Customs in India
Every country has rules and regulations related to imports and exports or the movement of goods to another country. These rules and regulations are formed to prohibit the export and import of restricted goods, impose taxes on imported and exported goods, inspect goods, conduct audits of financial statements, maintain revenue data, and so on. All these rules and regulations are set up by specific authorities called customs authorities.
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These authorities are responsible for collecting revenue in the form of duties and complying with trade rules. The rationale for imposing custom duties is to protect domestic industries from foreign competition. In India, various acts related to customs are enacted, such as Customs Act, 1962, Customs Tariff Act 1975, and Foreign Trade (Development and Regulation) Act, 1992.
These acts regulate the international trade in a transparent manner. Customs in India are regulated by Central Board of Excise and Customs (CBEC),which has various authorities and agencies that regulate various activities related to the management of customs. CBEC has the power to formulate export-import rules, regulations, and policies. The chapter discusses in detail the concept of customs authorities. It explains important customs acts in India.
Introduction to Customs
Customs can be defined as an authority/agency in a country/state that collects customs duties and controls the flow of goods into and out of a country. A customs duty is a type of tax levied on goods imported in and exported out of the country. It is imposed by customs authorities and constitutes a major part of the revenue of a country.
The major reason for customs duties on exports is to control the exports of important items (by increasing its price) from a country. On the other hand, duties on imported goods are levied to provide protection to the domestic industry.
The main objectives of levying customs duty are to:
- Ensure that nothing goes out of the country against the laws of the land and rules and regulations are followed as enforced by customs authorities
- Check the authenticity of the value of goods as per the customs valuation rules to prevent over and under invoicing
- Assess the export duty as per the Customs Tariff Act
- Check that all provisions set are being followed by export and import authorities
- Maintain all import and export data
- Prevent the imports of drugs for illegal use like opium in the country
Customs duties are calculated on the actual value of imported and exported goods. Actual value implies the price at which merchandise is sold under fully competitive situation. If the actual value cannot be determined for specific goods, the value for identical goods can be taken. Customs authorities were formed as a result of government agreements and international laws between countries. Goods that are not cleared through customs are held in a customs area called bonded store.
Customs in India
Customs in India is an ancient concept that is being used since the time of the Indus Valley Civilisation. As per the Kautilya’s Arthashastra, the highest revenue officer of the time was Samaharta, who was the collector general. He was assigned a duty of collecting revenue from various places. Similarly in Mauryan Empire, the tax on trade was collected from land routes and sea routes. This was done to undertake the welfare activities of the state.
In the period of Mughal Empire, ‘chungi’ was the type of tax imposed on goods moving from one state to another. During the British rule in India, the customs duty was an important source of revenue for states. Lord Cornwallis demolished the customs duty in 1788. However, it was reintroduced in 1801.The customs laws in India were designed as per the British system by enacting the Sea Customs Act and the customs authority in place.
Till 1924, the customs administration was in control of provincial government. After the establishment of the Central Board of Revenue Act, the control of customs shifted to the federal government. The Land Customs Act was established for controlling the flow of goods through land routes and frontiers.
After independence, Indian Customs Act 1962 was enacted by merging the system of sea customs, land customs, and warehouse customs into one. In India, the Central Board of Excise and Customs (CBEC), created under the Ministry of Finance, is the customs authority. CBEC is mainly responsible for framing customs rules and collecting customs duties in India.
Apart from this, the following are some other functions performed by CBEC:
- Collecting customs duties as per the Act
- Making provisions for regulating exports and imports
- Taking preventive measures to control smuggling and drug trafficking
India is a part of various international customs agreements set by global institutions. Some of these institutions are discussed as follows:
The World Trade Organisation (WTO)
WTO, headquartered at Geneva, Switzerland, consists of 153 members and represents more than 97% of the world trade. It was established in 1995 and deals with the rules of trade between the countries.
World Customs Organisation (WCO)
WCO is an independent inter-governmental body established in 1952. Its main objective is to increase the efficiency of customs administration.
Organization for Prohibition of Chemical Weapons
It presently consists of 190 states that work together to attain a world that is free of chemical weapons; thereby strengthening international security.
The South Asian Association for Regional Co-operation
SAARC accelerates the growth and economic development of member states.