Custom duty is a kind of an indirect tax that is imposed on both exported and imported goods and services. The tax imposed on the import of goods is known as the import duty. Whereas, the tax imposed on the export of goods is known as the export duty. The government charges these taxes during the export or import of goods and services to raise money and/or to shield the domestic establishments from the competitors from other countries.
In the past few months, the government of India brought a major change in the tax systems of the nation. They introduced GST (Goods and Services Tax), a new tax collection system, that is a destination based tax, which implies that the consumers are liable to pay when they use any goods and services.
Earlier, the tax system was complex. Multiple taxes such as service tax, value added tax, state tax, central excise, etc. were imposed on various goods and services. Under GST, these multiple taxes have been replaced by just one tax – GST.
GST has three categories – CGST (Central Goods and Services Tax), SGST (States Goods and Services Tax) and IGST (Integrated Goods and Services Tax). Both CGST and SGST are applicable on the intra-state transactions whereas the IGST is applicable on the inter-state transactions.
The custom duty is now replaced by IGST, which means that instead of the custom duty, IGST tax is applicable (along with other applicable custom duties) on every import and export of goods and services. Let’s read further to understand it better.