Customs and foreign trade · Imports, exports and customs
How is customs duty on imports worked out?
Short answer
Customs duty is charged on the assessable value, usually the CIF value (cost, insurance and freight) converted at the exchange rate notified by CBIC. On it come basic customs duty at the tariff rate for the 8-digit tariff item, the social welfare surcharge where it applies, and then IGST (and any compensation cess) on the value plus those duties. IGST paid on import can be claimed as input tax credit; basic customs duty cannot.
The building blocks
| Item | How it is worked out |
|---|---|
| Assessable value | Transaction value of the goods, plus freight and insurance to the Indian port (CIF). If freight is not known, 20% of the FOB value; if insurance is not known, 1.125% |
| Exchange rate | The rate notified by CBIC for imports, on the date the bill of entry is filed |
| Basic customs duty (BCD) | Tariff rate for the 8-digit item in the First Schedule, or a lower rate under an exemption notification or trade agreement |
| Social welfare surcharge (SWS) | 10% of BCD, where it applies (many goods are exempt) |
| Agriculture infrastructure and development cess (AIDC) | On certain goods, in place of part of BCD |
| IGST | GST rate on (assessable value + BCD + SWS + AIDC) |
| Compensation cess | On notified goods only |
Anti-dumping, countervailing or safeguard duties apply on top for some goods from some countries.
Example
Machine imported at USD 10,000 CIF, rate ₹85 per USD; BCD 7.5%, SWS 10% of BCD, IGST 18%.
| ₹ | |
|---|---|
| Assessable value | 8,50,000 |
| BCD at 7.5% | 63,750 |
| SWS at 10% of BCD | 6,375 |
| Value for IGST | 9,20,125 |
| IGST at 18% | 1,65,623 |
| Total duty | 2,35,748 |
The IGST of ₹1,65,623 is available as input tax credit; the BCD and SWS are part of the cost.
The process
- Classify the goods correctly under the 8-digit tariff item. Our HSN finder gives the heading.
- File the bill of entry on ICEGATE, preferably in advance, before the goods arrive. Assessment is self-assessment; customs may verify.
- Pay duty online; interest applies if payment is late.
- Clear the goods.
Concessions
Lower rates under free trade agreements need a valid certificate of origin. Schemes such as Advance Authorisation and EPCG allow duty-free import of inputs or capital goods against export obligations.
Legal basis
- Sections 12, 14, 17 and 46, Customs Act, 1962
- Section 3, Customs Tariff Act, 1975, and the First Schedule (tariff)
- Customs Valuation (Determination of Value of Imported Goods) Rules, 2007
Official sources
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