An entrepreneur willing to expand his/her business abroad must abide by the tax laws of the home country as well as of the particular foreign country and accordingly pay the required taxes. Taxes (or duties) are defined as the financial charges levied by the Government upon an individual or an organisation or property in return for the government services received by them. These taxes may be broadly classified into direct and indirect taxes. Direct taxes are those where the tax payer pays the taxes directly to the imposing authority like income tax and corporate tax. Whereas, indirect taxes are those which are not paid directly to the imposing authority but paid to someone else who acts as an intermediary link between the tax payer and the tax levying authority like customs duty and service tax. In India, the power to levy taxes and duties is distributed among the three tiers of Government, in accordance with the provisions of the Constitution.

The most important tax which an entrepreneur is subjected to is the 'customs duty' which is a type of indirect tax levied on goods imported into India as well as on goods exported from India. In India, the basic law for levy and collection of customs duty is Customs Act, 1962. It provides for levy and collection of duty on imports and exports, import/export procedures, prohibitions on importation and exportation of goods, penalties, offences, etc. The Central Board of Excise & Customs (CBEC) is the apex body for customs matters. It is a part of the Department of Revenue under the Ministry of Finance, Government of India.

But due to different tax laws and rules prevailing in different countries, a businessmen faces the problem of 'double taxation'. Double taxation refers to a situation where the same income becomes taxable in the hands of the same company or individual (tax-payer) in more than one country. This puts unnecessary and prohibitive burden on the tax-payer. In India, the liability under the Income tax Act arises on the basis of the residential status of the assessee during the previous year. Hence, if the assessee is resident in India, he/she has to pay tax not only on the income which is received in India but also on that income which accrues, arises outside India or received outside India. Thus he becomes liable to pay double taxes. The relief against such double taxation in India has been provided through, bilateral relief and unilateral relief.