Import and Export Duties: Customs Duty In India

Introduction

India’s customs duty system plays a pivotal role in shaping its international trade strategy. From safeguarding domestic industries to aligning with global trade agreements, import and export duties directly influence cost structures, pricing, and compliance for businesses.

This comprehensive guide explores the types of customs duties, calculation methods, recent changes, and their implications—especially for importers and exporters operating in India.

What Are Customs Duties?

Customs duties are indirect taxes imposed on goods entering or leaving the country. These include:

• Import duties, which apply to foreign goods entering Indian borders.
• Export duties, levied on select goods leaving India.

India’s customs policy is governed primarily by the Customs Act, 1962, and managed by the Central Board of Indirect Taxes and Customs (CBIC).

Evolution of Import and Export Duties in India

Historically, India’s customs duty structure was designed to protect domestic industries and generate revenue. However, since the 1991 economic liberalization, the system has become more streamlined, aligning with WTO norms, Free Trade Agreements (FTAs), and global competitiveness.

In recent years, the integration of GST (Goods and Services Tax) and reduction of multiple duty rates have further simplified trade compliance.

Types of Import Duties in India

Duty Type	Description	Example
Basic Customs Duty (BCD)	Primary tax levied on imported goods based on classification under the HS Code. Learn more about BCD Tax	10% BCD on electronic components
Integrated GST (IGST)	Replaces CVD and SAD. Applied to the sum of CIF value + BCD.	18% IGST on mobile phones
Social Welfare Surcharge (SWS)	Levied at 10% on the BCD amount (as of 2025).	₹100 BCD = ₹10 SWS
Anti-Dumping Duty	Imposed on goods sold below fair value to protect domestic industry. Understand Anti-Dumping Duties	On tires from China
Safeguard Duty	Temporary duty to protect domestic producers from import surges.	Solar panels
Protective Duty	Defends nascent or sensitive sectors from foreign competition.	Steel imports
Countervailing Duty (CVD)	Old regime component, now mostly replaced by IGST except in specific cases.	Historical use in FMCG imports

How to Calculate Import Duties in India

Calculating import duties in India requires consideration of various components and can be complex due to the multiple layers of duties and charges. The actual duty rate varies based on the specific product, its Harmonized System (HS) code, and the country of origin. Let’s break down the general steps:

1. Determine the Assessable Value (AV):
   • The AV is the value of the product upon which the customs duty will be calculated. It is typically based on the Cost, Insurance, and Freight (CIF) value for imports: Assessable Value (AV)=Cost of the product+Insurance+Freight Assessable Value (AV)=Cost of the product+Insurance+Freight
2. Calculate Basic Customs Duty (BCD):
   • The BCD is applied to the assessable value: BCD Amount=Assessable Value (AV)×BCD RateBCD Amount=Assessable Value (AV)×BCD Rate
3. Calculate Integrated Goods and Service Tax (IGST):
   • IGST replaces the earlier Countervailing Duties (CVD) and Special Additional Duties (SAD) under the GST regime. It is applied on the combined value of the product’s CIF value and the BCD: IGST Amount=(Assessable Value (AV)+BCD Amount)×IGST RateIGST Amount=(Assessable Value (AV)+BCD Amount)×IGST Rate
4. Consider Additional Charges:
   • Anti-dumping Duty: If applicable to the specific product and country of origin, this is calculated on the assessable value or as a fixed amount per unit.
   • Safeguard Duty: If applicable, it is levied as a percentage on the assessable value or CIF value.
   • Social Welfare Surcharge (SWS): This is often levied on the aggregate of customs duties (excluding GST): SWS Amount=BCD Amount×SWS RateSWS Amount=BCD Amount×SWS Rate (Note: The rate for SWS can vary, but as of my last update in January 2022, it was typically 10% on the BCD.)
5. Summing it Up:
   • The total customs duty payable will be the sum of BCD tax, IGST, any other specific duties (e.g., anti-dumping or safeguard, if applicable), and the SWS: Total Import Duty=BCD Amount+IGST Amount+Other Duties+SWS AmountTotal Import Duty=BCD Amount+IGST Amount+Other Duties+SWS Amount

Export Duties in India

Export duties are taxes levied by a country on goods and services that are shipped out of its borders. In the context of India, export duties are not as prevalent as import duties, given that the country aims to promote exports to boost its economy. However, there are a few goods on which export duties are imposed, mainly to conserve domestic resources, meet domestic demand, or achieve some other policy objectives.

Read more about:- Export Duty Calculation

Types of export duties in India are as follows:

Unlike import duties, export duties are imposed selectively to:

• Conserve scarce resources (e.g., iron ore)
• Stabilize domestic markets
• Regulate trade of strategic goods

Duty Type	Basis	Example
Ad Valorem Duty	Calculated as a percentage of the value of goods.	10% on raw leather exports valued at ₹1,00,000 results in ₹10,000 duty
Specific Duty	A fixed amount per physical unit, regardless of its value.	₹5 per kg on 1,000 kg of iron ore = ₹5,000 total duty
Compound Duty	Combination of ad valorem and specific duties.	5% of value + ₹10 per unit on specialized chemicals

Free Trade Agreements (FTAs) and Duty Concessions

India has signed multiple FTAs with countries like:

• ASEAN
• Japan
• South Korea
• UAE (CEPA 2022)

These allow for preferential duty rates, often 0%, when the product meets Rules of Origin (RoO).

✅ Example: Indian textile exporters to Japan benefit from reduced or zero duties under India-Japan CEPA.

To avail benefits:

• Claim preferential tariff under FTA
• Submit Country of Origin Certificate

Explore the full FTA list on DGFT Portal.

Impact of GST on Import and Export Duties

With the rollout of GST in July 2017, major changes were:

• IGST replaced CVD and SAD
• Exporters can claim GST refunds on inputs (via LUT or rebate routes)
• Seamless input tax credit (ITC) on imports used in manufacturing or trading

Learn more on:- Impact of GST on Import and Export Duties

Exemptions and Relaxations

CBIC periodically issues exemption notifications for public interest goods, including:

• Life-saving drugs
• Defense equipment
• Raw materials for MSMEs
• Equipment for renewable energy

Also available:

• SEZ exemptions
• EOUs (Export Oriented Units) benefits
• Advance Authorization Scheme

🟢 For current updates, visit: Customs Exemptions Notifications

Budget 2024: Latest Changes in Customs Duty (Effective 1 April 2024)

Item	Old Rate	New Rate	Remarks
Camera lens for mobile phones	2.5%	0%	Encourages smartphone manufacturing
Parts of open cell TV panels	5%	2.5%	Boosts domestic TV production
Seeds for lab-grown diamonds	5%	0%	Supports sustainable diamond manufacturing
Naphtha	2.5%	2%	Reduces cost of industrial fuel
Electric kitchen chimneys	7.5%	15%	Discourages finished goods import
Silver dore, bars, articles	Aligned differently	Aligned with gold/platinum	Uniform duty structure for precious metals
Compounded rubber	10%	25% or ₹30/kg (whichever is lower)	Brought on par with natural rubber duties

Conclusion

Import and export duties, intricate as they are, form India’s trade policy’s backbone, mirroring the nation’s aspirations, challenges, and strategies on the global stage.

Understanding India’s import and export duty structures is essential for cost planning, compliance, and global competitiveness. With policy updates every year and evolving trade agreements, businesses must stay informed to leverage exemptions and duty concessions smartly.

🔍 Whether you are a manufacturer, trader, or startup, knowing your customs liabilities helps optimize operations and reduce costs.

References and Further Reading

India’s Customs Department website
Import Duty Exemptions and Special Cases
List of Goods & Services Exempted Under GST