Indirect Taxation

Customs Duty

In India, Customs Duty is levied on the import of goods into the country and is payable at the time of clearance of goods for home consumption from the customs station.

With a change in the indirect tax structure, the components of Customs Duty have also reformed. Customs Duty comprised of the following elements up to 30 June 2017:

  • Basic Customs Duty (BCD) (with a peak rate of 10%)
  • Countervailing Duty (CVD) (with a peak rate of 12.5%, in lieu of Central Excise Duty)
  • Education Cess (EC) and Secondary and Higher Education Cess (SHEC) at the rate of 3% of the BCD and CVD
  • Special Additional Duty of Customs (SAD) (at the rate of 4%, in lieu of domestic sales tax)

With the introduction of GST, the Customs Law has been amended to levy Integrated Goods and Service Tax (IGST) on the import of goods in lieu of CVD and SAD. BCD will continue to be levied, however, EC and SHEC levied at 3% has been replaced by Social Welfare Surcharge (SWS) at 10%. Customs Duty now comprises of the following elements:

  • BCD (typically ranging between 10% to 40%)
  • SWS (10% on BCD)
  • IGST (same as GST rate applicable on local supply, in lieu of CVD and SAD)
  • Compensation cess (Applicable on few goods ranging from 1% to 290%) depending on the nature of the goods

Furthermore, the Union Budget 2020-21 introduced a new levy of ‘Health cess’ at the rate of 5% of the assessable value on the import of medical equipment falling under Chapter Headings 9018, 9019, 9020, 9021 and 9022 (such as ECG, ultra-sound scanner, etc.). BCD, SWS and Health cess is not available as an input tax credit. However, IGST and Compensation cess are available as an input tax credit under the GST Law (subject to the fulfillment of certain conditions and documentation requirements)

Get in Touch
Saket Patawari
Executive Director
Indirect Tax

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