Customs Law: Levy, Classification, Valuation and Import/Export Procedures
What the exam tests
This domain tests the Customs Act, 1962 charging provisions, types of duty, classification, customs valuation and the documentation for import and export. The exam commonly combines assessable value with basic customs duty and social welfare surcharge.
Core rules
- Levy: Section 12 charges customs duty on goods imported into or exported from India at the rates specified in the Customs Tariff. Import duty may include basic customs duty, social welfare surcharge, integrated GST and compensation cess.
- Classification: Goods are classified under the Customs Tariff using the General Interpretative Rules, section notes, chapter notes and the HSN. Essential character and specific descriptions matter.
- Valuation: Import value generally starts with the transaction value, normally CIF, plus specified additions. Related-party transactions require special scrutiny. Export value is generally FOB, subject to adjustments.
- Import procedure: Importer obtains an IEC where required, files a bill of entry through the EDI system, pays duty and obtains clearance. Export uses a shipping bill and may claim duty drawback or other benefits.
Worked example
FOB value is ₹1,000; freight is ₹100; insurance is ₹20. Assessable value is ₹1,120. Basic customs duty at 10% is ₹112. Social welfare surcharge at 10% of basic customs duty is ₹11.20. IGST is computed on assessable value plus basic customs duty plus social welfare surcharge, subject to the applicable rate.
Traps
FOB is not the import assessable value; freight and insurance are added. Social welfare surcharge is not levied on IGST. Classification is not based only on trade name. Related-party influence can displace transaction value. Do not ignore section and chapter notes when classifying goods.