Customs Duty is a tax imposed on imports and exports of goods.
The rates of customs duties are either specific or on ad valorem basis, that is, it is based on the value of goods. Rule 3(i) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 states that the value of imported goods shall be the transaction value adjusted in accordance with the provisions of its Rule 10.
If objective and quantifiable data do not exist with regard to the valuation factors, if the valuation conditions are not fulfilled, or if Customs authorities have doubts concerning the truth or accuracy of the declared value in terms of Rule 12 of the said Valuation Rules, 2007, the valuation has to be carried out by other methods in the following hierarchical order: (i) Comparative Value Method - Comparison with transaction value of identical goods (Rule 4); (ii) (Comparative Value Method - Comparison with transaction value of similar goods (Rule 5); (iii) Deductive Value Method - Based on sale price in importing country (Rule 7); (iv) Computed Value Method - Based on cost of materials, fabrication and profit in country of production (Rule 8); and (v) Fallback Method - Based on earlier methods with greater flexibility (Rule 9).
Import duties are generally of the following types: 1. Basic duty; 2. Additional Customs duty; 3. True Countervailing duty or additional duty of customs; 4. Anti dumping duty/Safeguard duty.
While revenue is a paramount consideration, Customs duties may also be levied to protect the domestic industry from foreign competition.