Customs Levy, Types of Duties, Valuation and Drawback
This domain tests the charging provisions of the Customs Act, 1962, the several duties imposed at import, the valuation rules, and drawback on re-export or export of duty-paid goods.
Levy and types of duty
Section 12 charges customs duty on goods imported into or exported from India. Import duty includes basic customs duty under the First Schedule, social welfare surcharge at 10% of BCD, IGST under section 3(7) of the Customs Tariff Act, and compensation cess where applicable. Protective duties include anti-dumping duty under section 9A and countervailing duty on subsidised goods under section 9; safeguard duty under section 8B addresses surge injury. Social welfare surcharge is computed on BCD, not on IGST.
Valuation
Transaction value under rule 3 of the Customs Valuation Rules is accepted if the buyer and seller are unrelated and price is the sole consideration. Rule 10(2) adds commissions, brokerage, royalties related to imported goods, assists, packing, and freight, insurance and landing costs to the CIF level. If transaction value is rejected, rules 4 to 8 apply sequentially: identical goods, similar goods, deductive value, computed value and residual method.
Drawback
Section 74 allows drawback on re-export of imported goods, generally 98% of duty if re-exported within 18 months, with reduction for later re-export. Section 75 allows drawback on export of duty-paid goods under All Industry Rates or a brand rate fixed on application.
Worked example
FOB is US$10,000, freight US$1,000 and insurance US$200; CIF is US$11,200, converted at ₹80, giving ₹8,96,000. BCD at 10% is ₹89,600; SWS at 10% of BCD is ₹8,960. IGST at 18% applies on ₹9,94,560, that is ₹1,79,021.
Traps
- Charging SWS on the IGST component.
- Omitting freight and insurance from assessable value.
- Applying section 74 drawback beyond the permitted re-export period without reduction.