In its simplest terms, customs duty is the tax charged on products when they cross international borders. Rather than being a piece of legislative or bureaucratic red tape, it is a significant factor in the cost structure of global trade.

The key to knowing the custom duty and tax structure lies in its many types, each fulfilling a particular purpose—from safeguarding domestic or native industries to producing earnings for social causes. These charges can provide helpful insights into improving your business operations when decoded.

That is specifically what this post targets to do: provide you with a complete, in-depth analysis of the different types of custom duty in India.

What are the Different Types of Custom Duty in India?

1. Basic Customs Duty

Basic Customs Duty, shortened as BCD, is the main tax on imported products getting into India. The Indian Customs Tariff Act describes the rate of BCD depending on the kind of imported commodity, which varies between 5% to 40% and can significantly affect the overall landed cost of the imported goods.

2. Additional Customs Duty or Special CVD

Additional Customs Duty is also known as Special Countervailing Duty or CVD. This type of duty is specific in its arrangement with Central Excise Duty, a tax levied on items produced in India. Significantly, Additional Customs Duty levels the playing arena, assuring that imported goods do not enjoy an unlawful benefit over domestically manufactured ones.

3. Countervailing Duty (CVD)

This is not to be muddled with the Special CVD we just explained above. Countervailing Duty is particularly designed to counterbalance the subsidies offered by foreign governments on exported products, which otherwise will have had an adverse effect on the household industries in the importing nation. It is a protection to make sure foreign countries cannot dispose of the system by underwriting their exports to get an unfair benefit.

4. Anti-Dumping Duty

Anti-dumping duty is charged on foreign goods sent to India at a cost lower than their normal price in the home country. The main objective is to protect domestic industries from unethical competition and prospective devastation. When a foreign country is found to be dumping its goods at very low prices into India, the Indian Government can charge Anti-Dumping Duty on those goods’ imports to level the playing arena.

5. Education Cess

Education Cess is an extra charge levied on custom duties to subsidise educational initiatives in India. As a growing nation, India understands the significance of education. Thus, the Education Cess rate is normally 2% of the cumulative or aggregate customs duties.

6. National Calamity Contingent Duty

National Calamity Contingent Duty, or NCCD, is imposed to develop resources that can be set up fast throughout natural calamities or various large-scale national disasters.

NCCD is generally levied as a percentage of the value of the imported goods. The Government specifies the rate, and it can differ based on the kind of commodity and the prevalent social or environmental requirements.

7. Safeguard Duty

Safeguard Duty, under the Customs Tariff Act’s Section 8, covers domestic businesses from an unexpected surge in imports. This duty is a protection, offering the domestic industry some time to adjust and stay firm next to outside market pressures.

8. Protective Duties

Protective Duties, as the name implies, are the types of custom duties made to safeguard indigenous or growing industries from outside competition. The Indian government generally specifies these duties after comprehensively investigating the market changes, competitive environment, and the prospective effect on domestic industry.

9. Social Welfare Surcharge on Imported Goods

Social Welfare Surcharge is imposed on the combined duties of customs, changing the previous Education Cess as well as Secondary and Higher Education Cess. This duty targets increasing revenue for the government’s social welfare drive, whether it is education, healthcare, or poverty mitigation. 

Calculating Different Types of Custom Duty in India?

Customs duties are calculated on a particular or ad valorem basis. In other words, it is calculated based on the value of the goods. Such value is identified according to the rules set in the Customs Valuation (Identification of Value of Imported Goods) Rules, 2007. If there are doubts related to the authenticity or certainty of the value of goods, the valuation of these items is done using the following methods:

1. Rules 4 and 5 – Involves comparative value method that evaluates the transaction value of similar or identical items.
2. Rule 7 – Includes deductive value method that employs the sale cost of such goods in the importing nation.
3. Rule 8 – It involves a computed value method that uses costs associated with fabrication, materials, and profit in the country of manufacturing.
4. Rule 9 – It consists of the fallback method based on earlier methods with an element of increased flexibility. 

How to Make Payment of Custom Duty?

One can pay different types of custom duty online with some easy steps:

1. Sign in to ICEGATE’s e-payment portal.
2. Feed the import or export code or simply enter the login information offered by ICEGATE.
3. After that, click on the e-payment button.
4. You will be able to verify all e-challans indicating your name.
5. You can then select the challan that you want to pay and choose the payment method, and you will then be taken to the payment gateway.
6. Once the payment is made, you will be taken to the ICEGATE portal.
7. At last, click on the option of print and keep your payment copy for further reference. 

Final Words

If you are establishing an export and import business, staying in front of the competition requires optimising the charges of importing items. Knowing different types of custom duty can offer you that edge, prospectively saving you sufficient sum in the long run. You can also choose a high-end freight forwarding or fulfilment service which can initiate the movement of your goods flawlessly through custom clearance and global borders. 

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