Customs Duty on imported goods

Customs Duty on imported goods


  • An import or export of goods we often use the term custom duty which is payable or to be paid but at what point of time and when the importation of goods would be treated as complete makes us confused.
  • As per section 12 of the Customs Act, 1962 duties of customs shall be levied as per rates specified under the Customs Tariff Act, 1975 on goods imported into or exported from India.
  • When goods are brought into India it becomes imported goods from the moment they enter into territorial waters, and customs duty becomes leviable on them.
  • The taxable event will be counted at that point. It has to be determined whether they are exempt from duty or not on that date.
  • If they are exempt from duty, no question of calculating the duty payable arises at any later point in time. If they are chargeable to some duty and are not wholly exempt then only the question arises as to what duty is payable.
  • If the goods are wholly exempt from duty as against being partially exempt from such duty they cannot be subjected to duty even if the exemption is withdrawn or modified before the bill of entry is presented or the goods are cleared for home consumption.
  • Custom duty refers to the tax imposed on goods when they are transported across international borders. In simple terms, it is the tax that is levied on the import and export of goods.
  • The government uses this duty to raise its revenues, safeguard domestic industries and regulate the movement of goods.
  • The liability to pay customs duty commences as soon as goods enter the territorial water of India. No duty is leviable on goods that are in transit in the same ship or if goods are in transit from one ship to another. No customs duty is leviable on sample goods. Basic custom duty

The term territorial waters are sometimes used informally to refer to any area of water over which a sovereign state has jurisdiction. The maritime boundaries and areas are calculated from the baseline.

Baseline: It is the low water line along the coast as officially recognized in the coastal state. Internal water: Internal waters are waters on the landward side of the baseline from which the breath of the territorial sea is measured. There is no right of innocent passage through internal water.

Territorial sea: The Territorial sea extends seaward up to 12 nautical miles from its baseline. The coastal States have sovereignty and jurisdiction over the territorial sea.

These rights extend not only on the surface but also to the seabed, subsoil, and even airspace.

Contiguous zone: This extends seaward up to 24 nautical miles from its baseline. It is an intermediary zone between the territorial sea and the high seas.

The coastal state has the right to both prevent and punish infringement within its territory and territorial sea. Unlike the territorial sea, the contiguous zone only gives jurisdiction to a state on the ocean surface and floor. It does not provide air and space rights.

Exclusive Economic Zone: It extends seaward up to 200 nautical miles from its baseline. Within the EEZ(Exclusive Economic Zone), a coastal state has sovereign rights for the purpose of exploring, exploiting, conserving, and managing natural resources, whether living or nonliving of the seabed and subsoil.

It has the right to carry out activities like the production of energy from water, current, and wind. Unlike the territorial sea and the contiguous zone, the EEZ only allows for the above-mentioned resource right. It does not give a coastal state the right to prohibit or limit freedom of navigation.

High sea: The ocean surface and the water column beyond the EEZ are referred to as the high seas.

  • Section 12 declares that duties of customs shall be levied on all goods imported into India. The goods imported shall have to be valued under section 14 of the Customs Act and the duty payable shall have to be determined according to the rates specified under section 15 of the Customs Act,1962 read with the Tariff Act.
  • Under section 46(1) of the Customs Act every importer of goods is required to make an entry for home consumption or warehousing in the prescribed form.
  • The goods may be unloaded only at the approved place and under the supervision of the customs officer as per section 31 of the Customs Act.
  • Section 29 of the Customs Act prohibits the person-in-charge of a vessel or aircraft entering India from any place outside India from permitting the vessel or aircraft to land at any place other than the Customs port or Customs Airport.
  • Within 24 hours of arrival, the person in charge is required to deliver an IGM as per section 30 of the Customs Act. As per section 45 of the Customs Act, all imported goods unloaded in Customs Area shall remain in the custody of the Customs until they are cleared for home consumption or are warehoused or transshipped.
  • Section 14 of the Customs Act does not lay down when or what goods are chargeable to Customs duty. It only deals with the valuation of the goods imported which are chargeable to customs duty.
  • It does not lay down at what point of time the goods become imported goods. Whether they are chargeable at all to duty and if so, when they become chargeable must be determined with reference to section 12 of the Customs Act.
  • Section 15 of the Customs Act would become relevant only if goods are chargeable to duty. Only then for the purpose of determining the amount of duty payable on imported goods the rate at which the duty has to be levied has to be determined by section15.

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