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Import Duty

What is import duty?

Import duty, also called customs duty, tariff, import tax, or import tariff, is a tax levied by a country's customs authorities on goods that are imported from other countries. The amount of import duty depends on different factors, such as the value, origin, and type of the goods. Import duty serves as a source of revenue for the government and a way to protect domestic industries from foreign competition.

The Customs Act 1962 defines custom duty in India, and the Central Board of Excise & Customs (CBEC) handles all related matters.

Import Duty in India

A major reform in the tax systems of India was implemented by the government in the last few years. They introduced a new tax collection system called GST (Goods and Services Tax), which is a destination-based tax, meaning that the consumers pay when they consume any goods and services.

The previous tax system was complicated. Various taxes, such as service tax, value-added tax, state tax, central excise, etc., were levied on different goods and services. Under GST, these multiple taxes have been unified into a single tax – GST.

GST has three components – CGST (Central Goods and Services Tax), SGST (States Goods and Services Tax), and IGST (Integrated Goods and Services Tax). CGST and SGST are applicable to transactions within a state, whereas IGST is applicable to transactions between states.

The custom duty has been replaced by IGST, which means that IGST tax is applicable (along with other applicable custom duties) on every import and export of goods and services. This will help to simplify the taxation process.


Determining Factors for the Imposition of Import Duties

  • The value of the goods:  This is based on the market value of the goods, regardless of whether they are sold or not

  • Free trade agreements: These are agreements between countries that may reduce the import duties

  • Description of the goods: This is used to classify the goods into categories that have a general duty rate, depending on other factors

  • Country of origin

  • Country-specific regulations

  • End use of goods: This can be either for personal or commercial use