All goods must be classified into groups and sub-groups in order to levy the customs duty. The Customs Tariff Act 1975
, gives the classification of goods and accordingly specifies the rate of duty. The act contains two schedules:-
- Schedule 1 classifies the goods for import and prescribes the rate of import duties. It specifies the various categories of import items in a systematic and in accordance with an international scheme of classification of internationally traded goods – termed as ‘harmonized system of commodity classification'.
- Schedule 2 classifies the goods for export and prescribes the rate of export duties.
In addition, the Customs Tariff Act makes provisions for duties like additional duty(CVD), preferential duty, anti-dumping duty, protective duties,etc.
The duties are levied both on specific and ad-valorem basis, while there are few cases where at times specific-cum-ad valorem duties are also collected on imported items. Where ad-valorem duties (i.e. duties with reference to value) are collected, which are the predominant mode of levy, the value of the goods has to be determined for customs duty purposes as per provisions laid down under the Customs Act and the Customs Valuation (determination of prices of imports goods) Rules, 1988 issued thereunder. These provisions are essentially adoption of GATT based valuation system and followed internationally (now termed WTO Valuation Agreement). The importer as well as the assessing officer has to carefully study and apply these provisions so that the duties as due after proper valuation as per law get discharged before the goods get out of customs control.