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All about the Amendments in Custom Duty in the Budget 2021-22

Custom Duty in the Budget 2021-22

India’s Finance Minister presented the Budget for the Financial Year 2021 – 22 in the Lok Sabha on 1st February 2021& has made changes in custom duty to encourage domestic processing & manufacturing of goods.

The articles talk about the meaning of customs duty & the amendments made in the Budget 2021 – 22.

What is custom duty?

Customs duty is the tax levied on the goods transported internationally. In other words, the custom duty is levied on the goods that are imported or exported in the country.

Customs duty is the tax levied on the goods transported internationally. In other words, the custom duty is levied on the goods that are imported or exported in the country.

The government uses the duty collected in raising the revenue & safeguarding the domestic industries of the country. It also regulates the movement of goods especially prohibited & restricted goods, across international borders.

The customs duty rate varies from where the goods were made & what are the goods made of. The Budget has estimated the custom revenue for the year 2021 – 22 was Rs. 1, 38,000 crore.

What are the types of custom duty?

Custom duty is being levied on every good that is imported into the country.These are divided into:

  • Basic Customs duty (BCD)
  • Countervailing Duty (CVD)
  • Special CVD or additional Customs Duty
  • Protective Duty
  • Anti – Dumping Duty
  • Education Cess on customs duty

How is the custom duty computed?

The customs duty is calculated on an ad valorem basis, i.e., the value of goods. The value is determined as per the rules laid down in the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.

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The method to be followed for the valuation of goods with accuracy is:

  • Rule 4 & 5: Comparative method

It talks about the comparative method that compares the value of transaction of similar or identical items.

  • Rule 7: Deductive method

It talks about the deductive method that uses the sale price of the goods in the importing country.

  • Rule 8: Computed value method

It talks about the computed value method that employs the cost of the materials, fabrication & profit in the production country.

  • Rule 9: Fallback method

It talks about the fallback method, based on the previous methods with higher flexibility.

How the payment of custom duty is made?

The steps to be followed to make payment of customs duty are:

  • Visit the e- portal of ICEGATE[1].
  • Log in using the import / export code provided by ICEGATE.
  • Then click on the e – payment button.
  • Select the challan from the options of e – challan to be paid.
  • Select the mode of payment.
  • After the payment is made, click on the print button & save the payment receipt.

What are the exemptions from custom duty?

There are 2 types of exemptions from customs duty:

  • General exemption

The official Gazette in its notification exempts either absolutely or with specific conditions as specified in the notification, goods of any specified description wholly or partly custom duty levied.

  • Special exemption

By a special order, payment of duty are exempted of any goods on which the duty is levied under exceptional circumstances to be stated in such order.

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What are the recent developments in custom duty?

The government has made few changes to the custom duty to meet several objectives that include promoting energy, curbing non – essential imports, raising revenue, etc.

The Budget presented proposes basic changes in custom duty to encourage domestic processing & manufacturing in the country and it includes increasing custom duties & withdrawing exemption to encourage on value addition.

A few of the items on which Custom Duty rates are revised are:

  • Custom duty has been reduced from 5% to 2.5%
  • Special additional excise duty has been reduced on petrol & high – speed diesel oil (branded or non – branded)
  • Duty on solar inverters is increased from 5% to 20%
  • Duty on solar inverters is increased from 5% to 15%
  • Basic custom duty on silver & gold is reduced
  • The department will rationalize the duty on textile, chemicals & other products

The revised rates will be applicable from 2nd February 2021 onwards.

Major amendments made in Customs Act, 1962 are:

S. No.



Improving compliance


·        Chapter VAA as section 28DA has been inserted in the customs act to provide the enabling provision to administer the preferential tariff treatment regime under the Trade agreements.

·        The section provides certain obligations on the importers & it prescribes verification from the exporting country in case of any doubt.

·        In some cases, the preferential tariff may be denied without any further verification.


Reduction in Litigation


·        An explanation has been inserted in section 28 to explicitly clarify that any notice issued under this section (before enacting the Finance Act, 2018) is governed by section 28 as it existed before the said enactment.


Other enabling provisions


·        Section 11 (2) clause (f) empowers the Central Government to prevent the injury to the economy of the uncontrolled import or export of gold or silver in the country. The clause has been amended to include the words ‘any other goods’ in addition to gold & silver).


·        Section 51B is inserted to provide for an Electronic Duty Credit Ledger in the custom system. This enables the issuance of suitable regulations and inserted in section 157(2) in the Act. The provisions for the recovery of duties under section 29AAA are also expanded to include the electronic credit of duties.

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The union budget of 2021 – 22 has corrected the irregularity in custom duty structure by raising the custom duties or withdrawing exemption from some. It encourages the growth in domestic processes & manufacturing of goods.

Read our article:Major Highlights of the Union Budget 2021-22 (Part-2): Pillars to Energise the Economy

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