Customs duties in India are governed by the Customs Act, 1962 and the Customs Tariff Act, 1975, forming the backbone of India’s indirect taxation on international trade. Customs duties regulate the import and export of goods, protect domestic industries, generate revenue, and ensure compliance with trade policy. Each type of duty serves a specific legislative and economic purpose, shaped by statutory provisions and judicial interpretations. The Supreme Court in Collector of Customs v. Gopal Krishna emphasized that customs duty is not merely a revenue measure but also an instrument for regulating international commerce. Understanding the types of customs duties is crucial for students studying taxation, indirect tax law, and international trade.
Basic Customs Duty (BCD)
Basic Customs Duty is the standard form of duty levied on goods imported into India under Section 12 of the Customs Act read with the Customs Tariff Act, 1975. BCD rates vary across product categories based on economic policy, protection of domestic industries, and revenue considerations. Goods classified under specific tariff headings attract the rate prescribed therein.
Courts have consistently held that classification must be based on common parlance, technical specifications, and trade understanding. In Dunlop India Ltd. v. Union of India, the Supreme Court ruled that tariff classification should focus on the primary use of the product and not on minor variations. Proper classification is essential as it directly determines the applicable BCD rate.
“Tip: Always correlate tariff classification with the HSN explanatory notes for accurate identification.”
Integrated Goods and Services Tax (IGST) on Imports
Although GST subsumed many indirect taxes, imports continue to attract IGST under Section 3(7) of the Customs Tariff Act. IGST is computed on the value of goods after adding BCD, social welfare surcharge, and other duties. IGST ensures tax neutrality by enabling input tax credit to registered taxpayers, thereby preventing cascading.
The Supreme Court in Mohit Minerals Pvt. Ltd. v. Union of India clarified that IGST on imports forms part of a unified GST system and must be levied strictly under the statutory framework. Importers can claim credit of IGST, which allows seamless flow of tax across supply chains.
“Tip: Remember that IGST on imports is creditable but BCD is not.”
Social Welfare Surcharge (SWS)
SWS is levied on the amount of BCD and not on the total value of goods. Introduced to replace various earlier cesses, it helps fund education, health, and social programs. The rate is usually 10%, unless exempted for specific categories.
The Delhi High Court in Nissan Motor India v. Union of India held that exemption notifications must be strictly construed, and SWS is payable unless explicitly exempted. Importers often overlook its calculation, but SWS significantly impacts landed cost.
“Tip: SWS is always calculated on BCD only—not on IGST or product value.”
Protective Duties
Protective duties under Section 6 of the Customs Tariff Act are imposed based on recommendations of the Tariff Commission to shield domestic industries from injury caused by cheaper imports. These duties are temporary and targeted.
In Reliance Industries Ltd. v. Designated Authority, the Supreme Court observed that protective duties are valid tools for promoting domestic competitiveness but must follow fair investigation procedures.
“Tip: Protective duties serve industrial protection, not revenue collection.”
Safeguard Duties
Safeguard duty is imposed to protect domestic producers from sudden or unforeseen surges in imports causing serious injury. Governed by Section 8B of the Customs Tariff Act, these duties are WTO-compliant and time-bound.
The Supreme Court in Saurashtra Chemicals Ltd. v. Union of India emphasized that safeguard duties must be backed by substantive evidence of injury, ensuring they do not become arbitrary trade barriers.
“Tip: Safeguard duties require proof of serious injury, not merely increased competition.”
Also Read: Constitutional Basis of Taxation in India
Anti-Dumping Duty (ADD)
Anti-dumping duty, imposed under Section 9A of the Customs Tariff Act, counteracts dumping—when foreign producers sell goods in India at lower than normal value, injuring domestic industries. ADD aims to create fair trade parity rather than to block imports.
In the landmark case Reliance Industries Ltd. v. Designated Authority, the Supreme Court held that anti-dumping measures must comply with principles of fairness, transparency, and proper calculation of injury margin.
“Tip: ADD does not apply when domestic industry suffers no ‘material injury’.”
Countervailing Duty (CVD)
CVD can refer to two kinds of duties:
1. CVD in Lieu of Excise Duty (Earlier System)
Before GST, CVD equalized excise duty on imported goods. Post-GST, this duty was largely removed except for products still outside GST like petroleum and tobacco.
2. Countervailing Duty on Subsidized Imports
Under Section 9 of the Customs Tariff Act, CVD is imposed when foreign governments provide subsidies that harm domestic producers. This ensures competitive neutrality.
In SOVA Mining & Minerals v. Union of India, the Court highlighted that imposing CVD requires a clear link between foreign subsidization and injury to Indian industry.
“Tip: Countervailing duty neutralizes foreign subsidies, not price differences.”
Export Duty
Export duties are imposed on limited goods, such as certain minerals and raw materials, to discourage excessive export and preserve domestic resources. Export duty also serves policy goals like controlling inflation of essential commodities.
The Supreme Court in Bharat Forge & Press Industries v. CCE noted that export duties aim to regulate national resource management rather than revenue maximization.
“Tip: Export duties are rare but crucial for resource-based policymaking.”
Road and Infrastructure Cess
This is levied on petroleum products under the Finance Act, not the Customs Act. It enhances infrastructure development and is included in the customs valuation of such goods.
“Tip: Cess may appear minor but significantly increases total tax incidence.”
Conclusion
India’s customs duty framework is a multi-layered system addressing revenue, protectionism, trade balance, and industrial growth. Each duty—whether anti-dumping, safeguard, IGST, or BCD—serves a distinct policy purpose deeply rooted in statute and judicial rulings. With growing international trade, understanding these duties helps students appreciate how India balances domestic interests with global commitments under WTO norms.
Also Read: How to Use AI Tools in Law Studies: A Easy Guide for Law Students 2025