Customs duty in India |what is custom duty act, 1962 | role of customs duty

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Customs duty is an indirect tax changed on import and export of goods and services. Customs duty is governed by entry no. 83 of the union list, hence it is levied and collected by the Central Government of India. Customs duty act 1962, and customs traffic act, 1975 are the predominant sources of CUSTOMS laws in India.

The power to levy customs duty is derived from entry 83 of Union list of 17th schedule of the Constitution of India, which reads as, “duty of customs including export duties” Thus the power to make laws in respect of custom duty vests which the central government. the tax receipt on account of customs duty is slowly enjoyed by the union. the custom traffic act, 1975 or any other low time being is force provided the duties of custom shall be levied on goods imported into or exported from India

Custom duty refers to the duty levied on the import of goods as well on the export of the goods. The duty imposed on the goods imported into the country is called import duties and duty levied on the goods exported out of the country is called an export duty.

During the ancient period whenever a trader entered into the boundaries of a country for selling his merchandise, he offered some gifts to the king/administration of that country. Later on, this practice got converted into custom duty. these days import and export duties are an important source of revenue for all the countries of the world

The custom act, 1962, and the customs traffic act, 1975 have been amended from time to time. In this amendment made up to finance act, 2016 has been taken into account and efforts have been made to present the provision in simple language.

All the enactments enacted by the parliament should have their source in the constitution of India. the power for enacting the laws is conferred on the parliament and on the legislature of the state by Articles 245 of the Constitution. The said Article states:

Subject to the provision of this constitution, parliament may make law for the whole or any part of the territory of India, and the legislature of the state may make laws for the whole or any part of the state. No law made by the parliament shall be deemed to be invalid on the ground that it could an extra-territorial operation.

Article 246 governs the subject matter of the law made by the parliament and the legislature of states. the matters are listed in the 17th schedule of the Constitution.

Articles 17th schedule is classified into three lists as follows:

This list enumerates the matters in respect of which the parliament has the exclusive right to make laws and 83 of the union list has been given the power to the central government to levy duties of customers including export duties.

List 2 [referred to as state list]

This list enumerates the matters in respect of which the legislature of any state has exclusive rights to make laws.

List 3 [referred to as the concurrent list]

This enumerates the matters in respect of which both the parliament and, subject to list 1, the legislature of any state, has the power to make laws.

Parliament has a further power to make any laws for any part of India not comprised in a state, notwithstanding such matters is included in the state list.

Import duty and export duty may be determined on the following two bases:

1. Specific Duty:

When the duty is determined on the basis of the measurement of goods, it is called specific Duty.

2. Ad Valorem Duty:

When the duty is determined on the basis of the value of the goods it is referred to as ‘Ad Valorem Duty’.

1.specific Duty:

Specific duty is a kind of Duty which is is levied of goods, such as weight, length, volume, thickness, etc., Of the item. In such cases, calculation of Duty payable is comparatively easy. However, the disadvantage is that if the selling price of the product increases, revenue earned under search duty does not increase correspondingly. frequent revision of rates has to be done which is a slow and time-consuming process.

This method is a discriminatory and effective protection against cheap products. there are reverse relationships between product value and duty percentage. as a product price goes up duty as a percentage of the price will fall on the other hand for the productivity percentage will rise accordingly.

2.Ad Valorem Duty

It is the duty that is levied on the basis of the valuation of goods. the valuation in money terms may be as per traffic value on national value fixed by the board or assemble value based on transaction value. the customs traffic act, 1975 stipulates various rates based upon principle.

It is accordingly to value as a fixed percentage of the invoice or dutiable value. this is opposite to specific duty. there is a direct relationship between the duty and price of the product it provides continuous and relative protection against all price levels of a particular product.

It is the combination of the specific and Ad Valorem duties on a single product. For example, traffic may be Rs.100 per Quality plus 5% Ad Valorem.

Customs duty is imposed with a motive of earning revenue as well as to (a) regulate, (b) control, © develop, (d) promote international trade with preference to duty imposing country.

The role of customs duty in international trade can be witnessed from the establishment of organizations like W.H.O. It has a broad regulatory framework to regulate international trade.

1.Receiving the revenue: Customs duty forms an important source of revenue for the Central government.

2.Protection to domestic Industry:

Import duty provides protection to the domestic Industry especially small-scale and household industry against the competition from well-developed foreign industry.

3.Reducing deficit in the balance of trade and the balance of payments:

When the imports of a country increase or export decreases, it becomes difficult to pay in the foreign currency. in such a situation increasing the cost of imports and decreasing the cost of exports, saves foreign currency. import duty is used to make imports costlier and providing subsidy on exports decrease the cost of the goods exported.

4.controlling the smuggling:

When the import duties are high, it encourages smuggling because it becomes profitable. but when import duties are lowered then smuggling does not remain profitable. proposition and it decreases. decrease of import duty on gold is a very good example of this.

If certain goods are in short supply in our country and are in great demand outside and is sold at a higher price then it is natural that the traders will export the goods. in such a situation the government will make the export costlier by imposing a heavy export duty on it.

6.Saving Foreign Exchange:

Several luxury items are better made in foreign countries. there richer classes of our country spend a lot of foreign exchange on the purchase of these items. to solve this process the problem the government tries to reduce the demand for foreign-made luxury goods by making them costlier through the imposition of increased import duties on them.

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