of same goods. This method of inspection by appraising officer of customs
prevents fraudulent activities of importer or exporter by over invoicing or under invoicing. So
Invoice plays a pivotal role in value assessment in import customs clearance procedures.
Read more: How to prepare Commercial Invoice? Contents of Commercial Invoice.
Difference between proforma Invoice and Commercial Invoice. Howmany types of Bills of
Entry in India?

Bill of Lading / Airway bill :

BL/AWB is one of the documents required for import customs clearance.

Bill of lading under sea shipment or Airway bill under air shipment is carrier’s document
required to be submitted with customs for import customs clearance purpose. Bill of lading or
Airway bill issued by carrier provides the details of cargo with terms of delivery. I have
discussed in detail about Bill of Lading and Airway bill separately in this website. You can go
through those articles to have a deep knowledge about documents required for import customs
clearance. Read more about: Different types of Bill of Lading When to release Bill of
Lading? Importance of Bill of Lading

Import License

As I have mentioned above, import license may be required as one of the documents for
import customs clearance procedures and formalities under specific products. This license
may be mandatory for importing specific goods as per guide lines provided by government.
Import of such specific products may have been being regulated by government time to time.
So government insist an import license as one of the documents required for import customs
clearance to bring those materials from foreign countries.

Insurance certificate

Insurance certificate is one of the documents required for import customs clearance
procedures. Insurance certificate is a supporting document against importer’s declaration on
terms of delivery. Insurance certificate under import shipment helps customs authorities to
verify, whether selling price includes insurance or not. This is required to find assessable
value which determines import duty amount.

Purchase order/Letter of Credit

Purchase order is one of the documents required for import customs clearance. A purchase
order reflects almost all terms and conditions of sale contract which enables the customs
official to confirm on value assessment. If an import consignment is under letter of credit
basis, the importer can submit a copy of Letter of Credit along with the documents for import
clearance. Also read How does Letter of Credit work?

Technical write up, literature etc. for specific goods if any

Technical write up, literature of imported goods or any other similar documents may be
required as one of the documents for import clearance under some specific goods. For
example, if a machinery is imported, a technical write up or literature explaining it’s function
can be attached along with importing documents. This document helps customs official to
derive exact market value of such imported machinery in turn helps for value assessment.
Industrial License if any

An industrial license copy may be required under specific goods importing. If Importer claims
any import benefit as per guidelines of government, such Industrial License can be produced
to avail the benefit. In such case, Industrial license copy can be submitted with customs
authorities as one of the import clearance documents.

RCMC. Registration cum Membership Certificate if any

For the purpose of availing import duty exemption from government agencies under specific
goods, production of RCMC with customs authorities is one of the requirements for import
clearance. In such cases importer needs to submit Registration Cum Membership Certificate
along with import customs clearance documents.

Test report if any

The customs officials may not be able to identify the quality of goods imported. In order to
assess the value of such goods, customs official may draw sample of such imported goods and
arranges to send for testing to government authorized laboratories. The concerned customs
officer can complete appraisement of such goods only after obtaining such test report. So test
report is one of the documents under import customs clearance and formalities under some of
specific goods.

DEEC/DEPB /ECGC or any other documents for duty benefits

If importer avails any duty exemptions against imported goods under different schemes like
DEEC/DEPB/ECGC etc., such license is produced along with other import clearance
documents.

Central excise document if any

If importer avails any central excise benefit under imported goods, the documents pertaining
to the same need to be produced along with other import customs clearance documents.

GATT/DGFT declaration.

As per the guidelines of Government of India, every importer needs to file GATT declaration
and DGFT declaration along with other import customs clearance documents with customs.
GATT declaration has to be filed by Importer as per the terms of General Agreement on Tariff
and Trade.

Any other specific documents other than the above mentioned,

Apart from the above mentioned documents, importer has to file additional documents if any
required as per the guidelines of government / customs department under import of specific
goods.

EXPORT PROCEDURE
 Receipt of an Order

The exporter of goods is required to register with various authorities such as the income tax
department and Reserve Bank of India (RBI). In addition to this, the exporter has to appoint agents
who can collect orders from foreign customers (importer). The Indian exporter receives orders either
directly from the importer or through indent houses.

Obtaining License and Quota

After getting the order from the importer, the Indian exporter is required to secure an export license
from the Government of India, for which the exporter has to apply to the Export Trade Control
Authority and get a valid license. You can get a license from here too. The quota is referred to as the
permitted total quantity of goods that can be exported.

 Letter of Credit

The exporter of the goods generally ask the importer for the letter of credit, or sometimes the importer
himself sends the letter of credit along with the order.

 Fixing the Exchange Rate

Foreign exchange rate signifies the rate at which the home currency can be exchanged with the foreign
currency i.e. the rate of the Indian rupee against the American Dollar. The foreign exchange rate
fluctuates from time to time. Thus, the importer and exporter fix the exchange rate mutually.

 Foreign Exchange Formalities

An Indian exporter has to comply with certain foreign exchange formalities under exchange control
regulations. As per the Foreign Exchange Regulation Act of India (FERA), every exporter of the goods
is required to furnish a declaration in the form prescribed in a manner.

The declaration states:-

 The foreign exchange earned by the exporter on exports is required to be disposed of in the
manner specified by RBI and within the specified period.
 Shipping documents and negotiations are required to be done through authorised dealers in
foreign exchange.
 The payment against the goods exported will be collected through only approved methods.

 Preparation for Executing the Order

The exporter should make required arrangements for executing the order:

 Marking and packing of the goods to be exported as per the importer’s specifications.
 Getting the inspection certificate from the Export Inspection Agency by arranging the pre-
shipment inspection.
  Obtaining insurance policy from the Export Credit Guarantee Corporation (ECGC) to get
protection against the credit risks.
 Obtaining a marine insurance policy as required.
 Appointing a forwarding agent (also known as custom house agent) for handling the customs
and other related matters.

 Formalities by a Forwarding Agent

The formalities to be performed by the agent include –

 For exporting the goods, the forwarding agent first obtains a permit from the customs
department.
 He must disclose all the required details of the goods to be exported such as nature, quantity,
and weight to the shipping company.
 The forwarding agent has to prepare a shipping bill/order.
 The forwarding agent is required to make two copies of the port challans and pays the dues.
 The master of the ship is responsible for the loading of the goods on the ship. The loading is to
be done on the basis of the shipping order in the presence of customs officers.
 Once the goods are loaded on the ship, the master of the ship issues a receipt for the same.

 Bill of Lading

The Indian exporter of the goods approaches the shipping company and presents the receipt copy
issued by the master of the ship and in return gets the Bill of Lading. Bill of lading is an official receipt
which provides the full description of the goods loaded on the ship and the name of the port of
destination.

 Shipment Advise to the Importer

The Indian exporter sends shipment advice to the importer of the goods so that the importer gets
informed about the dispatch of the goods. The exporter sends a copy of the packing list, a non-
negotiable copy of the Bill of Lading, and commercial invoice along with the advice note.

 Presentation of Documents to the Bank

The Indian exporter confirms that he possesses all necessary shipping documents namely;

Marine Insurance Policy

The Consular Invoice

Certificate of Origin

The Commercial Invoice

The Bill of Lading

Then the exporter draws a Bill of Exchange on the basis of the commercial invoice. The Bill of
Exchange along with these documents is called Documentary Bill of Exchange. The exporter then
hands over the same to his bank.

 The Realisation of Export Proceeds

In order to realise the proceeds of the export, the exporter of the goods has to undergo specific banking
formalities. On submission of the bill of exchange, these formalities are initiated. Generally, the
exporter receives payment in foreign exchange.

Customs Duties are classified as follows:

 Basic Customs Duty (BCD)

 Additional Customs Duty or Special CVD
 Protective Duty
 Countervailing Duty (CVD)
 Anti-dumping Duty
 Education Cess on Custom Duty.

While revenue is a paramount consideration, Customs duties may also be levied to protect the
domestic industry from foreign competition. The government uses this duty to raise its
revenues, safeguard domestic industries, and regulate the movement of goods. It is beneficial
for many reasons. For instance, it ensures a country’s economic stability, jobs, environment,
among others. The rate of Customs duty varies depending on where the goods were made and
what they were made of. To simplify it, any tariff that is introduced on goods across national
borders is referred to as a custom duty.

Types of Custom Duty

Custom duties are levied on nearly all goods that are imported into the nation. While export
duties are levied on goods as specified by the Second Schedule, import duties are not levied
on certain items like fertilizers, food grains, lifesaving drugs etc. Custom duty can be
classified into the following types:

 Basic Customs Duty: This duty is imposed on the value of goods at a specified rate as it
is fixed on an ad-valorem basis. After being amended time and again, it is currently
regulated by the Customs Tariff Act, 1975. The Central Government, however, holds the
rights to exempt specific goods from this tax.
 Countervailing Duty: CVD or Additional Customs Duty is levied on imported goods
that fall under Section 3 of the Customs Tariff Act of 1975. It is the same as the Central
Excise Duty which is levied on similar goods that are produced in India.
 Education Cess: The cess used to be levied at 2% and an additional 1% of the aggregate
of customs duties.
 Protective Duty: This duty is imposed in order to shield the domestic industry against
the imports at rates that are recommended by the Tariff Commissioner.
 Safeguard Duty: As the name suggests, this duty serves as a means of safeguarding the
rise in exports. Sometimes, if the government feels that a rise in exports can damage the
existing domestic industry, it may levy this duty.
 Anti-Dumping Duty: This duty is based on the dumping margin, i.e. the difference
between the export price and the normal price. It is only imposed when the goods that are
imported are below the fair market price.

Calculating Custom Duty

Custom duty can be calculated on either a specific or an ad valorem basis. The value of
goods, for the latter, is determined by Rule 3(i) of the Customs Valuation Rules, 2007. If
there are no quantifiable data w.r.t. valuation factors, then the valuation of the items is
done using other means based on a system of hierarchy, as follows:

Comparative Value Method: This method compares transaction values of items similar
in nature (Rule 4)

 Deductive Value Method: This method uses the sale price of items in the importing
country (Rule 7)
 Comparative Value Method: This method uses costs related the fabrication,
materials as well as profit in the production country (Rule 8)

 Fallback Method: This method is based on the earlier methods that offer higher
flexibility (Rule 9)

Custom Duty Online

The portal that contains online custom duty is the ICEGATE or Indian Customs Electronic
Commerce/Electronic Data Interchange (EC or EDI) Gateway. It allows the clients of the
Customs Department an e-filing service that includes trade and cargo carriers, which is
collectively known as Trading Partner. Through ICEGATE, one can do an electronic filing of
Bill of Entry and shipping bills along with messages between the trading partner and customs
through email, web upload or FTP. This portal particularly helps airline and shipping agents
who file their manifests. Additionally, cargo logistics as well as custodians are able to have
interactions with customs EDI for pieces of information related to cargo and logistics. Besides
e-filing, document tracking, e-payment, online registration of IPR, PAN based CHA data,
code status and verification of certain licenses can be done too. For any queries and issues, the
24*7 helpdesk can be contacted by trading partners.
 Payment of Custom Duty

In the world of the internet, payment of custom duty hasn’t been left far behind. It can easily
be paid online with a few simple steps:

 First, access the e-payment portal of ICEGATE Then, enter the import or export
code or simply key in the login credentials given by ICEGATE
 Finally, click on e-payment
 You will be able to check all the e-challans that are in your name
 You can then select the challan which you have to pay and choose the payment
method or select the bank
 You will be redirected to the payment gateway of the bank
 Initiate the payment
 Once it is done, you will be redirected to the ICEGATE portal
 The last step would be to click on the print button and save the payment copy.

Custom Duty Calculator

This calculator serves as a simple tool for calculating the custom duty you have to pay. You
can gain access to it at the ICEGATE portal. Upon accessing the custom duty calculator, you
will have to enter the CTH or HS Code of the goods that you plan to import. You will have to
enter a description of maximum 30 characters and then select the country of origin, be it for
preferential duty or antidumping. If you want to see the list of goods, then simply click on the
search tab and the list matching your criteria will appear. You can choose the right one and
then gain access to a chart loaded with relevant information. In this dynamic chart, you can
enter the values to check the exact custom duty you ought to pay.

Custom Duty Rates

These rates can either be specific or ad valorem. The duty, in general, varies from the range 0-
150%. The average rate, however is 11.90%. There is a list to refer to for goods that are
exempted from this duty.

There are other types of fee that are applicable to custom duty. Thy include:

 LC: Landing charge – 1% CIF

 CVD: Countervailing Duty – 0%, 6% or 12% (CIFD + LC)
 CEX: Education and Higher Education Cess – 3% CVD
 CESS: Education + Higher Education – 3% (Duty + CEX (Education and Higher
Education Cess) + CVD)
 Additional CVD: 4% (CIFD + LC + CVD + CESS + CEX)
CONCLUSION

So, Customs Duty is levied when goods are transported across borders between countries. It
refers to the tax imposed on goods when they are transported across international borders. It is
a kind of tax imposed upon goods” imported or exported. It is the tax that governments
impose on the export and import of goods. These duties are imposed by the government on
different rates. The rates of customs duties are either specific or on an ad valorem basis, that
is, it is based on the value of goods. Duties, or tariffs, are either based on the value of the
goods (ad valorem duties), some other factors such as weight or quantity (specific duties) or a
combination of value and other factors (combined duties). While value-based duties are called
Valorem duties, quantity-based duties are called specific duties. When it is levied on imported
goods, it is termed import duty and the same will be known as an export duty when it is
imposed on goods exported. It regulates the movement of goods in and out of the country.
Depending on the context, import duty may also be known as a customs duty, tariff, import
tax or import tariff.
 BIBLIOGRAPHY

 https://cleartax.in/s/customs-duty-india
 https://www.assignmentpoint.com/business/economics/customs-duty.html#:~:text=It%20is
%20a%20kind%20of,on%20the%20value%20of%20goods.
 https://www.coverfox.com/personal-finance/tax/custom-duty/
 https://howtoexportimport.com/Documents-required-for-import-customs-clearance-
159.aspX
 https://cleartax.in/s/export-procedure