THE CUSTOM ACT OF INDIA

Author – Sandhya Pant (The ICFAI University, Dehradun)

INTRODUCTION

Customs law is a branch of indirect tax law that governs the import and export of goods across international borders. It regulates the collection of duties on imported goods and imposes restrictions on exports and imports[1]. Custom duty [2]is a tax levied on goods imported into a country. The rate of customs duty is usually determined by the value of the goods, their weight or volume, or a combination of these factors[3]. The customs authorities collect the customs duty at entry into the country. Customs law also governs the procedures for the clearance of goods through customs. This includes the submission of customs declarations, the payment of duties and taxes, and the inspection of goods by customs officials. Customs law also imposes restrictions on the import and export of certain goods. These restrictions can be quotas, bans, or licensing requirements. Quotas limit the amount of a particular good that can be imported or exported. Bans prohibit the import or export of certain goods altogether. Licensing requirements require importers or exporters to obtain a license before importing or exporting certain goods. Customs law also regulates the valuation of goods for customs purposes. The value of imported goods is used to determine the customs duty payable. Customs authorities use various methods to determine the value of goods, including the transaction value, which is the price paid or payable for the goods, adjusted for certain expenses.

Customs law is an essential branch of indirect tax law that regulates the import and export of goods across international borders. It imposes customs duties on imported goods, restricts the import and export of certain goods, and regulates the procedures for the clearance of goods through customs.

HISTORY

1. history of customs law in India can be traced back to ancient times when various Indian kingdoms levied taxes on goods imported or exported through their territories.
2.  During the Mughal period, customs duties were a significant source of revenue for the Mughal Empire.
3.  During the British colonial period, customs duties played a crucial role in regulating trade and generating revenue for the British Empire. The East India Company, which controlled trade in India, established a system of customs duties to regulate the flow of goods into and out of the country. The first modern customs law in India was introduced in 1834 by the British government, known as the Indian Tariff Act.
4.  After India gained independence in 1947, customs law was regulated by the Indian Customs Act 1962, which is still in force today. The Indian Customs Act provides for the levy of customs duty on goods imported into or exported out of India. The Central Board of Excise and Customs determines the customs duty rates responsible for implementing the customs law in India.[4]
5. Customs law in India also regulates the procedures for the clearance of goods through customs, including the submission of customs declarations, payment of duties and taxes, and inspection of goods by customs officials. The law also provides for the valuation of imported goods and establishes procedures for determining the value of goods for customs purposes.
6. In recent years, the Indian government has introduced several reforms to modernize the customs law in India and make it more transparent and efficient. These include introducing an electronic customs clearance system and implementing a risk-based customs clearance process, which aims to reduce the time and cost of customs clearance while improving compliance with customs regulations.

TYPES OF CUSTOM DUTY

In India, there are mainly five types of customs duties, which are:

1. Basic Customs Duty (BCD[5]): Basic Customs Duty is a duty levied on imported goods [6]as a percentage of their assessable value. The assessable value is determined based on the customs value of the goods, which is the transaction value of the goods plus the cost of freight, insurance, and other charges incurred during transportation.
2. Additional Customs Duty or Countervailing Duty [7](CVD): Additional Customs Duty, also known as CVD, is levied on imported goods to provide a level playing field to domestic manufacturers. It is levied on the assessable value of the goods and is equivalent to the central excise duty levied on similar goods produced in India.
3. Special Additional Duty (SAD[8]): Special Additional Duty is a duty levied on imported goods as a percentage of their assessable value. It is levied on all imported goods except those covered by other duties and is intended to protect domestic industries.
4. Protective Duty: [9]Protective duty is levied on certain imported goods to protect domestic industries vulnerable to competition from imports. This duty is levied in addition to the essential customs duty and is designed to provide temporary protection to domestic industries until they can compete effectively in the global market.
5. Anti-dumping Duty[10]: Anti-dumping duty is a duty levied on imported goods sold in India at a price lower than their average value. This duty is intended to prevent unfair competition from foreign manufacturers selling goods below cost to gain market share in India.

In addition to these duties, India also levies cess on certain imported goods, such as crude oil and petroleum products, to generate revenue for specific purposes. The customs duties and cess rates are periodically revised by the Central Board of Excise and Customs to reflect changes in the economic and trade scenario.

WHY IS CUSTOM TAX IMPORTANT IN INDIA?

Customs duty is crucial in regulating international trade and generating revenue for the Indian government. The importance of customs duty in India can be summarized as follows:

1. Revenue generation: Customs duty is a significant source of revenue for the Indian government. The revenue generated from customs duty is used to finance various developmental programs and infrastructure projects in the country.
2. Protection of domestic industries: Customs duty is often used to protect domestic industries from competition from imported goods. By levying customs duty on imported goods, the government can make them more expensive than domestically produced goods, which can help protect domestic industries and promote their growth.
3. Control of imports: Customs duty is used to regulate the flow of imports into India. By setting tariffs on certain goods, the government can control the number of imports and prevent the importation of goods that may harm the Indian economy, environment, or public health.
4. Promotion of exports: Customs duty is also used to promote exports from India. The government can make exports more competitive and promote their growth by providing exemptions or reduced duty rates on raw materials and intermediate goods used in producing export goods.
5. National security: Customs duty regulates the import of goods that may threaten national security. The government can impose restrictions or prohibit the import of goods that may be used for terrorist activities, espionage, or other activities that threaten national security.

In summary, customs duty is a vital tool for regulating trade and generating revenue for the Indian government. Its importance in promoting economic growth, protecting domestic industries, and ensuring national security cannot be overstated.

CONCLUSION

In conclusion, customs duty is vital to indirect taxation in India. It is an essential source of revenue for the government and is used to regulate international trade, protect domestic industries, promote exports, and ensure national security. Different customs duties, such as Basic Customs Duty, Additional Customs Duty, Special Additional Duty, Protective Duty, and Anti-Dumping Duty, are levied on imported goods based on their assessable value. The customs duties and cess rates are periodically revised by the Central Board of Excise and Customs to reflect changes in the economic and trade scenario. Overall, customs duty plays a crucial role in the Indian economy and helps to promote economic growth and development while also safeguarding national interests.

REFERENCE

1. https://www.lkouniv.ac.in/site/writereaddata/siteContent/202004132159500737somesh_shukla_ATLP.pdf
2. https://taxguru.in/custom-duty/types-duties-customs.html
3. https://blog.ipleaders.in/customs-various-types-duties/
4. https://www.arsdcollege.ac.in/wp-content/uploads/2020/03/GST-Custom-Law.pdf
5. http://www.referencer.in/General_Information/Customs.aspx#:~:text=Additional%20Customs%20Duty%20(CVD),produced%20or%20manufactured%20in%20India.

---

[1] Section 2(23) of custom act 1962.

[2] Custom act 1962

[3] Custom tariff act 1975

[4] Section 156 of custom act 1962

[5] Section 12 of the custom act 1962.

[6] Section 2(19) of the custom tariff act 1975.

[7] Section 3(1) of custom tariff act 1975.

[8] Section 3(5) of custom tariff act 1975.

[9] Section 6(1) of custom tariff act 1975.

[10] Section 9A of custom tariff act 1975