[This blog post is sourced from one of the studies (workshop presentation slides here) yours truly was involved in about a year ago while working at SAWTEE. I think sharing analytical excerpts from the comprehensive report will be helpful to interested readers and researchers. This blog post focuses on para-tariff barriers on Nepali exports to the Indian market. Here are earlier blog posts on the state of tariff barriers; the issues surrounding pegged exchange rate between Nepal and India; the confidence on the Indian rupee in Nepal; and the size of Indian market for Nepal.]
State of para-tariff barriers
Besides the tariffs, India imposes other duties and charges as well on imports. These are
Additional duty of customs (ADC)
Special additional duty (SAD)
Education cess and the secondary and higher education cess
Some product-specific charges and cesses
The additional duty of custom (ADC) is aimed at removing or reducing a pro-import bias as a result of the application of central excise duties to domestically manufactured goods, in accordance with India's trade legislation. The ADC rate is equivalent to the central excise duty, which is also referred to as Central Value Added Tax (CENVAT), on domestically produced goods of the same tariff classification. The general ADC rate was 10% in 2010.
The 4 percent special additional customs duty (SAD) continues to be imposed on imports, with few exceptions (14.8 percent of all tariff lines), to partially compensate for sales tax, state value-added tax, local tax or other charges leviable on similar article on its sale, purchase or transportation in India. However, since the SAD is an across-the-board tax applied at a flat rate on most goods, it may not always be equivalent to local sales taxes on similar domestically produced goods, which may be higher or lower. The SAD paid on imports subsequently sold within India and for which the importer has paid state-level value-added taxes, may be refunded. In 2007, India was dragged to the WTO dispute settlement body for the application of ADC and SAD.
Since 2004, an education cess of about 2 percent of all aggregate customs duties (excluding safeguard, countervailing or anti-dumping duties if applicable) has been charged on imports. For instance, if the import duty for a certain product is 10 percent, the education cess on that product would be 2 percent of 10 percent, i.e. 0.02 percent.The secondary and higher education cess of 1 percent is also levied on all imports since 2007. This cess is calculated on the aggregate value of all excise duties (including the additional and the special duties or any other duty or excise), but excluding the education cess and safeguard, countervailing or an anti-dumping duty if applicable.
The calculation of all charges applied on imports including landing charges, the effective customs duty, the additional customs duty, the special additional customs duty, and the education cess shows an average protection of 25.6 percent compared to just 12 percent on what is said as an effective applied MFN rates (see Table 1).
Besides these duties and charges levied by the central government, additional taxes/charges are imposed by the state governments. For example, the State of Maharashtra levies an entry tax (octroi) on entry of domestic and imported goods (particularly petroleum products, tiles, and air conditioners) with rates ranging from 10 percent to 34 percent based on the product. Additionally, entry taxes are applied in several states, including Jammu and Kashmir, Himachal Pradesh, Rajasthan, Uttar Pradesh, Uttaranchal, Haryana, Punjab, Andhra Pradesh, Karnataka, Tamil Nadu, Kerala, Bihar, Assam, Orissa, Arunachal Pradesh, Chhattisgarh, West Bengal, Maharashtra, Goa, Madhya Pradesh, and Gujarat.
Table 1: Summary of India’s import charges, 2010/11
a Calculation for averages with extra charges include landing charges, effective custom duty, additional duty, special additional duty, and education cess.
b ISIC Rev.2 classification. Electricity, gas, and water is excluded (1 tariff line).
Note: Calculations exclude specific rates and include the ad valorem part of alternate rates.
Source: WTO. 2011. Trade Policy Review India: Report by the Secretariat. Trade Policy Review, Geneva: World Trade Organization (WTO).
 The excise and tariff nomenclatures are harmonized at HS 8-digit level.
 Some 12 lines in HS71 (articles of jewellery) have SAD duty of 1%.