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Unraveling custom duties in India

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What is customs duty?

Customs duty is an indirect tax that needs to be paid to import or export an item from the country. The value of the tax is dependent on the value of the products being moved in or moved out from the country. IT also takes into consideration various other factors like the dimensions, weight, etc.

Customs duty in India is governed by the central government and has been defined under Customs Act, 1962. Under this act, the government has the power to levy taxes over an item or service. There is a separate department, Central Board of Excise & Customs that takes care of all the collection and levying penalties over those involved in tax evasions.

Types of Customs Duties:

  • Basic Customs Duty: This is the tax that needs to be paid when the product is being imported or exported. The value of the tax depends on the type and the complete evaluation of the item. Central Government has the power to increase or decrease the rates of taxation. It can also decide to exempt several products according to its discretion.
  • Additional duty of Customs: The value of this tax is calculated by adding the starting value of the imported items along with the tax already paid as a basic customs duty. The value of this tax is equivalent to the value of excise tax levied on the similar goods being produced in India.
  • Export duties: This tax is meant to be levied over the items being exported from the country. The rates of this tax can be changed by the government in emergency conditions. In the case of any policy decision to encourage some industry, these taxes can be improvised accordingly.
  • Anti Dumping Duty: This tax is a measure aimed at safe keeping the domestic markets from the powerful multinationals. It has been seen that large multinationals can pump in a huge amount of products at lower prices; this has the ability to cripple the local manufacturing units. Anti-dumping duty is levied on the imported items in order to discourage the external manufacturers taking the lead in the domestic market.
  • Safeguard duty: When the Indian market is producing some items that are in direct competition with those produced by international players, then the government has been entrusted with the ability to put taxes on the imported goods. This tax would not allow the international exporters to throng the Indian market with their product and will allow the Indian industry to thrive in return.
  • National Calamity Contingent Duty: This levying of this tax is purely a policy decision. It is meant to give preference to some items while discouraging the import of some. This tax has been put on tobacco and pan masala. It has an option for giving preferential taxation rates to the countries in order to strengthen the bilateral ties in the diplomatic as well as the economic sense.

Taxation in India is a pretty wide spectrum. Custom duties form the largest part of this spectrum. The above-mentioned types of customs duties almost sum up the structure of custom taxation in India. This zone is completely under the control of the central government and any policy decision can reflect in the rates and the nature of these taxes.

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