What is Custom Duty?
Custom duty, also known as import duty, is a tax imposed by a government on goods imported from other countries. It is a source of revenue for the government and is usually calculated as a percentage of the value of the imported goods.
Types of Custom Duties
- Basic Customs Duty: This is levied on the assessable value of the goods as per the Customs Act, 1962.
- Additional Customs Duty: Also known as Countervailing Duty (CVD), it is levied on imported goods to protect domestic manufacturers from foreign competition.
- Protective Duty: This is imposed on goods to protect the domestic industry from unfair competition.
Why Custom Duty Matters
Custom duty serves multiple purposes. It helps in regulating imports, protecting domestic industries, and generating revenue for the government. By imposing custom duties, governments can control the flow of goods into the country and prevent dumping of cheap goods that can harm local businesses.
Case Study: US-China Trade War
In recent years, the US and China have been engaged in a trade war, imposing tariffs and custom duties on each other’s goods. This has led to a significant impact on global trade and has disrupted supply chains worldwide.
Impact on Businesses
Custom duties can have a significant impact on businesses, especially those that rely on imported goods. Higher duties can increase the cost of production, leading to higher prices for consumers. Businesses may also face challenges in sourcing alternative suppliers or passing on the increased costs to customers.
Conclusion
Custom duties play a crucial role in regulating international trade and protecting domestic industries. Understanding the implications of custom duties is essential for businesses engaged in import-export activities.
