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Exports & Imports:: Custom Duty


Customs duties are levied on the imported goods and in a few cases on export goods at the rates specified in the schedules to the Customs Tariff Act, 1975. The taxable event is import into or export from India. Import duties generally consist of the following

  • Basic Duty
  • Additional Customs Duty equal to Central Excise duty leviable on like goods produced or manufactured in India.
  • Countervailing Duty
  • Surcharge  @ 10% of Basic Duty
  • Special Additional Duty @ 4% to be computed on the aggregate of (i) assessable value, (ii) basic duty, (iii) surcharge and (iv) additional duty of Customs
  • Additional duty of Customs @ Rs. 1/- per litre on imported motor spirit (petrol) and high speed diesel oil.
  • Anti dumping duty/safeguard duty for import of specified goods.


Most of the Customs duties are .ad valorem. Goods have, therefore, to be valued for purposes of assessment.Valuation Rules, 1988 follow the GATT provisions whereunder the norm is the transaction value or invoice price but the invoice value to be acceptable should be a fully commercial and genuine price.

Where the Customs Officer has reasonable doubt about the truth and accuracy of the declared transaction value (grounds for which, will, at the request of the importer be intimated to him), he may ask the importer to furnish further information and evidence to substantiate the declared transaction value and in the event of the importer’s failure to do so, he may after hearing the importer reject the declared transaction value and proceed further under the Valuation Rules.

Date for Determination of value

The relevant date for determination of value for the purpose of assessment of Customs duty under Section 14 of the Customs Act, 1962, is the date of importation or exportation and not the date of contract between the buyer and the seller.

Reliance on prices in other invoices is permissible only if imports chosen for comparison are contemporaneous, are of same quality and specification and from same manufacturer and country of productions, size of the comparable consignment(s) is more or less similar and importers belong to same commercial level (i.e class of buyers).Where several contemporaneous import values are available, the lowest of the values has to be accepted. But where the declared price is very low and totally unrealistic, it may even be necessary to value unbranded goods on the basis of the known price of branded goods and also the goods of one country or origin (or manufacturer) on the basis of the known price of the goods of another country of origin (or manufacturer). In case of high seas sale, it is the high seas sale price inclusive of canalising agency’s service which would form the basis of assessment.

Proforma invoice/quotation being only an offer for sale of goods at the price mentioned therein is   a relevant evidence for sale price.

Unless the invoice price already includes ocean freight and insurance, these elements have to be added as under as per Notification No.39/90-Cus.(N.T.) to make it C.I.F value:-

i) For Air Cargo Actual air freight, but not exceeding 20% of f.o.b value
ii) Where actual sea/air freight is not ascertainable : 20% of f.o.b value
iii) Where actual insurance is not ascertainable : 1.125% of f.o.b value

Where goods are generally imported by sea but due to urgent demand they were imported by air, only sea freight is to be added. Insurance charges paid on the Customs duty are, however, not includible in the assessable value since they relate to post-importation factor. Landing charges realized by Port authorities have also to be added at the prescribed flat rate of 1% of C.I.F value, or on actual basis unless seller or his agent is under obligation to bear it as part of CIF value.

Loading on account of royalty or foreign collaboration fee (now reduced to 1% of value of the goods) is permissible only if such royalty etc. payment has nexus with the imported goods, pending verification of books of accounts and influence of relationship on price.

Regarding agency commission, where the Indian importer checked the quotations of all proposed suppliers and finally approved the supplier party (out of those listed by his agent abroad) and entered into purchase transaction directly with the selected supplier, procurement charge or commission of 3% paid to foreign agent was held to be not includible in assessable value. Interest amount (charged for delayed payments made after the permitted credit period of 90 days) was held to be not includible in assessable value. Board has also accepted that interest charged to importers by foreign suppliers under deferred payment scheme is not addable to assesssable value provided such interest charges are shown separately in the invoice, there is no special relationship between the importer and the exporter and there is no evidence that the interest has influenced the sale price. Government has the power to fix tariff values for goods in which case duty is assessed on such tariff value. For goods found damaged or deteriorated before clearance, proportionate abatement in value is allowable.

Imports of second hand machinery of value above Rs.10 lakhs require a Certificate from an internationally reputed inspection and certification agency/Chartered Engineer. In case of import of second-hand plant, charges for dismantling, packing, forwarding, insurance and compulsory inspection expenses incurred in the country of export are includible in assessable value.

For calculating additional Customs duty, the value base would comprise of the transaction value CIF plus basic Customs duty plus anti-dumping duty plus surcharge.

Date of determination of rate of duty

The rates of duty and tariff values as in force on the date of presentation of Bill of entry for home consumption will be the rate applicable for rate of duty. However, there are two exceptions to it so far as rate of duty and tariff value are concerned. In case the bill of entry has been filed in advance of entry inwards of the vessel or the arrival of the aircraft, the crucial date will be the date of entry inwards of the vessel or the date of arrival of the aircraft. Secondly, in the case of clearance of goods from a bonded warehouse, the date of actual removal of goods from the warehouse is the crucial date provided the goods are removed during the permitted warehousing period (including extension allowed, if any). But once the permitted warehousing period expires, the goods cease to be warehoused goods and they are deemed to be improperly removed from the warehouse. The rate of duty applicable in that case will be the rate prevalent on the date when the warehousing period (including permitted extension) came to an end.

As regards exchange rate, the rate notified by the Government and as in force on the date of presentation of the bill of entry (for home consumption or for warehousing) will be the one applicable.

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