Indirect Tax Laws · Levy of and Exemptions from Customs Duty

Levy of Customs Duty under Section 12 (CA Final Indirect Tax)

Updated 5 October 2026

Section 12 of the Customs Act, 1962 is the charging section. It levies customs duty on goods imported into or exported from India at the rates in the Customs Tariff Act, 1975 or any other law. To solve a question, find the taxable event, the rate date, the goods and the duties that stack on one another.

Understand Levy of Customs Duty under Section 12

Customs duty is a tax on goods that cross India's border. Section 12 of the Customs Act, 1962 is the charging section. It says duty is leviable on goods imported into, or exported from, India, subject to the exceptions in the Act or any other law. The rates come from the Customs Tariff Act, 1975 or any other law for the time being in force. The Central Government's notifications can reduce or exempt the duty.

The taxable event for import is the crossing of the customs barrier, that is, the goods entering India's territorial waters or limits. For export, the levy crystallises when the goods are exported, that is, when they cross the barrier out of India. The rate, however, is fixed by separate provisions. For imports, Section 15 fixes the rate as that in force on the date the bill of entry for home consumption is presented. For exports, Section 16 fixes the rate as that in force on the date the proper officer makes an order permitting clearance and loading of the goods for exportation. Do not confuse the event with the rate date.

Duty applies to goods. It does not apply to services. Section 12 levies duty on goods imported or exported, subject to the exceptions in the Act or any other law. Goods that are exempted are still within the levy. They are relieved by an exemption notification under Section 25. Goods prohibited under Section 11 are also exposed to the confiscation and penalty provisions of the Act. Whether duty is also demanded on them depends on the facts and the law, so read the question carefully.

Several duties can apply to one import. Basic customs duty (BCD) is under Section 12 read with the First Schedule of the Customs Tariff Act. Social Welfare Surcharge (SWS) is not a separate type of duty. It is a surcharge levied under the Finance Act, 2018 on the aggregate of the duties of customs, at the notified rate. The base excludes IGST, safeguard duty and the transition duties. As an exam simplification, SWS is usually worked on BCD at the rate given, unless the question puts other duties into the base. It is often exempted by notification, so apply the facts given in the question. IGST is levied under Section 3(7) of the Customs Tariff Act, with the IGST Act. Its value is the value of the imported goods plus any duty of customs chargeable under the Customs Act, the Customs Tariff Act or any other law in force. So the base includes BCD, SWS, and safeguard, anti-dumping and countervailing duty where applicable.

Trade remedy duties are levied under the Customs Tariff Act to protect domestic industry. Safeguard duty is under Sections 8B and 8C. Section 8C deals with critical circumstances. Anti-dumping duty is under Section 9A. Countervailing duty to offset subsidies given by the exporting country is under Section 9. Do not confuse this with the old 'additional duty' under Section 3 of the Customs Tariff Act, also called CVD. That additional duty has been replaced by IGST, which is now levied under Section 3(7). So IGST on imports is a different levy from the countervailing duty on subsidies under Section 9.

The key exam idea is stacking. IGST on imports is charged on a base that already includes all the customs duties chargeable, including BCD, SWS and any trade remedy duty that applies. So the order of working matters: value, then BCD, then SWS if applicable, then any trade remedy duty as given, then IGST.

Key rules to remember

Assessable value: Assessable value = Transaction value (CIF basis, after Valuation Rules additions); Starting point for all ad valorem duties. Freight and insurance are included in imports per the Valuation Rules.
Basic customs duty: BCD = Assessable value × BCD rate; Rate is in the First Schedule to the Customs Tariff Act or in an exemption notification.
Social Welfare Surcharge: SWS = Aggregate of duties of customs on which it is levied × SWS rate (as notified); SWS is a surcharge, not a separate type of duty. It is levied under the Finance Act, 2018. The base excludes IGST, safeguard duty and the transition duties. Exam simplification: work it on BCD only, unless the question puts other duties into the base. SWS is often exempted by notification. If the goods are exempt from SWS, ignore it. Use the rate given in the question.
IGST on imports: IGST = (Assessable value + BCD + SWS + safeguard, anti-dumping or countervailing duty, where applicable) × IGST rate; Levied under Section 3(7) of the Customs Tariff Act. The IGST value is the value of the imported goods plus any duty of customs chargeable under the Customs Act, the Customs Tariff Act or any other law in force. Include SWS and trade remedy duties only where they apply on the facts. The IGST paid can be claimed as input tax credit by the registered importer, subject to GST law.
Total customs payable: Total = BCD + SWS + trade remedy duty (if any) + IGST; Add each duty in the order of the question. All customs duties chargeable that apply on the facts form part of the IGST base.
Taxable event and rate date: Import: crossing the customs barrier; rate date under Section 15 (bill of entry for home consumption presented). Export: goods crossing out of India; rate date under Section 16 (order permitting clearance and loading).; The event creates the liability. The rate date fixes the rate applied.

How to solve Levy of Customs Duty under Section 12 questions

Use this order for any question on levy of customs duty. It keeps the duty stacking correct and shows the examiner the legal basis.

1Identify whether the transaction is an import or an export and state that Section 12 is the charging section.
2State the taxable event and, if the question asks, the rate date: Section 15 for imports, Section 16 for exports.
3Confirm the item is goods and check whether any exemption notification applies.
4List every duty that applies: BCD, SWS, safeguard, anti-dumping, countervailing, IGST, as the question facts say.
5Compute the assessable value first, then BCD, then SWS if applicable, then trade remedy duties, then IGST on the cumulative base.
6Total the duties and state the conclusion with the legal basis in one line.

Quickest way: Duty stacking in five lines

When to use it: Use it for numerical questions that give a value, a BCD rate, SWS and an IGST rate. If the question also gives a safeguard, anti-dumping or countervailing duty, put it into the IGST base and the total.

Write the assessable value in the first line.
Line 2: BCD = value × rate.
Line 3: SWS = BCD × rate, if applicable (exam simplification: worked on BCD only, unless the question puts other duties into the SWS base).
Line 4: IGST = (value + BCD + SWS + any safeguard, anti-dumping or countervailing duty given) × IGST rate.
Line 5: add BCD, SWS, any trade remedy duty and IGST for the total, and say which duties are creditable.

Common mistakes in Levy of Customs Duty under Section 12

Treating the date of the contract or ordering as the taxable event for imports.
Students link the tax to the sale, as under GST.
Fix: Remember customs duty is a tax on the movement of goods across the border. The rate date is a separate rule.
Charging IGST on the assessable value alone.
Students copy the domestic GST method.
Fix: Add BCD and SWS (where leviable) to the value before applying the IGST rate.
Computing SWS on the assessable value instead of on the duty.
Students think all duties come from the same base.
Fix: SWS is calculated on the aggregate of duties of customs (mainly BCD for exam purposes), not on the value of the goods. Use the rate given in the question.
Saying Section 12 itself fixes the rates.
It is called the charging section, so students assume it gives the numbers.
Fix: Section 12 authorises the levy. The rates sit in the Customs Tariff Act, 1975 or other law, and notifications can vary them.
Mixing up safeguard, anti-dumping and countervailing duty.
All three protect domestic industry and sound alike.
Fix: Safeguard duty answers a surge in imports. Anti-dumping duty answers imports below normal value. Countervailing duty offsets subsidies given by the exporting country.

Worked examples

Example 1

Case: Meridian Tools Pvt Ltd, a GST-registered importer, imports machinery with an assessable value of ₹10,00,000. BCD is 10%, SWS is 10% of BCD, and IGST is 18%. No other duty applies. Compute the total customs duty payable and state the legal basis.

Show the solution

Legal basis: Section 12 of the Customs Act, 1962 levies the duty on imported goods at the rates in the Customs Tariff Act, 1975.
Note: SWS is often fully exempted by notification. It is applied here only because the question states it. If the question says SWS is exempt, skip the SWS step.
BCD = ₹10,00,000 × 10% = ₹1,00,000.
SWS = ₹1,00,000 × 10% = ₹10,000. This is an exam simplification: SWS is worked on BCD only because no other duty applies.
IGST base = ₹10,00,000 + ₹1,00,000 + ₹10,000 = ₹11,10,000.
IGST = ₹11,10,000 × 18% = ₹1,99,800.
Total = ₹1,00,000 + ₹10,000 + ₹1,99,800 = ₹3,09,800.

Answer: Total customs duty payable is ₹3,09,800. Of this, the IGST of ₹1,99,800 can be claimed as input tax credit by the registered importer, subject to GST conditions.

Example 2

Case: Kaveri Exports ships goods from Chennai to Dubai. The proper officer makes an order permitting clearance and loading of the goods for export on 12 June. The export duty rate was 5% until 10 June and 8% from 11 June onwards. The goods leave India on 14 June. Which rate applies, and what is the legal basis?

Show the solution

Legal basis: Section 12 of the Customs Act, 1962 levies duty on goods exported from India.
The rate date for export goods is fixed by Section 16: the date on which the proper officer makes an order permitting clearance and loading for exportation.
That order was made on 12 June.
The rate in force on 12 June is 8% (applicable from 11 June), so 8% applies.
The date of leaving India (14 June) is not the rate date. For imports, the corresponding rate date under Section 15 would be the date of presenting the bill of entry for home consumption.

Answer: The rate of 8% applies. Section 12 is the charging section, and under Section 16 the rate is that in force on the date of the order permitting clearance and loading (12 June).

Exam tips

Write 'Section 12 of the Customs Act, 1962' and 'Customs Tariff Act, 1975' in every theory answer. These two anchors earn the first marks.
In numerical MCQs, do the BCD, SWS and IGST in order and check the IGST base before choosing an option.
Case scenarios often hide a trap such as a notification exempting SWS or a different IGST rate. Re-read the facts before computing.
For trade remedy duties, state the trigger in one line: surge, dumping or subsidy.
Separate the taxable event from the rate date in your answer, and cite Section 15 for imports and Section 16 for exports. Examiners reward the distinction.

Practice questions from Levy of and Exemptions from Customs Duty

Levy of Customs Duty under Section 12: frequently asked questions

What is the taxable event in customs duty?

For imports, it is the entry of goods across India's customs barrier. For exports, the levy arises when the goods are exported out of India. The rate of duty is fixed by separate rate-date rules: Section 15 for imports and Section 16 for exports.

What is the difference between basic customs duty and IGST on imports?

BCD is levied under Section 12 of the Customs Act at the rate in the Customs Tariff Act. IGST on imports is levied under Section 3(7) of the Customs Tariff Act read with the IGST Act, on the value plus customs duties, including SWS where leviable. A registered importer can generally claim IGST as input credit, but not BCD.

What are the types of customs duty in India?

The main duties are basic customs duty, IGST on imports, safeguard duty, anti-dumping duty and countervailing duty. Export duty also exists but is levied on only a few goods. Social Welfare Surcharge is not a separate type of duty. It is a surcharge levied on the aggregate of the duties of customs.

Does Section 12 fix the rate of customs duty?

No. It is the charging section that authorises the levy. The rates are in the Customs Tariff Act, 1975 or other law, and notifications can reduce or exempt them.