The document outlines various types of customs duties in India, including Basic Customs Duty (BCD), Countervailing Duty (CVD), Special Additional Duty (SAD), and others, explaining their purposes and conditions for imposition. It also details the provisions for duty drawback, which refund customs duty on imported materials used in manufacturing exported goods, while setting out the eligibility criteria and calculation methods. Furthermore, it discusses emergency powers of the Central Government to impose or enhance export and import duties as necessitated by circumstances.

1. Types of Customs Duty
and Duty Drawback
CA Divakar Vijayasarathy

2. Credits and Acknowledgement
Harish Kumar R
CA Jugal Narendra Gala

3. Legends used in the Presentation
BCD Basic Customs Duty
CA Customs Act, 1962
CG Central Government
CTA Customs Tariff Act, 1975
CVD Countervailing Duty
EOU Export Oriented Units
FEMA Foreign Exchange Management Act, 1999
GST Goods and Service Tax
RBI Reserve Bank of India
SAD Special Additional Duty

4. Types of Customs Duty

5. Coverage
Introduction Basic Customs Duty Countervailing Duty
Special Additional Duty Protective Duties Safeguard Duty
Anti- Dumping Duty
Emergency Power to
Impose or Enhance
Export Duties
Emergency Power to
Impose or Enhance
Import Duties

6. Introduction
Customs Duty refers to the tax imposed on the goods when they are transported across the
international borders
Customs duties are computed on a specific or ad valorem basis
The primary purpose of customs duty is to raise revenue, safeguard domestic business, jobs,
environment and industries, etc. from foreign competitors
Levy and regulation of custom duty falls under the Central Board of Indirect Taxes and Customs

7. Types of Customs Duty
Types of Customs Duty
Basic
Customs Duty
Countervailing
Duty Protective
Duties
Anti-dumping
Duty
Special
Additional Duty Safeguard Duty

8. Basic Customs Duty (BCD)
BCD shall be levied
• at such rates as may be specified
• on goods imported into or exported from India
The rates are specified in First and Second Schedules of Customs Tariff Act
First Schedule
Second Schedule
enlists the goods liable to import duty
enlists the goods liable to export duty
BCD is levied at standard rate of duty however, if certain conditions are satisfied, the importer can avail
the benefit of preferential rate of duty on imported goods
At the time of importation, a specific claim should be made for the preferential rate
The goods should be produced or manufactured in preferential area (Mauritius,
Seychelles, Tonga are notified as preferential area)
The origin of the goods shall be determined in accordance with the specified rules under
the Customs Tariff Act
Conditions for
preferential rate
of duty

9. Countervailing Duty (CVD)
-Duties levied on imported goods to offset subsidies provided to producers of these goods in the
exporting country
- Imposed to level the playing field between domestic producers and foreign producers
-The duty chargeable shall be in addition to any other duty imposed
Conditions for charging CVD
Conditions
Any country pays subsidy upon the manufacture or production or exportation of any article
Such articles are imported into India
The importation may/may not be directly from the country of manufacture/production
There may or may not be change in the condition of article
The amount of CVD shall not exceed the amount of subsidy paid
The duty can be for a maximum period of 5 years, however, CG can further extend to maximum
period of another 5 years
The injury to domestic industry which has become difficult to repair
In order to preclude recurrence of such injury, it is necessary to levy
retrospectively
Conditions for
retrospective imposition
of countervailing duty
Note: Retrospective imposition date shall not exceed beyond 90 days from the date of notification issued for levy

10. Special Additional Duty (SAD)
Special additional duty is levied to counter balance the excise duty leviable on raw materials,
components and ingredients of the same nature as, or similar to those, used in the
production or manufacture of the imported article
The CG can levy such duty if it is satisfied that it is necessary in the public interest to do so
even if such article is liable to normal duty
Imposed to provide a level playing field to indigenous goods (in this context, domestic
products)
The duty would counter-balance the sales tax, value added tax, local tax or any other charges
for the time being leviable on a like article on its sale, purchase or transportation in India
Due to introduction of GST, the levy of SAD would be limited

11. Protective Duties
Protective Duties are levied for the purpose of protecting domestic businesses
and domestic products against overseas imports
The protective duties are levied by the CG upon the recommendation made to it
by the Tariff Commission (which recommends CG remedial measures for
protecting Indian industries)
The protective duty shall be effective only upto and inclusive of the date
specified in the First Schedule
The CG may reduce or increase the duty by notification in the Official Gazette.
However, in case of increase in duty, approval of both the Houses of Parliament
is required
Factors to be considered while levying protection duties
The protective duties should not be very stiff so as to discourage imports
It should be sufficiently attractive to encourage imports to bridge the gap between
demand and supply of those articles, which are deprived in the domestic market

12. Safeguard Duty
Any article is imported into India in increased quantities
Such increased importation is causing or threatening to cause serious
injury to domestic industry
Circumstances to impose safeguard duty
• The safeguard duty is imposed for the purpose of protecting the interests of any domestic industry
• The duty imposed shall be in force for a period of 4 years from the date of its imposition
• The CG can extend the period of such imposition as it deems fit, however, the total period of levy of
safeguard duty is restricted to 10 years
Exemptions from safeguard duty
Articles from developing country which does not exceed 3% of the total imports of that article
into India from that country
When articles originating from more than one developing country, the aggregate of imports from
each developing countries with less than 3% and import share taken together does not exceed
9% of the total imports of that article into India
Articles imported by a 100% EOU/unit in a SEZ unless specifically made applicable

13. Anti-dumping Duty
When the export price of a product imported into India is less than the Normal
Value of ‘like articles’ sold in the domestic market of the export country
Anti-dumping duty arises when the normal value of like article in the domestic market
of export country is greater than export price to India
Dumping
Anti-dumping duty is Margin of Dumping or Injury margin whichever is lowerComputation
Margin of dumping
 In relation to an article, it means the difference between its export price and normal value
in domestic market of export country, expressed as a percentage of the export price
Export price The price of an article exported from the exporting country or territory to India
Normal value
Comparable price, of like goods, in the domestic market of export country, in the normal
course of business
Injury Margin
 Injury margin is the margin adequate to remove the injury to the domestic industry
 It is the difference between the Fair Selling Price due to India (price expected to charge
in India) and the Landed Value of the dumped imports
Landed Value
The assessable value under the Customs Act and the applicable basic customs duties
except CVD, SAD and other special duties
The anti-dumping duty shall be levied for a period of 5 years, however, CG can extend the same
for a further period of 5 years
Time limit

14. Emergency Power to Impose or Enhance Export
Duties – Sec 8 of Customs Tariff Act
The CG may impose or enhance export duties by making amendment to the Second Schedule by issue of
a notification in the Official Gazette
Key Considerations The goods may or may not be specified in the Second Schedule
CG can impose or enhance, based on the prevailing circumstances necessary for
the imposition or enhancement of export duties
Emergency Power to Impose or Enhance Import
Duties – Sec 8A of Customs Tariff Act
The CG may impose or enhance import duties by making amendment to the First Schedule by issue of a
notification in the Official Gazette
Key Considerations The goods should be specified in the First Schedule
The CG is satisfied that circumstances exist, which render it necessary for the
enhancement of import duties
Note: The CG shall not issue any notification under Sec 8A unless the earlier notification amending the
rate of duty has been placed before and passed in the Parliament

15. Duty Drawback

16. Coverage
Overview and Basis of Drawback
Allowability of Drawback
Conditions of Drawback
Drawback where Imported Goods are used before Re-exportation
Drawback on Imported Materials Used in the Manufacture of Export Goods
No Drawback in Certain Scenarios
Factors to be Considered for Drawback
Cases where Drawback is not Determined
Supplementary Claim
Interest on Drawback
Prohibition and Drawback

17. Overview and Basis of Drawback

18. Overview
Drawback means the refund of duty of customs that are chargeable on imported materials
used in the manufacture of exported goods
To entitle to drawback, goods must be exported to a foreign port
The object of the relief afforded by the drawback is to enable the goods to be disposed
in the foreign market as if they had never been taxed at all
Sec 74 to Sec 76 of Customs Act, 1962 covers provisions for duty drawback read with
Customs and Central Excise Duties Drawback Rules, 2017

19. Basis for Drawback
An important principle in the levy of customs duty is that the goods should be consumed within the country
of importation
If the goods are not so consumed, but are exported out of the country, the cost of export goods gets unduly
escalated on account of incidence of customs duty
The re-export of the goods which were erstwhile imported into the country is broadly on two occasions:
Where the goods are sent back as such to the foreign country (normal exports)
Where the goods are used in the manufacture of other articles and such other articles are exported
Relief of import duty paid in case of above is allowed by way of duty drawback

20. Drawback on Re-export of Duty Paid Goods

21. Drawback Allowable on Re-Export of Duty Paid
Goods – Sec 74
When goods capable of being easily identified
Then upto 98% of such duty shall be repaid as drawback
The CG may make rules which may:
provide for the manner in which the identity of goods may be established
specify the goods which shall not be deemed capable of being easily identified;
provide for the manner and the time within which a claim is to be filed
Includes unaccompanied baggage but does not include motor vehiclesBaggage
Have entered for exports
which have been imported into India and duty has been paid on importation,

22. Conditions for Duty Drawback
The goods should have been imported into India
The duty of customs should be paid on such imports
The goods should be capable of being easily identified as the goods, which were originally imported
The goods should have been entered for export and the Proper Officer should have permitted clearance of the
goods for export
The goods are identified to the satisfaction of the Assistant or Deputy Commissioner of Customs as the goods,
and
The goods are entered for export within 2 years from the date of payment of duty on the importation thereof

23. Identity of Goods
One of the important conditions is that the identity of the goods exported should be
established similar to the one which has been imported earlier on payment of duty
The concerned authority can be satisfied:
and as alternative through the correspondence exchanged between the
overseas seller of the goods and the Indian importer
primarily by physical examination of the goods
In the course of physical examination emphasis will be laid on
description of the goods
quantity and weight
identifying markings/distinguishing features
original packing of the goods

24. Drawback where Imported Goods are used
before Re-export

25. Amount of Drawback where Imported Goods
are used before Re-exportation
If imported goods are used after importation, then the amount of drawback will be at the reduced rates
as fixed by the CG having regard to the duration of use, depreciation in value and other relevant
circumstances
List of goods which are not entitled for drawback after use are as follows:
Wearing Apparel
Tea Chests
Exposed cinematograph films passed by Board of Film Censors in
India
Unexposed photographic films, paper and plates, and X-ray films

26. Reduced Drawback Rates
S.No
Length of period between the date of clearance for home
consumption and the date when the goods are placed for export
Percentage of import duty to
be paid as Drawback
1 3 months or less 95%
2 Between 3 to 6 months 85%
3 Between 6 to 9 months 75%
4 Between 9 to 12 months 70%
5 Between 12 to 15 months 65%
6 Between 15 to 18 months 60%
7 More than 18 months Nil
If goods are exported without using after importation, then drawback can be claimed upto 98%
Mere testing shall also tantamount to use

27. Reduced Drawback Rates in case of Car
S.No Year Drawback of duty shall be calculated by reducing the import duty by
1 1st 4% per quarter or part thereof
2 2nd 3% per quarter or part thereof
3 3rd 2.5% per quarter or part thereof
4 4th 2% per quarter or part thereof
If cars are exported without using after importation, then drawback can be claimed upto 98%
Mere testing shall also tantamount to use

28. Drawback on Imported Materials used in
Manufacture of Export Goods

29. Drawback on Imported Materials used in the
Manufacture of Export Goods – Sec 75
Where it appears to the CG that imported materials for manufacturing or processing of goods in India and
such goods have entered for export
a drawback should be allowed based on the amount determined by CG having regard to all
circumstances and facts of manufacturing industry
Aforesaid drawback not to be allowed in certain cases
The export value of the finished goods or the class of goods is less than the value of the imported material used in
the manufacture or processing of such goods or
The export value is not more than such percentage of the value of the imported materials used in the manufacture
or processing of such goods or
Any drawback has been allowed on any goods and the sale proceeds in respect of such goods are not received by
exporter in India, in any earlier consignment, within the time limit prescribed under FEMA

30. Customs and Central Excise Duties Drawback
Rules, 2017
No drawback in following cases
If the said goods, except tea chests used as packing material for export of blended tea, have been
taken into use after manufacture;
If the said goods are produced or manufactured, using imported materials or excisable
materials in respect of which duties have not been paid;
On jute batching oil used in the manufacture of export goods, namely, jute (including
Bimlipatam jute or mesta fibre) yarn, twist etc.
If the said goods, being packing materials have been used in or in relation to the export of jute
yarn, jute fabrics, etc
Further, the drawback amount shall not exceed 1/3rd of the market price of the export product

31. Factors to be Considered for Drawback
In determining the amount or rate of drawback, the CG shall have regard to
The average quantity or value of the materials from which a particular goods are ordinarily produced or
manufactured in India
The average quantity or value of the imported materials used for production or manufacture of goods in
India
The average amount of duties paid on imported materials used in the manufacture of semis, components
and intermediate products which are used in the manufacture of goods
The average amount of duties paid on materials wasted in the process of manufacture and catalytic agents
The average amount of duties paid on imported materials used for containing or, packing the export goods
Any other information which the CG may consider relevant or useful for the purpose

32. Cases where Drawback is not Determined
Where no amount or rate of drawback has been determined in respect of
any goods, any exporter of such goods may,
within 3 months from the date relevant for the applicability of the
amount/rate of drawback,
apply to the Principal Commissioner/ Commissioner of Customs,
for determination of the amount or rate of drawback
stating all the relevant facts including the proportion in which the
materials or components are used in the production or manufacture

33. Supplementary Claim
Where any exporter finds that the amount of drawback paid to him is less than what he is entitled to on
the basis of the amount or rate of drawback determined by the CG/ Principal Commissioner/
Commissioner of Customs, may prefer a supplementary claim
The exporter should prefer such supplementary claim within a period of 3 months
The supplementary claim shall be backed by relevant supporting documentary evidences

34. General Provisions for Drawback

35. Interest on Drawback – Sec 75A
Where any drawback payable to a claimant is not paid within a period of 1 month
-from the date of filing a claim for payment of such drawback,
-in addition to the amount of drawback,
-claimant is entitled to interest (fixed between 5% and 30% p.a.)
Where any drawback has been paid to the claimant erroneously or it becomes otherwise recoverable
under the Act or the Rules,
-the claimant shall within a period of 2 months from the date of demand,
-pay in addition to the said amount of drawback, interest at the rate (fixed between 10% and 36% p.a.)

36. Prohibition of Drawback – Sec 76
a. No drawback shall be allowed:
in respect of any goods, the market price of which is less than the amount of drawback due or
where the amount of drawback in respect of any goods is less than Rs. 50
b. If the CG is of the opinion
- that goods of any specified description in respect of which drawback is claimed
- are likely to be smuggled back into India, it may by notification in the Official Gazette,
- direct that drawback shall not be allowed in respect of such goods or may be allowed subject to
such restrictions and conditions
It shall be noted that the above provisions shall override all other provisions mentioned before

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