Question 1

What is customs duty and what are the different types applicable in India?

Accepted Answer

Customs duty is a tax levied on goods imported into or exported from India. For imports, the main components are: Basic Customs Duty (BCD) — the primary tariff rate; IGST on imports (5% to 28% depending on the product); Social Welfare Surcharge at 10% of BCD; and in some cases, countervailing duty or anti-dumping duty. The total effective duty on imports can range from under 10% to over 50% depending on the product and country of origin.

Question 2

What is an HSN code and why does correct classification matter?

Accepted Answer

HSN (Harmonised System of Nomenclature) is the international classification system for goods. For customs purposes, the equivalent is CTH (Customs Tariff Heading). Correct classification determines the duty rate, whether an import license is required, and eligibility for duty exemptions. Mis-classification can result in underpayment of duty (leading to demands and penalties) or overpayment (leading to avoidable costs).

Question 3

What is an advance ruling for customs?

Accepted Answer

An advance ruling from the Customs Authority for Advance Rulings (CAAR) gives importers and exporters a binding determination of the tariff classification, duty rate, or origin of their goods before the import or export takes place. It provides certainty and prevents future disputes with customs officers. BSP Associate assists clients in preparing and filing advance ruling applications.

Question 4

What is a customs audit and should importers be concerned?

Accepted Answer

Post-clearance customs audits (PCA) are conducted by customs authorities to verify that past import transactions complied with the Customs Act — correct classification, accurate valuation, proper duty payment, and compliance with import conditions. Importers with significant import volumes should maintain clean records and be prepared for PCA. BSP Associate assists businesses in preparing for and responding to customs audits.

Question 5

What are the penalties for customs duty evasion?

Accepted Answer

Penalties under the Customs Act range from the duty amount to five times the duty evaded, depending on the nature of the violation. Intentional mis-declaration or smuggling attracts prosecution with imprisonment. Even inadvertent errors attract interest at 15% per annum on the short-paid duty. This makes correct classification and valuation critical.

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