Import customs duties & taxes in India: Calculation and exemptions

For businesses involved in this vibrant international trade, a clear understanding of import duties and associated taxes is essential. Navigating these regulations effectively helps ensure compliance, avoid unforeseen customs charges, clearance delays, and maintain operational efficiency. 

This guide offers a comprehensive overview of what import customs duties are, how these are calculated, and available exemptions.

What are import duties?

Essentially, import duties are taxes levied by customs authorities on goods brought into the country from international sources. Its primary purpose is to generate revenue for the government and, in some cases, to regulate trade or protect domestic industries.

These duties form a key part of the overall taxes on imported goods that can apply when importing. Other levies, such as the Integrated Goods and Services Tax (IGST), may also be applicable, influencing the final cost of imported products for businesses and consumers.

Types of customs duties

When importing goods into India, businesses will encounter several types of customs duties and taxes. These collectively contribute to the final landed cost of the products and must be understood for accurate customs charges in India:

• Basic Customs Duty (BCD): This is the primary duty levied on the assessable value of imported goods as per the Customs Tariff Act, 1975. BCD rates are specific to each product's HSN (Harmonized System Nomenclature) code and can be ad valorem (a percentage of value, e.g., 0-10%² or higher for certain items) or specific (a fixed amount per unit).
• Integrated Goods and Services Tax (IGST): Applicable to all imports, IGST is levied at the same rate as the Goods and Services Tax on similar domestic products (typically 0%, 5%, 12%, 18%, or 28%)². This ensures tax neutrality, and businesses can usually claim an input tax credit for IGST paid.
• Social Welfare Surcharge (SWS): This surcharge is levied to fund social welfare schemes and is typically calculated at 10%² of the Basic Customs Duty (BCD) payable on the imported goods.
• Anti-Dumping Duty (ADD)²: If imported goods are sold at prices below their normal value in the exporting country (dumping) and this harms India's domestic industry, ADD may be imposed. These rates are product-specific, exporter-specific, and country-specific, determined after an official investigation.
• Countervailing Duty (CVD)²: This duty is applied to imported goods that have benefited from government subsidies in their country of origin or export, aiming to offset that unfair advantage. CVD rates are also product-specific and country-specific, following an investigation.
• Safeguard Duty²: A temporary measure imposed if a sudden, sharp increase in imports of a particular product causes or threatens serious injury to a domestic industry. The rate and duration are specific to the protective needs identified.
• Compensation Cess²: This additional levy applies to certain specified luxury items or 'sin' goods (such as tobacco products, certain motor vehicles, and aerated drinks) at product-specific rates, which can be substantial.
• Customs Handling Fee²: A fee charged by customs authorities to cover the administrative costs of processing and clearing imported goods. While specific services might attract ad-valorem fees, standard clearance processes often involve fixed fees or charges based on the type of document filed.

Factors determining import duties and taxes

Several key elements influence the final amount of customs duty for import in India and other taxes levied on your shipment. Understanding these factors is essential if you want to accurately estimate import duties and manage your landed costs effectively.

Key factors include: 

• Assessable value of goods: This is the value on which duties are levied. For imports into India, it's typically determined by your commodity trade classification, and its transaction value plus costs like freight and insurance up to the place of importation (CIF value).
• Product classification (HSN Code): The Harmonized System Nomenclature (HSN) code assigned to your goods is critical. This 8-digit code, used in India, dictates the specific duty rates applicable under the Customs Tariff.
• Country of Origin: The origin of the goods can impact duty rates. India has Free Trade Agreements (FTAs) or Preferential Trade Agreements (PTAs) with various countries, which may allow for lower or nil duty rates on qualifying goods.
• Applicable tariff rates and notifications: The specific rates for Basic Customs Duty (BCD), Integrated Goods and Services Tax (IGST), Social Welfare Surcharge (SWS), and any other applicable duties (like Anti-Dumping Duty, Safeguard Duty, Compensation Cess) are published by Indian Customs and are linked to the HSN code, origin, and current government notifications.
• Exemptions and De Minimis Value: Whether any specific duty exemptions are applicable to the imported goods, or if the goods' value falls below India's de minimis threshold (if any for general cargo, as this often applies more to courier/post shipments), can affect the final duty payable.

How to calculate import duty in India?

The calculation primarily involves determining the Assessable Value of the goods, applying the Basic Customs Duty (BCD), then calculating other applicable taxes like the Social Welfare Surcharge (SWS) and Integrated Goods and Services Tax (IGST).

Let's assume an example:

• Assessable Value (AV) of imported goods = ₹100,000
• Basic Customs Duty (BCD) Rate (derived from HSN code) = 10%
• Social Welfare Surcharge (SWS) Rate = 10% (levied on BCD)
• Integrated Goods and Services Tax (IGST) Rate (derived from HSN code) = 18%

Duty exemption schemes

A customs duty exemption in India refers to a provision under customs law that allows certain specific goods to be imported without the payment of some or all of the applicable customs duties that would otherwise be levied. 

These provisions for general exemption from customs duty are typically granted by the government through notifications to achieve specific economic, social, or policy objectives, including: 

• Promoting essential domestic industries by making inputs cheaper
• Supporting public welfare by exempting critical goods like life-saving medicines
• Facilitating international cooperation or research
• Encouraging exports through schemes that allow duty-free import of inputs for export production. 

Common categories or types of goods that frequently benefit from full or partial exemptions3 or concessions include:

• Life-Saving drugs and medical equipment: Specified medicines, medical instruments, and equipment essential for treating critical illnesses or for use in healthcare are often exempted or subject to concessional duty rates to ensure their availability and affordability.
• Goods for promotion of exports: Under schemes like Advance Authorisation or Export Promotion Capital Goods (EPCG), capital goods, raw materials, components, and consumables intended for use in the manufacturing of products destined for export can often be imported duty-free or at concessional rates, subject to fulfillment of export obligations.
• Goods for specified projects: Materials and equipment imported for use in notified projects of national importance, such as infrastructure development, power generation, or research projects undertaken by recognized institutions, may receive duty exemptions.
• Charitable goods: Items imported by recognized charitable organizations for bona fide relief work or free distribution to the needy can often be exempted from duties.
• Scientific & technical instruments for research: Specified instruments imported by recognized institutions for non-commercial research purposes may be eligible for customs duty exemptions.
• Personal effects (Baggage rules): Personal belongings of individuals transferring residence to India or of eligible passengers, within prescribed monetary limits and conditions, can be imported duty-free under baggage rules.
• Trade samples & prototypes: Bona fide trade samples of negligible commercial value, or prototypes imported for product development or demonstration, can often be cleared duty-free, usually subject to conditions like mutilation or re-export.
• Temporary imports: Goods imported for temporary purposes (e.g., exhibitions, testing, repair) that are intended to be re-exported may qualify for duty relief, often under specific procedures like an ATA Carnet or by furnishing a bond.

Navigating India's import duties and taxes with DHL Express

Mastering India's import duties—from identifying various types like BCD and IGST, to accurate calculation based on HSN codes, and exploring exemptions—is key for compliant and cost-effective operations. 

DHL Express assists with in-depth local expertise, advanced tools for visibility and duty estimation, comprehensive customs brokerage, and options like our Duties and Taxes Paid (DTP) service. Streamline customs clearance for imported goods, explore the full list of customs clearance documents, and ensure your shipments to India arrive smoothly. 

To aid in these calculations, you can leverage DHL's My Global Trade Services (MyGTS) tool to help you find correct the HSN codes for your products. MyGTS can also calculate potential customs duties and taxes at your shipping destination, giving you a clearer picture of your landed costs before you ship.

Open a DHL Express business account to streamline your logistics journey today.