Whatsapp
Customs Law and Procedures in India: A Comprehensive Guide to Import-Export Regulations
Introduction to Customs Duties in India
Customs Law and Procedures in India form the framework through which the government regulates international trade and collects revenue. This system applies to goods crossing Indian borders, whether imported or exported, and serves purposes beyond revenue collection. It helps protect domestic industries, control restricted items, and maintain a balance between local manufacturers and international competitors.
The Customs Tariff Act of 1975 establishes the foundation for customs duties in India, specifying which goods attract duty and at what rates[1]. The taxable event occurs at the moment goods are imported into or exported from Indian territory. While export duties have become increasingly rare in contemporary trade policy, occasionally appearing to manage excess profitability when international prices surge beyond domestic levels, import duties remain comprehensive and widely applicable. Essential commodities such as food grains, fertilizers, and life-saving medical equipment and drugs enjoy exemptions, but most other imported goods face duty obligations.
Structure of Import Duties
Import duties in India follow a multi-layered structure designed to address various policy objectives. Under Customs Law and Procedures, the basic duty forms the primary component, calculated either at standard rates or preferential rates for imports originating from countries with which India maintains special trade agreements. Additionally, the government levies an additional customs duty equivalent to the central excise duty that would apply to similar goods manufactured domestically. This countervailing duty, commonly abbreviated as CVD, ensures imported goods do not gain an unfair advantage over domestically produced alternatives by escaping the excise burden that Indian manufacturers bear.
The duty structure includes a special additional customs duty fixed at four percent, calculated on the aggregate of assessable value, basic customs duty, applicable surcharges, and the countervailing duty[2]. This levy aims to neutralize the sales tax advantage that imported goods might otherwise enjoy over indigenous products subject to state-level taxation. For petroleum products, specifically motor spirit and high-speed diesel oil, an additional duty of one rupee per liter applies. In situations where foreign manufacturers dump goods in the Indian market at artificially low prices or when sudden import surges threaten domestic industries, anti-dumping duties and safeguard duties provide protective mechanisms for local producers.
Courier-Based Import and Export Regulations
The liberalization of India’s economy necessitated streamlined procedures for handling lightweight goods moving across borders. Recognizing this need, the government introduced the Courier Imports and Exports (Clearance) Regulations in 1998, replacing earlier 1995 regulations[3]. These updated rules established a framework allowing private companies to register as authorized couriers at major international airports including Mumbai, Delhi, Chennai, Kolkata, Bangalore, Hyderabad, Ahmedabad, and Jaipur, with customs commissioners at respective locations granting authorizations.
The courier system accommodates most types of goods, though specific exclusions apply. Prohibited items for courier imports include animals and their parts, plants and botanical components, perishable goods requiring special handling, publications displaying incorrect Indian boundaries, gold and silver in any form, precious and semi-precious stones along with studded jewelry, and chemicals listed under chapters 28, 29, and 38 of the Customs Tariff Act’s first schedule that require laboratory testing for identification. These exclusions reflect concerns about handling times, security considerations, and the need for specialized examination procedures incompatible with the rapid clearance courier system demands.
Export restrictions through courier channels include goods subject to export duties, shipments claiming customs duty drawback, consignments under Duty Entitlement Pass Book Schemes or Duty Exemption Schemes or Export Promotion Capital Goods Schemes, and goods exceeding twenty-five thousand rupees in value where Reserve Bank of India waivers for foreign exchange requirements remain unavailable. Documents carrying information, messages, or data recorded through various media face no restrictions provided they contain no prohibited content. Bona fide commercial samples received free of cost qualify for courier import, as do gifts from overseas persons valued up to five thousand rupees and life-saving drugs and equipment currently exempt from customs duties.
The valuation methodology for the five thousand rupee threshold takes the export value in the country of dispatch, excluding locally refundable taxes like value-added tax but excluding freight, courier charges, and insurance for gifts and samples below this limit. For goods exceeding this threshold, freight and insurance costs add to the dutiable value. Weight limitations restrict courier imports to packages of seventy kilograms or less, though exports face no such weight constraints. When duty liability arises, courier companies typically handle small amounts directly, collecting reimbursement from recipients upon delivery, while higher duty assessments prompt direct clearance arrangements between customs authorities and importers.
Gift Import Provisions
Section 12 of the Customs Act subjects all goods entering India to customs duties and restrictions under the Foreign Trade (Development and Regulation) Act of 1992. However, recognizing social and cultural practices, the government exempts bona fide gifts received from abroad up to five thousand rupees in value from both customs duties and foreign trade restrictions. Under Customs Law and Procedures in India, these exemptions are carefully defined to ensure personal exchanges are allowed while preventing commercial misuse. This exemption applies exclusively to gifts imported through air freight or postal services, with calculation of the value threshold excluding transportation and postal charges.
The sending party need not reside in the dispatch country, allowing scenarios where a United Kingdom resident sends goods from South Korea to India with the South Korean value determining duty liability. No relationship requirements limit who may send gifts, permitting business associates, friends, relatives, companies, or acquaintances to utilize this provision. The system balances facilitating personal exchanges while preventing commercial exploitation of the gift exemption category. Items falling under the Foreign Trade Act’s prohibition list remain barred even as gifts, including wild animals and birds or their parts, narcotic drugs like opium and marijuana, ivory, arms such as revolvers, pistols, other handguns, and ammunition.
Gold jewelry and studded jewelry including samples face import restrictions for ordinary persons through courier routes. However, units operating in Export Processing Zones and Export Oriented Units may import gems and jewelry including samples through authorized couriers, reflecting these entities’ special status under export promotion schemes. Export of jewelry and samples encounters no such restrictions, with all units permitted to send these items abroad through courier services.
Drawback Under Section 74: Re-export of Imported Goods
The Customs Act provides relief mechanisms when imported goods subsequently require re-export, preventing double taxation that would otherwise discourage legitimate temporary imports. As per the provisions of Customs Law, Section 74 establishes the drawback framework for re-exported goods, requiring satisfaction of specific conditions. The claimant must demonstrate the goods were previously imported with import duty paid, enter them for export within two years from the duty payment date (extendable to three years by the Customs Commissioner upon sufficient cause), establish their identity as the originally imported items, and actually re-export them outside India. Additionally, the goods’ market price must equal or exceed the drawback amount claimed, and claims below fifty rupees face rejection under Section 76(1)(c).The procedural requirements mandate filing shipping bills under drawback claim in prescribed formats. After assessment, customs officers physically examine goods to verify identification. Following shipment, claimants submit their cases to the drawback department, forwarding pre-receipted drawback payment orders that trigger cheque issuance. Insufficient documentation prompts deficiency memos requesting additional information, with processing resuming upon compliance. Required supporting documents include the shipping bill triplicate bearing examination reports, bill of entry copies or prescribed import clearance documents, import invoices, duty payment evidence, Reserve Bank of India re-export permissions where applicable, export invoices and packing lists, bills of lading or airway bills, and any other documents specified in deficiency communications.
Time limits under Section 74 measure from duty payment date to export entry date under Section 50 for sea or air exports, Section 77 for baggage items, or Section 83 for postal exports. The Central Board of Customs and Central Excise may extend the two-year period upon sufficient cause demonstration. Claims must be filed within three months from let-export order dates per Rule 5 of the Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995, with Assistant Commissioners authorized to grant three-month extensions and Commissioners empowered to allow up to nine months additional time when sufficient cause prevents timely filing[6].
Drawback Under Section 75: Export of Domestically Manufactured Goods
Section 75 addresses the distinct situation of domestically manufactured goods exported with duty-bearing inputs, providing relief from customs and central excise duties paid on raw materials, components, intermediates, and packing materials used across production stages. Notably, this scheme excludes capital goods, fuels, and consumables from drawback calculations, nor does it reimburse sales tax, octroi, or other indirect taxes. Finished-stage excise duties on export products receive separate treatment under the Central Excise and Salt Act of 1944 and its associated rules rather than customs drawback provisions.
Manual processing under Section 75 requires filing drawback shipping bills in prescribed formats with necessary declarations. Officers examine goods post-assessment as individual cases require, with examination reports indicating goods nature for drawback schedule classification and correct rate application. Samples undergo laboratory testing for chemicals, synthetic fabrics, and other specified items to confirm export document declarations. The shipping bill triplicate containing examination reports serves as the claim copy.
Supporting documentation encompasses shipping bill triplicates, bank-certified invoice copies, bills of lading or airway bills, AR-4 form sixtuplicates where applicable, freight and insurance certificates for CIF or C&F contracts, laboratory test reports where goods require testing, brand rate letters for brand rate claims, mate receipts, contract or letter of credit copies, MODVAT declarations where applicable, declarations required by drawback schedule footnotes, worksheets showing claimed amounts, DEEC books and license copies where applicable, transshipment certificates where relevant, foreign agency commission payment proof, blank acknowledgment cards in duplicate, and pre-receipted drawback amounts on shipping bill reverses with signatures on one-rupee revenue stamps. Appraisers settle and pass claims below one lakh rupees, while Assistant Commissioners handle amounts exceeding this threshold. Following pre-audit, cheques reach designated banks for account credits or authorized representative collection[7].
Electronic Data Interchange System for Drawback Processing
Computerized processing through the Indian Customs EDI System operates at nineteen Indian ports, eliminating paper document processing except statutory declarations and endorsements until let-export order stages. The EDI system is an important part of Customs Law, ensuring that exporters and Customs House Agents can file and track drawback claims efficiently while maintaining compliance with legal requirements. Exporters access filing through service centers established at Custom Houses and Air Cargo Complexes. The system covers all exports except Section 74 claims and Export Processing Zone or hundred percent Export Oriented Unit exports, which continue under manual processing.
Exporters must establish accounts with customs-nominated banks enabling direct drawback credit transfers, obviating cheque issuance. Standard Data Format declarations in Annexure B replace GR-1 forms for drawback exports, supplemented by Annexure C declarations when presenting goods for examination and let-export. Additional declarations specified in customs public notices must accompany shipping bills. Drawback schedule serial numbers depend on associated conditions, requiring correct serial number specification and relevant appendix declarations for accurate system processing. Missing declarations prevent claim processing, emphasizing comprehensive documentation importance.
Post-export, the system processes claims on first-come, first-served bases. Service center query counters display shipping bill status and drawback sanctions, with raised queries or noted deficiencies appearing on provided terminals. Exporters or authorized representatives may obtain query or deficiency printouts, with claims returning to queue upon reply entry. Brand rate drawback claims require original brand letter production to Assistant Commissioners for Export and system entry before sanction, with serial number 98.01 specified for provisional claims. Daily sanctioned claims appear in scrolls transferred to nominated banks through the system, with banks crediting exporter accounts the following day and sending fortnightly credit statements. Steamer agents and airlines transfer Electronic Goods Manifests electronically for physical export confirmation, with processing contingent on EGM receipt[8].
Postal Export Drawback Claims
Drawback claims on goods exported by post require filing with postal authorities at parcel booking time using prescribed forms. Customs authorities’ receipt dates from postal authorities constitute filing dates for Section 75A purposes, establishing three-month payment timelines. Receipt triggers exporter notifications, while incomplete forms prompt deficiency memos within fifteen days. Exporters resubmit compliant forms within thirty days, with acknowledgment commencing three-month payment periods for proper claims.
Interest Provisions and Supplementary Claims
Section 75A mandates fifteen percent annual interest when claims remain unsettled three months beyond acknowledgment issuance under Rule 13(1), which occurs only for complete claims. Deficient claims receive deficiency memos within fifteen days, requiring compliance within thirty days from receipt, with acknowledgment and time limit commencement following compliance receipt. Conversely, exporters receiving erroneous or excess drawback who fail repayment within three months from demand dates face twenty percent annual interest liability[9].
When paid drawback falls short of entitlement, Rule 15 of the Drawback Rules 1995 permits supplementary drawback claims in prescribed formats within three months from original settlement dates. This provision ensures exporters receive full legitimate benefits despite initial calculation errors or omissions.
Conclusion
Customs law and procedures in India reflect a sophisticated balance between revenue generation, trade facilitation, domestic industry protection, and regulatory compliance. The framework established through the Customs Act, Customs Tariff Act, and associated regulations creates multiple pathways for goods movement while maintaining governmental control over border transactions. Understanding these mechanisms proves essential for businesses engaged in international trade, enabling efficient operations while ensuring legal compliance. The drawback provisions particularly demonstrate policy commitment to preventing duty cascading that would otherwise disadvantage Indian exporters in global markets, thereby supporting the nation’s export competitiveness and economic growth objectives.
References
[1] Customs Tariff Act, 1975. Government of India. https://www.cbic.gov.in/resources//htdocs-cbec/customs/cs-act/customs-tariff-act-1975.pdf
[2] Ministry of Finance. (2023). Customs Manual. Central Board of Indirect Taxes and Customs. https://www.cbic.gov.in/resources//htdocs-cbec/customs/cs-manual/cs-manual-index
[3] Courier Imports and Exports (Clearance) Regulations, 1998. Central Board of Indirect Taxes and Customs. https://www.cbic.gov.in/htdocs-cbec/customs/cs-act/notifications/notfns-1998
[4] Customs Act, 1962. Government of India. https://www.cbic.gov.in/resources//htdocs-cbec/customs/cs-act/cs-act-index
[5] Section 74, Customs Act, 1962: Re-export of Imported Goods. https://www.cbic.gov.in/htdocs-cbec/customs/cs-act/cs-act-sections/section-74
[6] Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995. Central Board of Indirect Taxes and Customs. https://www.cbic.gov.in/htdocs-cbec/customs/cs-act/rules-cs
[7] Section 75, Customs Act, 1962: Drawback on Re-export of Duty Paid Goods. https://www.cbic.gov.in/htdocs-cbec/customs/cs-act/cs-act-sections/section-75
[8] Central Board of Indirect Taxes and Customs. (2022). EDI System for Customs. https://www.icegate.gov.in/
[9] Section 75A, Customs Act, 1962: Interest on Delayed Payment of Drawback. https://www.cbic.gov.in/htdocs-cbec/customs/cs-act/cs-act-sections/section-75a
