Import duty, also known as customs duty, is a type of tax imposed by a government on goods and services that are brought into a country.
The primary purpose of import duties is to generate revenue for the government and protect domestic industries by making imported goods more expensive compared to locally produced items.
Import duty, also known as customs duty, is a type of tax imposed by a government on goods and services that are brought into a country. The primary purpose of import duties is to generate revenue for the government and protect domestic industries by making imported goods more expensive compared to locally produced items. Import duties can be based on the value of the goods, the weight or quantity (specific), or a combination of both.
Calculation: Import duties are typically calculated based on the value of goods, including costs like shipping and insurance (known as CIF value). The rate depends on the product's classification under the Harmonized System (HS) code and trade agreements between countries.
Types:
1. Standard Duty: Applied universally without preferential treatment.
2. Tariffs: A percentage-based tax aimed at regulating trade flows.
If a company in India imports machinery from Germany worth ₹100,000 and the import duty rate is 5%, the company would need to pay an import duty of ₹5,000 to the Indian government. This duty is added to the cost of the machinery, increasing the overall expense for the importer.