Foreign Trade Policy


Custom Duty


Custom duty is a tax which a state collects on goods imported or exported out of the boundaries of the country. It forms a significant source of revenue for all countries especially in developing countries like India. In India, custom duties are levied on the goods and at the rates specified in the schedules to the Custom Tariff Act, 1975.

Objectives of Custom Duties:
  • Restricting Imports for conserving foreign exchange
  • Protecting Indian Industry from undue competition
  • Prohibiting imports and exports of goods for achieving the policy objectives of the Government.
  • Regulating exports
  • Co-ordinating legal provisions with other laws dealing with foreign exchange such as Foreign Trade Act, Foreign Exchange Regulation Act, Conservation of Foreign Exchange and Prevention of Smuggling Act, etc.
Custom duty is levied on :
Import of Goods : Import is bringing of goods to India from any other country of the world. Territorial water extend upto 12 nautical miles into the sea from the coast of India and so the liability to pay import duty commences as soon as goods enter the territorial waters of India. No duty is leviable on goods which are in transit in the same ship or if goods are in transit from one ship to another.

Export of Goods : Export duty is levied on export of goods. The main objective of this duty is to simply restrict exports of certain goods. At present very few articles like skin and leather are subject to export duty. The liability to pay export duty commences as soon as goods leave the territorial waters of India.

Rules
To carry out the purpose of the act several rules are made by the Central Government. The few among these rules are:
  • Custom Valuation Rules, 1988 for valuation of imported goods that calculates the custom duty payable.
  • Customs and Central Excise Duties Drawback Rule, 1971 for calculating rates of duties as drawbacks on exports.
Regulations
The Central Board of Excise and Customs has been empowered to make regulations to carry out the provisos of the act. In case of any conflict regarding the rules and regulations the provisions of the rules shall prevail. In order to maintain the rules of the Act several regulations like Customs House Agents Licensing Regulations, 1984 have been framed.

Notifications
The Central Government may also issue notifications in the Official Gazette for the purpose of the act.

Emergency powers are granted to the Central government to increase import or export duties if a need arise to do so. The increase in these duties should be notified in the session of Parliament or should be placed within seven days before the next session of the Parliament. The notification is not considered to be valid if it is not approved within a span time of fifteen days.