Custom Duty in India: Meaning, Types, Rates, Calculation

‘Customs Duty’ refers to the tax imposed on the goods when they are transported across the international borders. The objective behind levying customs duty is to safeguard each nation’s economy, jobs, environment, residents, etc., by regulating the movement of goods, especially prohibited and restrictive goods, in and out of any country.

Every good has a predefined rate of duty that is determined based on various factors, including where such good was acquired, where such goods were made, and what these goods is made of. Also, anything that you bring into India for the first time should be declared as per the customs rules. For instance, you need to declare the items purchased in a foreign country and any gifts which you acquire outside India.

Latest Updates

Union Budget 2025: 1st February 2025
1. Rationalisation of Customs Tariff and Duty Inversion: Budget 2025 proposed the further reduction of 7 tariff rates, leaving only 8 (including ‘zero’), along with a single cess/surcharge per item. Social Welfare Surcharge is proposed to be exempted on 82 tariff lines with cess.

2. Duty Exemption on Certain Medicines and Healthcare Relief: Full BCD exemption proposed for 36 lifesaving drugs, including cancer and rare disease treatments; 6 medicines to be granted a 5% concessional rate. Further, BCD exemptions have been proposed for patient-assistance programmes run by pharmaceutical companies, provided the medicines are supplied free of cost to patients, with 37 new medicines and 13 additional programmes to be added.

3. Industry-specific proposals: 
Critical minerals: Full BCD exemption on 25 critical minerals that are not available domestically; 12 more critical minerals are fully exempt to support domestic manufacturing and job creation.
Textiles: Full exemption on two shuttle-less looms; BCD on knitted fabrics set at 20% or ₹115/kg, whichever is higher.
Electronics: BCD on IFPD raised to 20%, reduced to 5% on open cell components; LCD/LED TV open cell components fully exempt.
Lithium-Ion Batteries: BCD exemption on 35 EV battery and 28 mobile battery manufacturing capital goods.
Shipping: BCD exemption on shipbuilding materials extended for 10 years; same benefit for shipbreaking.
Handicrafts: Export time extended to 1 year (+3 months if needed); 9 more duty-free inputs added.
Leather: Full BCD exemption on Wet Blue leather; 20% export duty exemption on crust leather for small tanners.

Union budget 2024 Outcome: 23rd July 2024
Customs Duties revisions and exemptions for critical goods (refer table below)

Types of custom duties

Customs duties are charged almost universally on every good which are imported into a country. These  are divided into:

•      Basic Customs Duty (BCD)
•      Countervailing Duty (CVD)
•      Additional Customs Duty or Special CVD
•      Protective Duty,
•      Anti-dumping Duty
•      Education Cess on Custom Duty

How to calculate custom duty in India?

Customs duties are computed on a specific or ad valorem basis. In other words, it is calculated on the value of goods. Such value is determined as per the rules laid down in the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. If there are doubts regarding the truth or accuracy of the value of goods, valuation of such item is done through the following method:

• Rule 4 & 5 – Comparative value method that compares the transaction value of identical or similar items
• Rule 7 – Deductive value method that uses sale price of such good in the importing country
• Rule 8 – Computed value method that employs costs related to materials, fabrication, and profit in the country of production
• Rule 9 – The Fallback method that is based on previous methods with an element of higher flexibility.

Payment of custom duty

One can pay customs duty online with a few simple steps:

• Login into the e-payment portal of ICEGATE
• Enter the import or export code or simply key in the login credentials provided by ICEGATE
• Now, click on the e-payment button
• You would be able to check all e-challans which under your name
• You could then choose the challan that you wish to pay and select the payment method and you would be then redirected to the payment gateway
• Once the payment is done, you would be redirected back to the ICEGATE portal
• Finally, click on the print button and save your payment copy.

Recent Developments

Increase in basic customs duty – Effective from 27th September 2018

The Indian government has increased the basic customs duty on an array of items that include refrigerators, air-conditioners, footwear, washing machines, furniture fittings, tableware, jewelry and many more. This was done in an effort to shore up the falling rupee and restrict the current account deficit. This was initiated with an aim to curb imports of specified imported items. With the increase in duty, the prices of these goods are likely to rise, dampening their demand, reducing the imports and then indirectly assisting the domestic manufacturers.

e-Sanchit

In recent years, India witnessed major reforms in the taxation system via digitalisation. From Income Tax to GST, most of the things are now available online. To ensure ease of doing business, the CBIC (Central Board of Indirect taxes and Customs), has launched e-SANCHIT, which enables registered persons to file their customs related documents online.

The e-SANCHIT initiative is made mandatory from March 15th this year. Only the ICEGATE registered users can use the e-SANCHIT application by accessing e-SANCHIT link. Under this new scheme, hard copies of the uploaded documents are not required to be produced to the assessing officers. The objective here is to minimize the physical interface between the customs agencies and trade and to maximize the pace of clearance.