LEVY AND COLLECTION OF DUTY

What is Customs duty?
What are the different types of rates of duties of Customs ?
What are the different kinds of duties of Customs levied on imported goods?  What is the authority to levy and collect duties of Customs on imported goods?
What is meant by  special duty of customs?
What is Surcharge?
What is the additional duty of customs? What is the authority to levy it on imported       goods?
What is the Foreign Exchange Rate applied to the value of Invoice?
How to compute the duty amount in respect of imported goods?
What is the rate of duty applicable to a home consumption Bill of entry?
How do you compute the value for the purpose of charging duty on imported goods?
What are Stevedoring Charges? Are these charges to be added to the assessable value for the purpose of charging duty?
In case the Importer is aggrieved can he pay the duty under protest?  If so what are the advantages?
What is meant by effective rate of duty?

 

Q.1          What is Customs duty?

 

A             Customs duty is the duty charged on goods on their importation into India or exportation out of India.

 

 

 

 

 

Q.2          What are the different types of rates of duties of Customs ?

 

A             There are two types of rates of duty of Customs:

 

1.                    Ad valorem rate i.e., the duty is charged on the basis of value.

2.                    Specific rate i.e., on the basis of quantity/number/ volume/ weight.

 

 

 

 

 

Q.3          What are the different kinds of duties of Customs levied on imported goods?  What is the authority to levy and collect duties of Customs on imported goods?

 

A.                  Different kinds of duties of customs levied on imported goods are

 

(i)                  Basic Customs Duty

(ii)                Surcharge

(iii)               Additional duty of customs

(iv)              Special additional duties 

(v)                Additional levies like Countervailing duty, Anti dumping duty,

Safe guard duty etc.,

In addition, cess duty is leviable on certain goods.

 

Section 12 of the Customs Act, 1962 authorises the Customs Officers to levy and collect these duties

 

 

 

 

 

 

Q.4          What is meant by special additional duty of customs?

 

A             Special additional duty is specified under Section 3A of the Customs Tariff Act, 1975. The amount of Special Additional duty is computed by applying this rate on value, which is equal to the total of the assessable value, the basic customs duty and the additional duty of customs described above.

 

 

 

 

Q.5          What is the additional duty of customs? What is the authority to levy it on imported goods?

 

A             Additional duty of customs equal to the, excise duty leviable on like goods produced or manufactured in India. This is levied under Section 3 of Customs Tariff Act, 1975. This is usually referred to as "countervailing duty" (CVD). However, the correct description of this duty is Additional Duty of Customs. In order to determine the applicable rate, you have to obtain the correct classification of the goods under the Central Excise Tariff Act, 1986. The duties under the Central Excise Tariff are on ad valorem basis. However, specific rates have been prescribed for some items. Importantly, the value for the purpose of computing additional duties of  Customs is the total of the assessable value (generally the transaction value - roughly equal to the c.i.f. value) and the basic customs duty.

If you are a manufacturer, importing goods to be used as inputs for manufacture of other goods, you would be generally eligible for obtaining credit (called CENVAT credit) equal to the additional duty of customs paid on the imported goods. This duty amount is eligible for credit under input duty Central Excise Rules, 1944. This credit can be used for paying central excise duties on your manufacture.

 

 

 

 

Q.6          What is Surcharge?

A             Surcharge  at the rate of 10% of the Basic Customs Duty is leviable on imported goods under Section 90 of the Finance Act, 2000 ( unless exempted by a notification).

 

 

Q.7         How to compute the duty amount in respect of imported goods?

A.            Under the Custom Tariff Act, 1975 and other laws, there are various types of duties, which are leviable. As a first step, the following three types of customs duties have to computed:-

(i) Duty which is specified against each Heading or Sub-Heading in the First Schedule to the Customs Tariff Act, 1975. This is usually referred to as Basic Customs Duty. There are different rates of duty for different commodities. You may find these rates in column no. 4 (labeled as "standard rates") of the tariff. There is also a 5th column specifying the "preferential rates". These are different rates of duty for goods imported from certain countries in terms of bilateral or other agreements with such countries--which are called preferential rates of duties. The duty may be a percentage of the value of the goods ( in such cases it is called ad valorem duty) or at a specific rate, which is based on unit of measurement which is specified in the tariff entry. The rate of duty in percentage (in the case of advalorem duties) has to be applied on the Cost Insurance and Freight

(ii)  A Surcharge  at the rate of 10% of the Basic Customs Duty is leviable on imported goods under Section 90 of the Finance Act, 2000 ( unless exempted by a notification).

(iii) Additional duty of customs equal to the, excise duty leviable on like goods produced or manufactured in India. This is levied under Section 3 of Customs Tariff Act, 1975. This is usually referred to as "countervailing duty" (CVD). However, the correct description of this duty is Additional Duty of Customs. In order to determine the applicable rate, you have to obtain the correct classification of the goods under the Central Excise Tariff Act, 1986. The duties under the Central Excise Tariff are on ad valorem basis. However, specific rates have been prescribed for some items. Importantly, the value for the purpose of computing additional duties of  Customs is the total of the assessable value (generally the transaction value - roughly equal to the c.i.f. value) and the basic customs duty.

If you are a manufacturer, importing goods to be used as inputs for manufacture of other goods, you would be generally eligible for obtaining credit (called CENVAT credit) equal to the additional duty of customs paid on the imported goods. This duty amount is eligible for credit under input duty Central Excise Rules, 1944. This credit can be used for paying central excise duties on your manufacture.

(iv) Imported goods are also liable to a Special additional duty at a rate specified in Section 3A of the Customs Tariff Act, 1975. The amount of Special Additional duty is computed by applying this rate on value which is equal to the total of the assessable value, the basic customs duty and the additional duty of customs described above.

(3) Additional Levies

 

Having computed the above mentioned duties, you have to determine whether there are any additional levies on the particular items you intend to import. Some of the levies are commodity specific and would be applicable regardless of the time of import.  These include cesses under various enactments as also Additional Duties on specified commodities.

 

 There are certain other levies which are specific to the country of origin. Please consider the following levies.

Countervailing Duty on bounty-fed articles is leviable under Section 9, of the Customs Tariff Act 1975. No such duty is however, being levied at present.

Anti-dumping Duty (under Section 9A, Customs Tariff Act 1975) on specified goods imported from specified countries to protect indigenous industry from injury resulting from dumping of goods. This is notified and published from time to time.

Safeguard Duty (under Section 8B of the Customs Tariff Act, 1975) is applicable on certain goods at the time of import for specified periods in order to check their excessive imports, which may be injurious to the Indian industry.

4.  Exemptions:

These exemptions and concessions can be granted in a number of ways.

Some of these exemptions are briefly discussed below: -

Exemption by Notification: The Central Government may notify by publication in the Official Gazette certain exemptions and concessions. Such exemptions or concessions may be conditional or absolute. There are general exemptions given to a variety of items imported under certain conditions These include exemption of imports for promotion of exports, import by UN bodies, defence imports etc.,.. There are also exemptions which are unconditional and are applicable across the board. There are other exemptions based on conditions of end use.

Preferential Rates : Preferential rates of customs duty have been made applicable in respect of imports from certain countries such as Sri Lanka, Mauritius, Seychelles and Tonga provided certain conditions are satisfied. The goods in question must actually be manufactured or produced in such preferential areas. Rules have been framed in order to determine whether the goods have been manufactured or produced in such areas. Determination of origin of the goods is very essential in order to avail of the benefits of such concessional rates of duty.

 

 

 

 

Q.8          What is the Foreign Exchange Rate applied to the value of Invoice?

 

A             The rate of exchange applicable is the rate in force on the date on which a Bill of entry (Whether it is home consumption Bill of entry or Bill of entry for warehousing) is presented under Section 46 of the Customs Act 1962.  The same exchange rates are applicable to the Ex-bond bill of entry filed for clearing the goods for home consumption form the bonded warehouse.  The exchange rates are notified by the Central Government by issue of notifications from time to time.

 

 

 

 

Q.9          What is the rate of duty applicable to a home consumption Bill of entry?

 

A             The rate of duty applicable is the rate prevailing on the date of presenting the Bill of entry in the Customhouse.  However, in the case of Bills of entry filed before the date of entry inwards of the vessel, the arrival of the aircraft the rate of duty applicable is the rate prevailing on the date of entry inwards or arrival as the case may be (Section 15(1) (a) of the Customs Act 1962).

 

Note: Granting of entry inwards means permitting the unloading of goods from the vessel by the proper officer of customs.

 

 

 

 

Q.10        How do you compute the value for the purpose of charging duty on imported goods?

 

A.            CIF value (Cost, insurance and freight) and landing charges s the normal basis.  In addition, any royalty or service charges etc. paid or payable by the importers are also to be added.  Value for the purpose of charging duty on imported goods determined under Section14 of the Customs Act 1962 read with  Customs valuation (Determination of Prices of Imported Goods) rules, 1988.  The actual landing charges or at the prescribed rate are also to be added.  If the invoice shows the clue of FOB ( Free on Board) actual freight and insurance  charges have to be added if the import is by Sea.  In the absence of actual charges, notional charges at 20% on FOB value as fixed by the Government have to be added. However, in the case of certain bulk cargos where freight is more than FOB value, the actual freight has to be added.  In the case of import by Air when the invoice value is FOB, actual freight and insurance or notional freight (20% of FOB presently) and notional insurance (1,125 % of FOB presently), whichever is less are added to the FOB value.  This becomes CIF clue arrived at by adding all these elements is known as “Assessable Value”. Basic customs duty is leviable on such assessable value.  

 

 

 

 

 

 

 

 

Q.11        What are Stevedoring Charges? Are these charges to be added to the assessable value for the purpose of charging duty?

 

A.            Stevedoring charges are the charges incurred for unloading the goods from ship hold to wharf.  These charges are treated as forming part of the freight and are to be added to the value for the purpose of charging duty on imported goods.  This contingency arises only when the carrier does not include these charges in the Freight Bill.

 

 

 

 

Q.12        In case the Importer is aggrieved can he pay the duty under protest?  If so what are the advantages?

 

A             When the importers do not agree with the assessment made in the Bill of entry respect of classification/valuation/rate of duty etc., they may pay the duty ‘under protest’ as provided for the Section 27 of the Customs Act 1962.  In such cases the importers should indicate the reasons in writing for such protest, which will be registered by the customs officers and intimated to the Importers.  The advantage of paying the duty under protest is that in such cases the time stipulated in Section 27 of customs Act, 1962 to prefer refund claim shall not apply.

 

 

 

 

 

Q.13        What is meant by effective rate of duty?

 

A             The statutory or the highest rate of duty is specified in the Tariff Schedules for each of the articles.  The rate of duty so specified may be reduced by issue of exemption notifications.  For computing the amount of duty payable, the rate of duty indicated in the exemption notification has to be taken. Such rate is commonly known as ‘Effective rate of duty’.  If the exemption notification imposes any conditions, the reduced rate of duty is applied subject to fulfillment of the conditions laid down therein.