This document provides an overview of import duty calculation in India. It discusses the key components of import duty - Basic Customs Duty (BCD), Social Welfare Surcharge (SWS), Integrated Goods and Services Tax (IGST), and Compensation Cess. It also outlines various exemptions and reductions available, such as Special Economic Zones, Bonded Warehouses, and Free Trade Agreements. Government websites and tools for researching applicable import duties are also referenced.

1. Calculation of Import Duty in India — Formula, Online Tools and Exemptions
India’s economic growth and rising domestic consumption has spurred import of finished
goods, and inputs in the form of raw material, consumables and capital goods. But how are
these imports taxed by the Customs authority of India? This article provides a simple
explanation of the calculation of import duties and provides linkages to government websites
and tools that can be leveraged for detailed research.
The Customs Act of 1962 governs import (and export) tariffs and sets the rules for customs
valuation. India's tariff system is based on the Harmonised System of Nomenclature (HSN)
of the Customs Co-operation Council.
The sample calculation for identifying import duties on equipment, raw material and other
inputs is displayed in Figure I. The calculation has four variable values, where the rate of tax
depends upon the HSN Codes of the products. These four variables are:
Table 1
i. Basic Customs Duty (BCD): This is the tax that is calculated on the Assessment Value of
the goods that have landed at the customs border of India. It can vary between 0% to 100%.
BCD depends upon the HSN code of the product and the Country of Import.
BCD for HSN codes is revised from time-to-time and revised duties are published as
Notifications on the website of Central Board of Indirect Taxes and Customs (CBIC —
www.cbic.gov.in/Customs-Notifications) within the Ministry of Finance's Department of
Revenue.
Several central ministries such as Ministry of Electronics & Information Technology and
Department of Heavy Industries have announced Phase Manufacturing Programs (PMPs) to
encourage higher value addition in segments of Smartphone (meity.gov.in/content/phased-
manufacturing-programme) and Electric Vehicle (EV PMP), respectively. These PMPs have
proposed a calendar of increasing BCD on components in a phased manner.
Indian Customs Electronic Gateway (ICEGATE) is the national portal of CBIC that provides
e-filing services to the trade, cargo carriers and other trading partners electronically. It also

2. hosts a Custom Duty Calculator* that can be used to identify applicable BCD on imported
goods.
India Trade Portal is portal developed and maintained by the Federation of Indian Export
Organisations (FIEO), Ministry of Commerce & Industry. The portal can be leveraged to
identify BCD rates as per arrangements under Most-Favoured Nation (MFN), Free Trade
Agreements (FTAs) and Preferential Trade Agreements (PTAs).
India has signed several FTAs and PTAs with countries in East Asia (Japan, Korea, Malaysia,
Thailand, Singapore) and ASEAN Bloc, among others. Details of these agreement can be
accessed at this Link on website of Ministry of Commerce & Industry
* Please note that the tool at times may not reflect the recent changes in BCD and hence, we
advise you to always check Customs Notifications at CBIC website to access the latest
information.
Table 2
ii. Social Welfare Surcharge (SWS): It is a tax imposed on the value of goods including the
BCD value. It is generally 10% unless the good is exempted from this tax.
iii. Integrated Goods & Services Tax (IGST): Introduced on 1 July 2017, GST subsumed
most indirect taxes such as excise duties and a special additional customs duty that was
applied previously. A concept note on GST can be accessed at this Link on website of GST
Council. IGST is imposed on the imported goods to provide a level playing field for domestic
manufacturers, who also pay an equivalent tax (Central GST + State GST or IGST) on sale of
goods. IGST on imported goods can be set-off against any other GST liability in India. There
are five slabs of IGST 0%, 5%, 12%, 18%, 28%.
iv. Compensation Cess: This is an additional tax that is imposed along with GST on both
imported items as well as domestically manufactured items on products that are classified as
notified E.g. Special Utility Vehicles, Cigarettes, Tobacco, Aerated Water, etc.
At times to discourage import of certain finished goods or input materials that are available in
large quantities, Government of India imposes Anti-dumping duties or Safeguard duties over
and above the four taxes mentioned above.

3. There are five mechanisms that can be used to reduce the applicable BCD. Exemption or
waiver of IGST is not permitted as per law:
Special Economic Zone: Units operating in SEZ are exempted from BCD and IGST on
Capital Goods, Raw Material and other Fixtures. If these units, do any sales in the domestic
market of India then they pay applicable BCD + IGST on the product or service.
Bonded Warehouses: Bonded Warehouse can be used for storage of goods as well as for
manufacturing as elucidated in Circular 38/2018 dated 18 October 2018. Unitholders can
defer BCD on imported Capital Goods, Raw Material and other Fixtures. This duty can be
deferred until clearance in the domestic tariff area and can be exempted if the products are
exported/re-exported. There is no time limit for duty deferment. More on this concept at this
Link.
Free Trade Warehousing Zone: Governed by SEZ Act 2005 and SEZ Rules. Predominately
for EXIM trade & storage. Duty deferment permitted on imported goods and also permits
trade transactions in foreign currency.
Foreign Trade Policy 2015-20: Import policy is published by Directorate General of Foreign
Trade (DGFT), Ministry of Commerce & Industry. Foreign Trade Policy schemes that can
help reduce BCD liability are:
Project Import Scheme: Relaxes duties for import of specific capital goods
Advanced Authorization Scheme: Exempts duties for import of inputs for export
consignments
Export Promotion Capital Goods (EPCG): Allows import of capital goods including spares
for pre-production, production and post-production at zero duty subject to an export
obligation of 6 times of duty saved, to be fulfilled in 6 years from authorization issue date.
Sectoral Incentive Schemes: Central Government may announce exemption from BCD for
specific types of machinery to encourage manufacturing or modernization in certain sectors.
E.g. Government of India reduced BCD on 35 capital goods that are used for manufacturing
mobile phone components such as a lithium-ion battery, speaker and receiver of mobile
phones, data cables, optical fibre etc.
Free Trade Agreements & Other Preferential Treaties: Most Favoured Nation (MFN) or
arrangements under FTA /PTA can help reduced BCD rates. A thorough check should be
conducted in Customs Notifications at CBIC or through India Trade Portal to identify such
benefits.
Invest India’s sectoral experts can help you evaluated the impact of import duties on your
business model in India. They can also help you interpret the level of value addition that is
required to manufacture goods in India from an import duty perspective or whether the
products can be imported in finished form / Semi-Knocked Down (SKD) form or Completely
Knocked Down (CKD) form.
Calculation of Import Duty in India — Formula, Online Tools and Exemptions
India’s economic growth and rising domestic consumption has spurred import of finished
goods, and inputs in the form of raw material, consumables and capital goods. But how are
these imports taxed by the Customs authority of India? This article provides a simple
explanation of the calculation of import duties and provides linkages to government websites
and tools that can be leveraged for detailed research.

4. The Customs Act of 1962 governs import (and export) tariffs and sets the rules for customs
valuation. India's tariff system is based on the Harmonised System of Nomenclature (HSN)
of the Customs Co-operation Council.
The sample calculation for identifying import duties on equipment, raw material and other
inputs is displayed in Figure I. The calculation has four variable values, where the rate of tax
depends upon the HSN Codes of the products. These four variables are:
Table 1
i. Basic Customs Duty (BCD): This is the tax that is calculated on the Assessment Value of
the goods that have landed at the customs border of India. It can vary between 0% to 100%.
BCD depends upon the HSN code of the product and the Country of Import.
BCD for HSN codes is revised from time-to-time and revised duties are published as
Notifications on the website of Central Board of Indirect Taxes and Customs (CBIC —
www.cbic.gov.in/Customs-Notifications) within the Ministry of Finance's Department of
Revenue.
Several central ministries such as Ministry of Electronics & Information Technology and
Department of Heavy Industries have announced Phase Manufacturing Programs (PMPs) to
encourage higher value addition in segments of Smartphone (meity.gov.in/content/phased-
manufacturing-programme) and Electric Vehicle (EV PMP), respectively. These PMPs have
proposed a calendar of increasing BCD on components in a phased manner.
Indian Customs Electronic Gateway (ICEGATE) is the national portal of CBIC that provides
e-filing services to the trade, cargo carriers and other trading partners electronically. It also
hosts a Custom Duty Calculator* that can be used to identify applicable BCD on imported
goods.
India Trade Portal is portal developed and maintained by the Federation of Indian Export
Organisations (FIEO), Ministry of Commerce & Industry. The portal can be leveraged to
identify BCD rates as per arrangements under Most-Favoured Nation (MFN), Free Trade
Agreements (FTAs) and Preferential Trade Agreements (PTAs).

5. India has signed several FTAs and PTAs with countries in East Asia (Japan, Korea, Malaysia,
Thailand, Singapore) and ASEAN Bloc, among others. Details of these agreement can be
accessed at this Link on website of Ministry of Commerce & Industry
* Please note that the tool at times may not reflect the recent changes in BCD and hence, we
advise you to always check Customs Notifications at CBIC website to access the latest
information.
Table 2
ii. Social Welfare Surcharge (SWS): It is a tax imposed on the value of goods including the
BCD value. It is generally 10% unless the good is exempted from this tax.
iii. Integrated Goods & Services Tax (IGST): Introduced on 1 July 2017, GST subsumed
most indirect taxes such as excise duties and a special additional customs duty that was
applied previously. A concept note on GST can be accessed at this Link on website of GST
Council. IGST is imposed on the imported goods to provide a level playing field for domestic
manufacturers, who also pay an equivalent tax (Central GST + State GST or IGST) on sale of
goods. IGST on imported goods can be set-off against any other GST liability in India. There
are five slabs of IGST 0%, 5%, 12%, 18%, 28%.
iv. Compensation Cess: This is an additional tax that is imposed along with GST on both
imported items as well as domestically manufactured items on products that are classified as
notified E.g. Special Utility Vehicles, Cigarettes, Tobacco, Aerated Water, etc.
At times to discourage import of certain finished goods or input materials that are available in
large quantities, Government of India imposes Anti-dumping duties or Safeguard duties over
and above the four taxes mentioned above.
There are five mechanisms that can be used to reduce the applicable BCD. Exemption or
waiver of IGST is not permitted as per law:
Special Economic Zone: Units operating in SEZ are exempted from BCD and IGST on
Capital Goods, Raw Material and other Fixtures. If these units, do any sales in the domestic
market of India then they pay applicable BCD + IGST on the product or service.

6. Bonded Warehouses: Bonded Warehouse can be used for storage of goods as well as for
manufacturing as elucidated in Circular 38/2018 dated 18 October 2018. Unitholders can
defer BCD on imported Capital Goods, Raw Material and other Fixtures. This duty can be
deferred until clearance in the domestic tariff area and can be exempted if the products are
exported/re-exported. There is no time limit for duty deferment. More on this concept at this
Link.
Free Trade Warehousing Zone: Governed by SEZ Act 2005 and SEZ Rules. Predominately
for EXIM trade & storage. Duty deferment permitted on imported goods and also permits
trade transactions in foreign currency.
Foreign Trade Policy 2015-20: Import policy is published by Directorate General of Foreign
Trade (DGFT), Ministry of Commerce & Industry. Foreign Trade Policy schemes that can
help reduce BCD liability are:
Project Import Scheme: Relaxes duties for import of specific capital goods
Advanced Authorization Scheme: Exempts duties for import of inputs for export
consignments
Export Promotion Capital Goods (EPCG): Allows import of capital goods including spares
for pre-production, production and post-production at zero duty subject to an export
obligation of 6 times of duty saved, to be fulfilled in 6 years from authorization issue date.
Sectoral Incentive Schemes: Central Government may announce exemption from BCD for
specific types of machinery to encourage manufacturing or modernization in certain sectors.
E.g. Government of India reduced BCD on 35 capital goods that are used for manufacturing
mobile phone components such as a lithium-ion battery, speaker and receiver of mobile
phones, data cables, optical fibre etc.
Free Trade Agreements & Other Preferential Treaties: Most Favoured Nation (MFN) or
arrangements under FTA /PTA can help reduced BCD rates. A thorough check should be
conducted in Customs Notifications at CBIC or through India Trade Portal to identify such
benefits.
Invest India’s sectoral experts can help you evaluated the impact of import duties on your
business model in India. They can also help you interpret the level of value addition that is
required to manufacture goods in India from an import duty perspective or whether the
products can be imported in finished form / Semi-Knocked Down (SKD) form or Completely
Knocked Down (CKD) form.
Procedure for Refund of Deemed Exports
The refund of tax paid on the supply regarded as deemed export is admissible to either the
supplier or the recipient. The deemed exporters can either:
ˆ To levy of GST on supply and collect it from the recipient. In this case, the recipient shall
apply for a refund.
ˆ To levy of GST on supply and not to collect it from the recipient. In this case, the supplier
shall apply for a refund through GST RFD 01. In this case, a declaration is also required from
the recipient to the effect that he does not avail any input tax credit of the same.
Refund procedures in case of Supplies for Export of Goods & Services

7. ˆ Refund procedures in case of Supplies for Export of Goods
There is no need to file refund application (GST RFD-01) separately. The shipping bill filed
by the exporter is sufficient to claim refund.
The law specifies that shipping bill is to be considered as a refund claim on satisfying
following two conditions:
I. A person carrying the export goods should file an export manifest; and
II. Applicant should have filed the returns GSTR-3 or GSTR-3B appropriately. Once the
above two documents are filed appropriately, the refund is processed by the department.
ˆ Refund procedures in case of Supplies for Export of Services The option to pay IGST and
claim a refund is always available. In this case, the refund claim has to be filed in Form GST
RFD-01.
For exporters of services, the following are also required to be filed along with the refund
claim:
I. A Statement containing Number and Date of Invoices; and
II. Bank Realization Certificates / Foreign Inward Remittance Certificates
Refund procedures for Export of Services and Supplies to SEZ
According to CGST laws, the supplies made with the payment of IGST to an SEZ Developer
or SEZ Unit holder, he is liable for the payment of IGST at applicable rates. The export
invoice will be generated in Indian currency with a proclamation that ‘Supply is meant for
SEZ developer / unit with payment of integrated tax’. The declaration made with the
mentioned option will make the refund procedure fast. The IGST mentioned in the invoice is
not charged from the customer, it is just for the acknowledgement purposes.
The supplier of goods or services to an SEZ are required to file the following along with the
refund claim:
I. A Statement containing Number and Date of Invoices; and
II. Proof of Receipt of goods or services which is authorized by the specified officer of SEZ
III. Details of payment made
IV. The declaration that the SEZ or developer of SEZ has not claimed the input tax credit of
the taxes paid by the supplier
Example- ABC Pvt. Ltd. supplies the Goods (whose purchase price is Rs 2 lakh) for Rs 2.5
lakh to XYZ Pvt. Ltd located in Kandla SEZ.
The applicable IGST will be charged at 18%.
The invoice will look like:
Sale Price – Rs. 2.50 lakh
Add – IGST @ 18% Rs. 0.45 Lakh
……………………………………………………..
Invoice Value Rs. 2.95 Lakh

8. Particulars IGST
Output Tax(18% on Rs. 2,50,000) 45,000
Less - Input Tax (18% on Rs. 2,00,000) 36,000
Payment to be made in cash 9,000
ABC Pvt. Ltd. will release the tax liability of Rs 45,000 by using Input Credit of Rs 36,000
which is available on an account and cash payment of remaining Rs 9,000. So, ABC Pvt Ltd.
will get a refund which is the real net worth of input tax credit.
Provisional Refund in case of Supply to SEZ The exporters and suppliers of SEZ are entitled
to a 90% refund on a provisional basis. Provisional refund is granted within seven (7) days of
the refund claim. The amount of provisional refund is credited directly to the claimant’s bank
account.
There is a condition attached to provisional refunds. The provisional refund is not granted if
the applicant has been prosecuted for any offense under the GST law or earlier law within
past five (5) years. The amount of tax evaded in such prosecution shall be more than Rupees
Two Hundred and Fifty Lakhs (Rs. 2.5 Crores).