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Chris John

Expert

Published on: Sep 15, 2026

Customs Duty

Goods are imported into or exported from India through sea, air, or land. Goods may also arrive via post parcel or as baggage when passengers travel in and out of the country. The Customs Act was formulated in 1962 to prevent the illegal import and export of goods. Furthermore, all imported goods are subject to duty to protect indigenous industries and minimize imports, benefiting Indian companies and stabilizing the Indian currency exchange rate. In this article, we explore customs duty in India in detail.

Objective of Customs Act and Customs Duty

The Customs Duty on import and export of goods in India serves several purposes:

  1. To restrict imports and conserve foreign exchange.
  2. To protect domestic companies by achieving government policy objectives.
  3. To regulate export activities.
  4. To align legal provisions with related laws like the Foreign Trade Act and the Foreign Exchange Regulation Act.
  5. To safeguard domestic trade interests.
  6. To protect national revenue resources.
  7. To shield Indian industries from unfair competition.
  8. To prevent smuggling activities.
  9. To counteract the dumping of goods.

Types of Customs Duty in India

The customs duties collected are categorized as follows:

  1. Basic Custom Duty
  2. Surcharge
  3. Additional Duty of Customs
  4. Special Additional Duties (SAD)
  5. Other levies like Countervailing Duty, Anti-dumping Duty, Safeguard Duty, and, in some cases, Cess Duty.

Mode of Levy of Customs Duty

Customs Duty can be imposed in the following ways:

Specific Duties

A Specific Custom Duty is charged on every unit of a commodity imported or exported. For example, INR 10 per meter of cloth or INR 1,000 per TV set imported, without considering the commodity's value.

Ad Valorem Duties

Ad Valorem, Latin for 'According to the Value', is a duty levied on the total value of a commodity imported or exported. For instance, 10% of the F.O.B value of cloth imported or 20% of the C.I.F value of TV sets imported. The physical units of the commodity are not considered, and it's based on the goods' value.

Compound Duties

Compound Custom Duty combines specific and Ad Valorem duties, considering both quantity and value.

Exemptions from Customs Duty

Certain exemptions from Customs Duty are provided under the following conditions:

  • The Central Government may grant exemptions through notifications. Capital goods and spares can be imported under "project imports" at concessional/Nil rate.
  • Section 25 of the Customs Act authorizes the Central Government to grant partial or complete exemptions on any goods.
  • Exemptions can apply to primary duty or auxiliary duty.
  • General exemptions relate to user goods, while specific exemptions target various products.
  • Exemptions may be conditional upon specific criteria being met.

Types of Exemptions

The following types of exemptions from Customs Duty exist:

  1. By notification
  2. By particular order on an Adhoc basis
  3. General exemptions
  4. Exemptions to Oil and Natural Gas Corporations Limited (ONGC) and Oil India Limited (OIL)
  5. Other exemptions

"Customs Duty Drawbacks"

"Drawbacks" for goods manufactured and exported from India have two meanings:

  1. Rebate of duty chargeable.
  2. Rebate of excise duty.
  3. The drawback is equivalent to the Customs Duty paid on imported inputs and the Excise Duty paid on indigenous inputs.

Value of the Customs Act

Customs Duty is calculated as a percentage of the 'value' or 'Assessable Value' referred to as Customs Value. Section 14(1) provides criteria for deciding 'value':

  1. Price at which such goods are normally sold or offered.
  2. Price for delivery during import/export time and place.
  3. The sale price should be part of International Trade.
  4. The buyer and seller should have no mutual business interests.
  5. Price considerations should be sole for the sale.
  6. The exchange rate on the date of Bill of Entry presentation should be considered, as specified in the CBE&C's Customs Manual, 2001, for export goods. Import goods require valuation per Chapter 6, Para 5 of the CBE&C's Manual.

Scope and Coverage of Customs Law

Customs Law in India comprises several Acts, rules, regulations, and notifications. Below are key laws pertaining to Customs Duty:

The Customs Act of 1962

The Customs Act of 1962 is fundamental for implementing and collecting duties on imported and exported goods. It includes import/export procedures, restrictions, penalties, offenses, and more.

The Customs Tariff Act of 1975

The Customs Tariff Act of 1975 features two schedules. Schedule-1 provides classification and duty rates for imports, while Schedule-2 outlines similar details for exports. It also covers additional duties like Countervailing Duty (CVD) and anti-dumping duties.

Note: The Customs Act of 1962 governs the levy of duties, while the Customs Tariff Act of 1975 sets the duty rates.

Rules under the Customs Act

Section 156 of the Customs Act of 1962 empowers the Central Government to make regulations consistent with the Act's provisions. Key rules include:

  1. Customs Valuation Rules of 1988: For assessing imported goods for duty calculation.
  2. Customs and Central Excise Duties Drawback Rules of 1995: Calculating duty drawback on exports.
  3. Re-export of Imported Goods
  4. Baggage Rules of 1998: Regulations for bringing baggage into India, with a duty-free allowance of INR 50,000 per individual.
  5. Customs Rules of 1996: Regulate import of goods at concessional duty rates for manufacturing excisable goods and the procedure for exports.

Regulations under the Customs Act

Section 157 empowers the Board to create rules supporting the Act. Some notable regulations include:

  1. Project Import Regulations of 1986: Procedures for project imports.
  2. Customs House Agents Licensing Regulations of 1984

Other Specifics

Notifications under the Customs Act

The Central Government can issue notifications based on several sections:

  1. Section 25(1): Grants partial/full duty exemption. Section 11 prohibits goods import/export.
  2. Sections like 11B specify notified goods, while Section 11-I determines specific goods.

Board Circulars

Authorized under Section 151A, the Central Bureau of Indirect Taxes and Customs issues directions for customs officers to ensure uniformity in goods classification and duty levy.

Customs Manual of 2001

Offers an overview of Customs Law and procedures.

Public Notices

The Commissioners of Customs issue Public Notices to inform and guide stakeholders about specific regulations and updates.

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Frequently Asked Questions

Common questions about Customs Duty in India: Types, Objectives, and Exemptions.

The Customs Act and Customs Duty serve several purposes, such as restricting imports to conserve foreign exchange, protecting domestic industries from unfair competition, regulating exports, preventing smuggling and dumping of goods, and safeguarding government revenue. These measures aim to support Indian companies and industries while aligning with foreign trade policies.
The various types of Customs Duties levied in India include Basic Customs Duty, Surcharge, Additional Duty of Customs, Special Additional Duties, Countervailing Duty, Anti-dumping Duty, Safeguard Duty, and Cess Duty on certain goods.
Customs Duty in India can be levied in three modes: Specific Duties (a fixed amount per unit of commodity), Ad Valorem Duties (a percentage of the value of the commodity), and Compound Duties (a combination of specific and ad valorem duties).
Yes, there are exemptions from Customs Duty in India. The Central Government can issue notifications granting partial or full exemptions on certain goods or for specific users. Additionally, capital goods and spares can be imported under "project imports" at concessional or nil rates of Customs Duty.
The value for Customs Duty, also known as the "Assessable Value" or "Customs Value," is determined based on criteria outlined in Section 14(1) of the Customs Act. These include the price at which similar goods are ordinarily sold, the price for delivery at the time and place of import/export, and the consideration for sale in the course of international trade.
The primary laws and regulations governing Customs Duty in India include the Customs Act of 1962, the Customs Tariff Act of 1975, the Customs Valuation Rules of 1988, the Customs and Central Excise Duties Drawback Rules of 1995, the Baggage Rules of 1998, the Customs Rules of 1996, and various regulations like the Project Import Regulations of 1986 and the Customs House Agents Licensing Regulations of 1984.
The CBIC is empowered under Section 151A of the Customs Act to issue instructions and directions to Customs officers for uniformity in the classification of goods or the levy of duty. The CBIC also issues the Customs Manual, providing an overview of Customs Law and Procedures.
The Customs Tariff Act of 1975 contains two schedules: Schedule-1 provides the classification and rate of duties for imports, while Schedule-2 gives the classification and rates of duties for exports. It also makes provisions for additional duties like the Countervailing Duty (CVD), Special Duty, Anti-dumping Duty, and Protective Duties.
As of April 1, 2016, international passengers travelling to India have a duty-free baggage allowance of INR 50,000 per individual. Additionally, such passengers are not required to file declarations if they are not carrying dutiable goods as part of their baggage.
Customs Duty exemptions in India can be granted through notifications issued by the Central Government under Section 25 of the Customs Act. These exemptions may be general or specific and can be granted partially or wholly on certain goods, subject to fulfilling certain conditions.