Customs Duty is an indirect tax concept levied on goods crossing the international borders of India, with the taxable event being the import into or export from the country. The legal framework for its levy and collection is primarily the Customs Act, 1962, which is a central Act of Parliament. The concept's origin is ancient, with historical records like the Kautiliyam Arthasastram (circa 321-300 BC) mentioning a levy called Shulka on goods at trade routes. The modern system evolved under British rule, with a uniform Tariff Act introduced in 1859 and the Sea Customs Act passed in 1878. The Customs Act, 1962, was enacted to consolidate the earlier laws, including the Sea Customs Act and the Land Customs Act, to meet the requirements of an independent nation.
The mechanism of Customs Duty is governed by Section 12 of the Customs Act, 1962, which provides for the levy of duties at rates specified in the Customs Tariff Act, 1975. The Customs Tariff Act, 1975, aligns India's tariff system with the Harmonised System of Nomenclature (HSN) for global consistency. The duty is administered by the Central Board of Indirect Taxes and Customs (CBIC), which is part of the Department of Revenue under the Ministry of Finance. Key types of duties include Basic Customs Duty (BCD), which is the primary charge, and other duties like Anti-Dumping Duty and Safeguard Duty, which are imposed to protect domestic industries from unfair competition or a sudden surge in imports.
Customs Duty connects directly to the constitutional power of the Union Government, which is empowered to legislate and collect duties on imports and exports under Entry No. 83 of List I to Schedule VII. It also connects to the Integrated Goods and Services Tax (IGST), which is levied on imports to equalize them with domestic taxes. Recently, the framework has seen amendments, such as the introduction of Section 18A in the Customs Act, 1962, through the Finance Act, 2025, which allows importers and exporters to voluntarily revise entries post-clearance. Furthermore, the Finance Bill, 2026, proposed extending the validity of advance rulings from three years to five years by amending Section 28J(2). The core function of the duty, which is to generate revenue, regulate trade, and protect domestic industry, remains the same.