Types of Duties on Imported Goods | Customs Duty | Safeguard Duty | Countervailing Duty | Anti Dumping Duty

Topics covered in this article are as follows:

1. Introduction
2. Types of Duties on Imported Goods

2.1 Basic Customs Duty
2.2 Additional Duties of Customs
2.3 Safeguard Duty
2.4 Anti-Subsidy Countervailing Duty
2.5 Applicability of Customs Act, 1962 for Countervailing Duty on Subsidized Articles
2.6 Anti-Dumping Duty

For a detailed discussion on GST Exports-Imports & Deemed Exports from the perspective of GST, Customs, Foreign Trade Policy & Allied Laws, refer to [2021 Edition] of Taxmann's GST Exports-Imports & Deemed Exports

1. Introduction

Import of Goods is generally understood as bringing goods into India from a Place outside India. For the purposes of GST, the imports are treated as Inter-State Supply of Goods.

Article 269A of the Constitution mandates that supply of goods in the course of import into the territory of India shall be deemed to be supply of goods, in the course of inter-State trade or commerce.

“Import of Goods” into India is governed by many laws. Prime among these are the following :

• • Foreign Trade (Development and Regulation) Act, 1992;
  • Customs Act, 1962;
  • Customs Tariff Act, 1975;
  • Foreign Exchange Management Act, 1999;
  • SEZ Act, 2005.

(a) Foreign Trade (Development and Regulation) Act, 1992

The objective of Foreign Trade (Development and Regulation) Act, 1992 is to make provisions for development and regulation of foreign trade by facilitating imports and increasing exports. Section 5 of this Act, empowers the Central Government to formulate and announce, by notification in the Official Gazette, the Foreign Trade Policy (FTP) and in like manner, amend that Policy. Section 6 of the Act, empowers the Central Government to appoint Director General of Foreign Trade (DGFT), whose function is to advise the Central Government in the formulation of the FTP and carry out that Policy. The Commerce Ministry notifies the FTP from time to time. The DGFT prescribes the procedures through Handbook of Procedures (HBP) and public notices. The latest version of the FTP and HBP came into effect on 5th December, 2017.

(b) Customs Act, 1962 and Customs Tariff Act, 1975

The main objective of Customs Act, 1962 and Customs Tariff Act, 1975 is to make provisions for collection of revenue through Customs Duty on imported goods. The Central Board of Indirect Taxes and Customs (C.B.I.&C.), [known till 29th March, 2018 as Central Board of Excise and Customs (C.B.E.&C. or the Board)], Department of Revenue, Ministry of Finance, Government of India deals with the formulation of policy concerning levy and collection of Customs and Central Excise duties and Goods and Services Tax, prevention of smuggling and administration of matters relating to Customs, Central Excise, Goods and Services Tax and Narcotics to the extent under C.B.I. & C’s purview. The Board is the administrative authority for its subordinate organizations, including Custom Houses and Goods and Services Tax and Central Excise and Customs Commissionerates.

The important Customs related functions include the following :

(a) Collection of Customs Duties on imports and exports as per the provisions of Customs Act, 1962 and Customs Tariff Act, 1975;

(b) Enforcement of various provisions of the Customs Act, 1962 governing imports and exports of cargo, baggage, postal articles and arrival and departure of vessels, aircrafts, etc.;

(c) Discharge of agency functions and enforcing prohibitions and restrictions on imports and exports under various legal enactments;

(d) Prevention of smuggling including interdiction of narcotics drug trafficking; and

(e) International passenger clearance.

Other domestic laws/rules/orders/regulations/technical specifications/ environmental/safety and health norms applicable to domestically produced goods apply, mutatis mutandis, to imports, unless specifically exempted. These may be notified under various other laws but are implemented by the Customs at the customs stations.

(c) Foreign Exchange Management Act, 1999

The objective of Foreign Exchange Management Act, 1999 is to facilitate external trade and payments and promote orderly devolvement and maintenance of foreign exchange markets in India. Reserve Bank of India works towards this objective with suitable directions to authorised persons (banks, money changers etc.) who deal in foreign exchange.

(d) Special Economic Zones Act, 2005

The Special Economic Zones Act, 2005 applies to Special Economic Zones which are specially delineated geographical areas within India that are deemed to be Foreign Territory for certain limited purposes. As per Section 53(1) of the Special Economic Zones Act, 2005 :

A Special Economic Zone shall, on and from the appointed day, be deemed to be a territory outside the customs territory of India for the purposes of undertaking the authorized operations.

And, as per Section 51(1) of the Special Economic Zones Act, 2005 :

The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.

This blog deals primarily with the taxes on imported goods, especially the impact of GST Provisions on import of goods. References to other laws are made only when considered necessary or relevant.

2. Types of Duties on Imported Goods

The imported goods are subjected to following types of duties and taxes :

• • Basic Customs duty under Section 12 of the Customs Act, 1962;
  • Additional Duties of Customs under Section 3(1), 3(3) and 3(5) of Customs Tariff Act, 1975;
  • Safeguard Duty under Section 8B of Customs Tariff Act, 1975;
  • Transitional product-specific safeguard duty under Section 8C of Customs Tariff Act, 1975 (Omitted vide the Finance Act, 2016 w.e.f. May 14, 2016);
  • Anti-dumping Duty under Section 9A of Customs Tariff Act, 1975;
  • Countervailing duty on subsidized articles under Section 9 of Customs Tariff Act, 1975;
  • Social Welfare Surcharge under Section 110 of Finance Act, 2018;
  • Integrated Goods and Services Tax under Section 5 of Integrated Goods and Services Tax Act, 2017 read with Section 3(7) of Customs Tariff Act, 1975;
  • Goods and Services Tax Compensation Cess under Section 8 of Goods and Services Tax (Compensation to States) Act, 2017 read with Section 3(9) of Customs Tariff Act, 1975;
  • Road and Infrastructure Cess under Section 111 of the Finance Act, 2018 on the goods specified in the Sixth Schedule i.e. Motor spirit commonly known as petrol and High-speed diesel oil.
  • Health Cess on imported medical devices.

A brief note on these taxes and duties is given below to enable the readers get familiar with these types of duties :

2.1 Basic Customs Duty

As per Section 12 of the Customs Act, 1962;

Except as otherwise provided in this Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975, or any other law for the time being in force, on goods imported into, or exported from, India.

This is called the Basic Customs Duty. It is levied on the value of imported goods assessed in accordance with Section 14 of the Customs Act, 1962 read with the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. The value so determined is usually referred to as the assessable value.

In the said Rules, recently an amendment was made in respect of valuation of imported goods, through Notification No. 91/2017-Cus. (N.T.) dated 26th September, 2017.

As per proviso to Section 5(1) of IGST Act, 2017, Customs Law will be applicable for valuation of imported goods.

Circular No. 7/2020-Cus, dated 5.2.2020, gives guidelines for valuation of Second hand machinery.

2.2 Additional Duties of Customs

(A) Additional duty equal to Excise duty

As per Section 3(1) of the Customs Tariff Act, 1975 :

Any article which is imported into India shall, in addition, be liable to a duty (hereafter in this section referred to as the additional duty) equal to the excise duty for the time being leviable on a like article if produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the imported article shall be so liable shall be calculated at that percentage of the value of the imported article :

Provided that in case of any alcoholic liquor for human consumption imported into India, the Central Government may, by notification in the Official Gazette, specify the rate of additional duty having regard to the excise duty for the time being leviable on a like alcoholic liquor produced or manufactured in different States or, if a like alcoholic liquor is not produced or manufactured in any State, then, having regard to the excise duty which would be leviable for the time being in different States on the class or description of alcoholic liquor to which such imported alcoholic liquor belongs.

It may be noted that this Additional Duty of Customs is levied only on items mentioned in the Schedule IV to the Central Excise Act, 1944 that attract Central Excise Duty and alcoholic liquor that attracts Excise Duty levied by States.

(B) Additional duty to counter balance Excise duty on raw-materials, components, ingredients.

As per Section 3(3) of the Customs Tariff Act, 1975 :

If the Central Government is satisfied that it is necessary in the public interest to levy on any imported article [whether on such article duty is leviable under sub-section (1) or not] such additional duty as would counter-balance the excise duty leviable on any raw materials, components and ingredients of the same nature as, or similar to those, used in the production or manufacture of such article, it may, by notification in the Official Gazette, direct that such imported article shall, in addition, be liable to an additional duty representing such portion of the excise duty leviable on such raw materials, components and ingredients as, in either case, may be determined by rules made by the Central Government in this behalf.

At present, very few items such as Stainless Steel for household use, Transformer Oil etc. are notified for levy under this Section 3(3) of the Customs Tariff Act, 1975.

(C) Value of imported article under Section 3(1) and 3(3) of CTA, 1975.

As per Section 3(2) of the Customs Tariff Act, 1975 :

For the purpose of calculating under sub-sections (1) and (3), the additional duty on any imported article, where such duty is leviable at any percentage of its value, the value of the imported article shall, notwithstanding anything contained in Section 14 of the Customs Act, 1962 (52 of 1962), be the aggregate of —

(i) the value of the imported article determined under sub-section (1) of Section 14 of the Customs Act, 1962 (52 of 1962) or the tariff value of such article fixed under sub-section (2) of that section, as the case may be; and

(ii) any duty of customs chargeable on that article under Section 12 of the Customs Act, 1962, and any sum chargeable on that article under any law for the time being in force as an addition to, and in the same manner as, a duty of customs, but does not include —

(a) the duty referred to in sub-sections (1), (3), (5), (7) and (9);

(b) the safeguard duty referred to in Sections 8B and 8C;

(c) the countervailing duty referred to in Section 9; and

(d) the anti-dumping duty referred to in Section 9A.

The aforesaid Section 3(2) of the Customs Tariff Act, 1975, specifies the method of calculating value of imported article for the purpose of levy of Additional Duty.

(D) Special Additional Customs Duty (SAD) :

As per Section 3(5) of the Customs Tariff Act, 1975 :

If the Central Government is satisfied that it is necessary in the public interest to levy on any imported article whether on such article duty is leviable under sub-section (1) or, as the case may be, sub-section (3) or not such additional duty as would counter-balance the sales tax, value added tax, local tax or any other charges for the time being leviable on a like article on its sale, purchase or transportation in India, it may, by notification in the Official Gazette, direct that such imported article shall, in addition, be liable to an additional duty at a rate not exceeding four per cent of the value of the imported article as specified in that notification.

This Additional Duty of Customs, known popularly as Special Additional Duty, is imposed under Section 3(5) of Customs Tariff Act, 1975 to counter-balance the sales tax, value added tax, local tax or any other charges leviable on a like article on its sale, purchase or transportation in India. The expression “sales tax, value added tax, local tax or any other charges for the time being leviable on a like article on its sale, purchase or transportation in India” means the sales tax, value added tax, local tax or other charges for the time being in force, which would be leviable on a like article if sold, purchased or transported in India or, if a like article is not so sold, purchased or transported, which would be leviable on the class or description of articles to which the imported article belongs, and where such taxes, or, as the case may be, such charges are leviable at different rates, the highest such tax or, as the case may be, such charge.

It may be noted that this additional duty of customs is levied only on items mentioned in the Schedule IV to the Central Excise Act, 1944 that attract Central Excise Duty and alcoholic liquor that attracts Excise Duty levied by States because they continue to attract Value Added Tax levied by the States.

(E) Calculation of value of Additional duty under Section 3(5) of CTA, 1975

As per Section 3(6) of the Customs Tariff Act, 1975 :

For the purpose of calculating under sub-section (5), the additional duty on any imported article, the value of the imported article shall, notwithstanding anything contained in sub-section (2), or Section 14 of the Customs Act, 1962 (52 of 1962), be the aggregate of —

(i) the value of the imported article determined under sub-section (1) of Section 14 of the Customs Act, 1962 (52 of 1962) or the tariff value of such article fixed under sub-section (2) of that section, as the case may be; and

(ii) any duty of customs chargeable on that article under Section 12 of the Customs Act, 1962 (52 of 1962), and any sum chargeable on that article under any law for the time being in force as an addition to, and in the same manner as, a duty of customs, but does not include —

(a) the duty referred to in sub-sections (5), (7) and (9);

(b) the safeguard duty referred to in Sections 8B and 8C;

(c) the countervailing duty referred to in Section 9; and

(d) the anti-dumping duty referred to in Section 9A.

The aforesaid Section 3(6) of Customs Tariff Act, 1975 specifies the method of calculation of value of the imported article for the purpose of calculating the Special Additional Duty under Section 3(5) of the CTA, 1975.

2.3 Safeguard Duty

As per Section 8B(1) of the Customs Tariff Act, 1975 :

If the Central Government, after conducting such enquiry as it deems fit, is satisfied that any article is imported into India in such increased quantities and under such conditions so as to cause or threatening to cause serious injury to domestic industry, then, it may, by notification in the Official Gazette, impose a safeguard duty on that article.

(A)  Safeguard duty on imports by EOU and SEZ

It may be noted that as per Section 8B(2A) of the Customs Tariff Act, 1975 :

Notwithstanding anything contained in sub-section (1) and sub-section (2), a notification issued under sub-section (1) or any safeguard duty imposed under sub-section (2), shall not apply to articles imported by a hundred per cent export-oriented undertaking or a unit in a special economic zone unless,—

(i) specifically made applicable in such notifications or such impositions, as the case may be; or

(ii) the article imported is either cleared as such into the domestic tariff area or used in the manufacture of any goods that are cleared into the domestic tariff area and in such cases safeguard duty shall be levied on that portion of the article so cleared or so used as was leviable when it was imported into India.

So, in respect of imports by Export Oriented Units (EOU) and units in Special Economic Zones (SEZ), safeguard duty shall not be levied, unless specifically made applicable. So, for imports by these entities, there is no need to exempt safeguard duty through any notification. However, if the goods are sold in DTA by EOU or SEZ Safe Guard Duty is payable. It may be noted, however, that imports by Developers in SEZ are not covered by these provisions.

(B) All provisions of Customs Act, 1962 apply to safeguard duty

It may also be noted that as per Section 8B(4A) of the Customs Tariff Act, 1975 :

The provisions of the Customs Act, 1962 (52 of 1962) and the rules and regulations made thereunder, including those relating to the date for determination of rate of duty, assessment, non-levy, short levy, refunds, interest, appeals, offences and penalties shall, as far as may be, apply to the duty chargeable under this section as they apply in relation to duties leviable under that Act.

At present Safeguard Duty is levied on Hot Rolled flat sheets and plates (excluding hot Rolled flat products in coil form) of alloy or non-alloy steel and on imports of ‘Solar Cells, whether or not assembled in modules or panels’ falling under Heading 8541 of the Customs Tariff Act, 1975.

Section 8B of the Customs Tariff Act, 1975, is being substituted with a new section, vide Clause 114 of Finance Bill, 2020, to empower the Central Government to apply safeguard measures, in case any article is imported into India in such increased quantities and under such conditions so as to cause or threatening to cause serious injury to domestic industry. Safeguard measure shall include imposition of a Safeguard Duty or application of a Tariff Rate Quota or any other measure that the Central Government may consider appropriate as safeguard measure.

2.4 Anti-Subsidy Countervailing Duty

As per Section 9 of the Customs Tariff Act, 1975, where any country or territory pays, bestows, directly or indirectly, any subsidy upon the manufacture or production therein or the exportation therefrom of any article including any subsidy on transportation of such article, then, upon the importation of any such article into India, whether the same is imported directly from the country of manufacture, production or otherwise, and whether it is imported in the same condition as when exported from the country of manufacture or production or has been changed in condition by manufacture, production or otherwise, the Central Government may, impose a countervailing duty not exceeding the amount of such subsidy.

As per Section 9(1) of the Customs Tariff Act, 1975 :

Where any country or territory pays, bestows, directly or indirectly, any subsidy upon the manufacture or production therein or the exportation therefrom of any article including any subsidy on transportation of such article, then, upon the importation of any such article into India, whether the same is imported directly from the country of manufacture, production or otherwise, and whether it is imported in the same condition as when exported from the country of manufacture or production or has been changed in condition by manufacture, production or otherwise, the Central Government may, by notification in the Official Gazette, impose a countervailing duty not exceeding the amount of such subsidy.

It may be noted that as per Section 8B(2A) of Customs Tariff Act, 1975 the anti-subsidy countervailing duty shall be levied in respect of imports by Export Oriented Units (EOU) and Units/Developers in Special Economic Zones (SEZ), unless specifically exempted.

At present, there is no provision for investigation in case of circumvention of countervailing duties. A provision is being incorporated in the Customs Tariff (Identification, Assessment and Collection of Countervailing Duty on Subsidized Articles and for Determination of Injury) Rules, 1995 to enable investigation into case of circumvention of countervailing duty for enabling imposition of such duty.

Customs Tariff (Identification, Assessment and Collection of Countervailing Duty on Subsidized Articles and for Determination of Injury) Amendment Rules, 2020, have been notified vide Notification No.10/2020-Customs (N.T.), dated 2.2.2020.

2.5 Applicability of Customs Act, 1962 for Countervailing Duty on Subsidized Articles

It may also be noted that as per Section 9(7A) of the Customs Tariff Act, 1975 :

(7A) The provisions of the Customs Act, 1962 and the rules and regulations made thereunder, including those relating to the date for determination of rate of duty, assessment, non-levy, short levy, refunds, interest, appeals, offences and penalties shall, as far as may be, apply to the duty chargeable under this section as they apply in relation to duties leviable under that Act.

2.6 Anti-Dumping Duty

As per Section 9A(1) of the Customs Tariff Act, 1975 :

Where any article is exported by an exporter or producer from any country or territory (hereinafter in this section referred to as the exporting country or territory) to India at less than its normal value, then, upon the importation of such article into India, the Central Government may, by notification in the Official Gazette, impose an anti-dumping duty not exceeding the margin of dumping in relation to such article.

It may be noted that, as per Section 9A(2A) of the Customs Tariff Act, 1975 :

Notwithstanding anything contained in sub-section (1) and sub-section (2), a notification issued under sub-section (1) or any anti-dumping duty imposed under sub-section (2), shall not apply to articles imported by a hundred per cent, export-oriented undertaking unless, —

(i) specifically made applicable in such notifications or such impositions, as the case may be; or

(ii) the article imported is either cleared as such into the domestic tariff area or used in the manufacture of any goods that are cleared into the domestic tariff area, and in such cases anti-dumping duty shall be levied on that portion of the article so cleared or so used as was leviable when it was imported into India.

So, in respect of imports by Export Oriented Units (EOU) anti-dumping duty shall not be levied, unless specifically made applicable. So, for imports by these entities, there is no need to exempt anti-dumping duty through any notification. It may be noted, however, that imports by Units and Developers in SEZ are not covered by these provisions.