Customs Duty: An Outline — Practice

Question 1

What three components make up the CIF-based Assessable Value for customs purposes?

Accepted Answer

Cost of goods, insurance, and freight (up to the Indian port or airport).

Question 2

Which duty is charged when imports surge suddenly in quantity, regardless of whether the price was fair?

Accepted Answer

Safeguard duty.

Question 3

What document does an exporter file to declare goods to Customs?

Accepted Answer

A Shipping Bill.

Question 4

Goods are imported at an FOB price of Rs. 9,50,000. Freight is Rs. 70,000 and insurance is Rs. 18,000. Compute the Assessable Value and the Basic Customs Duty at a rate of 10%.

Accepted Answer

Assessable Value = 9,50,000 + 70,000 + 18,000 = Rs. 10,38,000. BCD = 10% x 10,38,000 = Rs. 1,03,800.

Question 5

Explain the difference between anti-dumping duty and safeguard duty.

Accepted Answer

Anti-dumping duty is charged when goods are imported at a price below their normal (home-market) value, protecting domestic industry from unfairly cheap foreign competition. Safeguard duty is charged when a sudden surge in import quantity threatens serious injury to domestic industry, regardless of whether the import price itself was fair.

Question 6

Explain the policy purpose of duty drawback.

Accepted Answer

Duty drawback refunds customs duty already paid on imported inputs when those inputs are used to manufacture goods that are subsequently exported, so that Indian exports are not made less internationally competitive by carrying a hidden domestic customs-duty cost embedded in their imported components.

Question 7

Explain why customs duty is levied on a CIF-based Assessable Value rather than the plain FOB invoice price, and what this implies for two importers of an identical product who arrange different freight terms.

Accepted Answer

Customs duty is intended to tax the full landed cost of bringing goods into Indian territory, not merely the price charged by the foreign seller, so freight and insurance genuinely incurred in transporting the goods to India are included in the duty base. This implies that two importers of an identical product could face different customs duty amounts purely because they negotiated or arranged different freight and insurance costs, even though the underlying goods and their FOB price are identical — the duty tracks the actual landed cost, not just the goods' base price.

Question 8

Explain why a single imported consignment can attract more than one type of customs duty simultaneously, using BCD, Social Welfare Surcharge and IGST on imports as your example.

Accepted Answer

Each duty targets a different policy purpose and is computed on its own specified base: Basic Customs Duty is the primary revenue duty computed on Assessable Value; the Social Welfare Surcharge is then computed as a percentage of the BCD amount itself (a duty on a duty), funding social welfare schemes; and IGST on imports is computed on Assessable Value plus BCD, mirroring the GST that would have applied had the goods been bought domestically, so that imported and domestically produced goods are not given an unfair tax advantage relative to each other. Because each layer serves a distinct purpose and uses a distinct base, they stack rather than substitute for one another.

Practice — Customs Duty: An Outline

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