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CUSTOMS DUTY AND GST

Custom duty is a type of indirect tax that is levied on the goods transported across the borders of a nation. Tax levied on goods imported from foreign countries is known as import duty and goods exported to the foreign countries is known as export duty. The value of these duties depends on various factors. Duties levied based on the value of the goods is known as velorem duties and duties levied depending on the quantity of the goods is referred to as specific duties.

The main objective of levying these taxes is to ensure the safety of a country’s economy, environment, jobs and citizens by managing the transportation of goods in and out of the country.

In India, custom duties come under the Customs Act, 1962. According to this, the government has a right to impose these taxes on both, the import as well as the export of the goods. Any matters corresponding to these are looked after by the Central Board of Excise and Custom (CBEC) which is a part of the Department of Revenue of the Ministry of Finance.

The government charges the exporter with export duty to send the goods across the national borders and when any goods are received by a country from outside the borders then the buyer or the customs broker must pay the pre-decided amount first in order to retrieve the delivery.

How are these customs duties imputed? Under the Customs Valuation Rules 2007, there are various rules laid down to impute the value of these taxes.

Rule 3 and 4 – Comparative Value Method, comparison of transaction value of similar goods.

Rule 7 – Deducting Value Method, use of sale price of imported goods in the importing country.

Rule 8 – Computed Value Method, combines the cost of materials, fabrications and profits in the production country.

Rule 9 – Fallback Method, based on the previous methods

On the 1st of July 2017, the Goods and Services Tax (GST) was implemented which shook the entire tax system. It is basically a tax that eliminates all the other indirect taxes and makes the tax system much easier. There are 3 different categories of GST – Central Goods and Services Tax (CGST), State Goods and Services Tax (SGST) and Integrated Goods and Services Tax (IGST). The first two are for intra-state transactions and the last one is for inter-state transactions.

The customs duty which are included in GST are the Countervailing Duty (CVD) and Special Additional Duty (SAD). The Basics Customs Duty (BCD) is still regulated as it is. When any goods are imported in India, IGST is imposed on them along with BCD. Before IGST, there were several other taxes such as anti-dumping duty, safeguard duty, central excise duty and service charges which made the whole tax system a lot more complicated whereas now, only one integrated tax is chargeable.

The introduction of GST made the whole international logistics process easier and less complicated. Although, this policy adopted by the government was criticized by many for various factors but all in all, it has reduced the possibility of loopholes in the taxation system and has made it more transparent.