Module 47: Mastering Customs
1. Introduction
When we talk about GST, we are usually thinking about taxes on goods and
services sold within India. But what happens when something crosses India’s
borders—when we import a fancy gadget from abroad or export our products to
another country? That’s where customs laws step in.
Customs duty is a kind of tax we pay when goods enter or sometimes leave India. It
is not just about raising money for the government; it is also about making sure
Indian businesses are not unfairly undercut by cheaper imports and keeping a
check on what comes in and goes out. Thus, whenever we import something, we
do not just pay GST. We also pay customs duties.
The main ones are Basic Customs Duty (BCD) and Integrated GST (IGST).
Understanding customs is essential, if we want to see the full picture of how
taxes work on international trade.
2. Some Customs Terms
It is important to know about few customs related terms which are explained
below;
Import: Bringing goods into India from another country.
Export: Sending goods out of India.
Customs Duty: The tax charged on these goods.
Assessable Value: The value customs uses to calculate how much duty we owe
—usually, it is what we paid for the goods, plus some extra costs.
3. Types of Customs Duties
Whenever we import something, we have to pay certain customs duties which are
listed below;
Basic Customs Duty (BCD): The standard import tax.
IGST: This is GST, but for imports—it makes sure imported goods are taxed at
the same rate as local ones.
Social Welfare Surcharge (SWS): A small extra charge on top of BCD, meant for
social programs.
Export Duty: Rare, but sometimes charged on goods leaving India .
4. Impact of customs Duty on The Value of Goods
When we pay for imports the value of goods is inclusive of customs duty, because
customs wants to know the real value of what’s coming in, so they add up:
The price we paid
Freight and insurance
Loading and unloading
Packing costs
Royalties or license fees if any
Commissions and brokerages
If customs thinks our invoice is not reliable ,maybe we are buying from a related
company, or the actual price is not declared, they will use other methods to figure
out the value—like comparing with similar imports.
5. Tariff Values and Exchange Rates
Tariff Value: For some goods like gold or edible oils, the government sets a
fixed value for duty, no matter what our invoice says.
Exchange Rate: Always use the rate announced by the Central Board of
Indirect Taxes and Customs (CBIC)—not our bank’s or the RBI’s rate.
6. Procedure for Calculating Export Duty
Export duties are pretty rare, but they do exist for certain products. When they
apply, the value is based on the FOB (Free on Board) value—basically, the price up
to the point the goods leave India, including packing and loading.
7. The Relationship Between GST and Customs Duty
Here’s what happens when goods cross the border, that is on imports;
We pay BCD , that is the classic customs duty.
We pay IGST , that is just like GST, but for imports.
We pay SWS , that is the social welfare surcharge.
IGST is calculated on the total value (price + BCD + SWS).
On Exports:
Exports are treated as “zero-rated” under GST—meaning we do not pay GST,
and we can claim a refund for any GST or ITC we paid earlier.
8. Importance of Customs Duty
If our business is involved in importing or exporting, knowing customs rules is very
important as we learnt the provisions of GST. The reasons for the same are listed
below;
Costing: We need to know our real costs so we do not lose money.
Compliance: Mistakes can mean fines, delays, or even having our goods
seized.
Faster Clearances: The right paperwork and procedures mean our goods move
quickly.
Documentation: We will need to master forms like the Bill of Entry , that is for
imports and Shipping Bill , that is for exports.
9. Conclusion
Even though GST has made domestic taxes simpler, customs duties are still a big
deal for anything that crosses India’s borders. If we understand how customs and
GST work together—how duties are calculated, which rates apply, and what
paperwork is needed—we will keep our business compliant and competitive. We
can say that, customs duty is the bridge between GST and the world of
international trade. Master it, and we are set for global business!