What is a tariff - A tariff or duty is a tax levied by governments on the value including freight and insurance of imported products. Different tariffs are applied on different products by different countries. Tariffs and taxes increase the cost of your product to the foreign buyer and may affect your competitiveness in the market. So knowing what the final cost to your buyer is can help you price your product for that market. In addition, your buyer may ask you to quote an estimate of these costs before making the purchase. Some countries have very high duties and taxes; some have relatively low duties and taxes.

Customs Duty is a type of indirect tax levied on goods imported into India as well as on goods exported from India. Taxable event is import into or export from India. Import of goods means bringing into India of goods from a place outside India. India includes the territorial waters of India which extend upto 12 nautical miles into the sea to the coast of India. Export of goods means taking goods out of India to a place outside India.

In India, the basic law for levy and collection of customs duty is Customs Act, 1962. It provides for levy and collection of duty on imports and exports, import/export procedures, prohibitions on importation and exportation of goods, penalties, offences, etc.

All goods must be classified into groups and sub-groups in order to levy the customs duty. The Customs Tariff Act 1975, gives the classification of goods and accordingly specifies the rate of duty. The act contains two schedules:-

 Schedule 1 classifies the goods for import and prescribes the rate of import duties. It specifies the various categories of import items in a systematic and in accordance with an international scheme of classification of internationally traded goods - termed as 'harmonized system of commodity classification'.

 Schedule 2 classifies the goods for export and prescribes the rate of export duties.
In addition, the Customs Tariff Act makes provisions for duties like additional duty (CVD), preferential duty, anti-dumping duty, protective duties, etc.