Definition
Customs Duty
Customs duty is the tax levied on goods imported into, or in some cases exported from, India, administered under the Customs Act.
Customs duty is a major tool of trade and fiscal policy. The most common is basic customs duty on imports, often supplemented by additional levies and cesses, and offset for GST purposes by integrated tax on imports. Rates are revised in the Budget and through notifications to protect domestic industry or correct distortions.
Beyond raising revenue, customs duty is used to encourage domestic manufacturing — for instance, raising duties on finished goods while keeping inputs cheap, a strategy linked to schemes like the PLI scheme. Protective duties such as anti-dumping duty sit alongside the basic structure.
Related terms
- HSN CodeThe HSN code is an internationally standardised system of numbers used to classify goods, adopted under GST to determine the applicable tax rate.
- Basic Customs DutyBasic customs duty is the primary tariff levied on imported goods as a percentage of their assessable value, forming the core of India's import tax.
- Anti-Dumping DutyAnti-dumping duty is a protective levy imposed on imports priced below their normal value to shield domestic industry from unfair foreign competition.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.