In this article, we will discuss Customs Duty (Definition). So, let’s get started.
Customs duty is a tax imposed on imports and exports of goods.
Customs duty is on import into India and export out of India. As per ancient custom, a merchant entering a kingdom with his goods had to make a suitable gift to the King. In the course of time, this ‘custom’ was formalised into ‘Customs Duty’. This is collected on imports (and occasionally on exports too). The word ‘Customary’ is derived from ‘customs’, which indicates that it is a very old tax. Taxes on goods were levied on various goods right from the Veda period. Customs Duty as we understand today has its origin in British period. British established its first Board of Revenue in 1786 at Calcutta. New Board of Trade was established in 1808. A uniform Tariff Act was introduced in 1859 all over India. General rate of import duty was 10%, which was reduced to 7.5% in 1864. Customs duty in India is linked with
history of textile industry. British manufacturers wanted to export their products to India and due to their pressure, duty on coarser varieties of cotton goods was abolished in 1877. In the meanwhile, Sea Customs Act was passed in 1878. In 1882, all import duties were abolished, but re-introduced in 1894 at general rate of 5%. Indian Tariff Act was passed in 1894. Import duty on cotton goods @ 5% was introduced in 1894. At the same time, excise duty on Indian cotton goods was imposed, which was bitterly resented in India and it was finally abolished in 1925. General rate of customs duty was later increased to 7.5%. Land Customs Act was passed in 1924. Air Customs was covered by making some rules under Indian Aircraft Act, 1911. After independence, manufacturing industry grew and trade expanded. Customs Act, 1962 was passed to consolidate Sea Customs Act, Land Customs Act and provisions for air customs.