Understanding Customs Duty in India: Types and Rates

Whether you’re importing raw materials or exporting finished goods, customs duty is a key factor that shapes every cross-border transaction in India. With new updates from the Union Budget 2025–26 and a growing shift toward digital processes, understanding customs duty isn’t just for tax experts anymore: it’s essential for business owners, logistics professionals, and anyone involved in international trade.

Customs duty rates, rules, and compliance requirements can feel complex and ever-changing. But staying informed can help you avoid unexpected costs, keep shipments moving smoothly, and make smarter business decisions. In this blog, we break down the latest customs duty updates, explain the different types of duties you might encounter, and show how modern digital tools are making customs management easier and more transparent than ever.

What is Customs Duty in India?

Customs duty in India is a government-imposed tax on goods imported into or exported from the country. The primary purpose of customs duty in India is to regulate the movement of goods across borders, protect domestic industries, and generate revenue for the government. Customs duty in India applies to a wide range of products, from raw materials and machinery to consumer goods and luxury items.

Now that we’ve defined customs duty, it’s important to recognize that not all duties are the same. India’s customs framework includes several distinct types, each serving a unique purpose.

Types of Customs Duty in India

India’s customs duty structure is designed to regulate international trade, protect domestic industries, and generate government revenue. Several types of customs duty in India are levied on imported and, in some cases, exported goods, each serving a specific regulatory or protective purpose.

1. Basic Customs Duty (BCD)

Basic Customs Duty (BCD) is the most common form of customs duty in India. It is imposed on nearly all goods imported into the country under the Customs Act, 1962 and governed by the Customs Tariff Act, 1975 .

The duty helps protect Indian manufacturers by making imported goods more expensive, ensuring a level playing field, while also contributing significantly to government revenue .

• Calculation Method: BCD is calculated based on the assessable value of the imported goods. This includes the Cost, Insurance, and Freight (CIF) value of the goods, plus landing charges (usually 1% of CIF) .

• Formula: BCD = (CIF + landing charges) × applicable BCD rate 

• Example: If you import industrial machinery from Germany with a CIF value of ₹1,00,000 and a BCD rate of 10%, landing charges would be ₹1,000. The assessable value becomes ₹1,01,000, and the BCD comes out to ₹10,100 .

• Product-Specific Rates: BCD rates are specified in the First Schedule of the Customs Tariff and vary depending on the product's HSN (Harmonised System of Nomenclature) code. For example, luxury goods like high-end electronics or cars may attract higher rates, while essential imports such as life-saving drugs or fertilizers often benefit from reduced or even zero BCD .

• Policy Adjustments: The Indian government regularly updates BCD rates through customs notifications and Union Budget announcements, aligning with trade priorities or economic strategies .

2. Countervailing Duty (CVD)

Countervailing Duty (CVD) is imposed to counteract subsidies provided by exporting countries to their producers, ensuring imported goods do not gain an unfair price advantage over similar goods manufactured in India.

• Purpose: The main goal of CVD is to level the playing field for Indian manufacturers by matching the excise duty that would be levied on a similar product if it were produced domestically.

• Calculation Method: CVD is calculated on the aggregate of the assessable value of the imported goods plus Basic Customs Duty (BCD).

• Formula: CVD=(Assessable Value+BCD)×CVD Rate

• Example: If you import a product with an assessable value of ₹1,00,000, BCD of ₹10,000, and the applicable CVD rate is 12%, then
  CVD = (₹1,00,000 + ₹10,000) × 12% = ₹1,32,000 × 12% = ₹13,200.

• Policy Context: CVD rates are specified in the Customs Tariff and may be updated through government notifications or budget announcements to reflect changes in domestic excise duties or trade policy priorities.

3. Special Additional Duty (SAD)

Special Additional Duty (SAD) is levied to offset local taxes such as VAT or GST that are charged on goods manufactured and sold within India, ensuring imported goods do not enjoy a tax advantage.

• Purpose: To create parity between imported and domestically produced goods by counterbalancing local indirect taxes.

• Calculation Method: SAD is generally charged at 4% on the sum of the assessable value, BCD, and CVD.

• Formula: SAD=(Assessable Value+BCD+CVD)×4%

• Example: If the assessable value is ₹1,00,000, BCD is ₹10,000, and CVD is ₹13,200,
  SAD = (₹1,00,000 + ₹10,000 + ₹13,200) × 4% = ₹1,23,200 × 4% = ₹4,928.

• Refunds/Exemptions: SAD is often refunded or exempted if the importer pays equivalent local taxes when selling the goods in India, to avoid double taxation.

• Recent Updates: The government may issue notifications to exempt certain goods from SAD or adjust the rate as part of trade facilitation measures.

4. Anti-Dumping Duty

Anti-Dumping Duty is imposed when goods are imported at prices lower than their normal value, typically due to dumping by foreign manufacturers.

• Purpose: To protect Indian industries from unfair competition and market distortions caused by underpriced imports.

• Imposition: The Directorate General of Trade Remedies (DGTR) investigates complaints of dumping and recommends the duty if justified.

• Calculation: The duty bridges the gap between the export price and the normal value of the goods in the exporting country.

• Example: If a foreign company sells a product in India at ₹80 per unit, but the normal value in its home market is ₹100 per unit, an anti-dumping duty of ₹20 per unit may be imposed.

• Duration: Anti-dumping duties are product-specific and time-bound, subject to periodic review.

5. Safeguard Duty

Safeguard Duty is a temporary customs duty used to protect domestic industries from sudden increases in imports that could cause or threaten serious injury to local producers.

• Purpose: To provide relief to domestic industries facing a surge in imports, allowing them time to adjust.

• Process: The DGTR conducts an investigation to determine if increased imports are causing harm and recommends the duty if needed.

• Duration: Safeguard duties are imposed for a limited period and may be reduced gradually.

• Example: If imports of a certain steel product rise sharply, a safeguard duty may be imposed for two years, starting at 20% and reducing to 10% in the second year.

6. Social Welfare Surcharge (SWS)

Social Welfare Surcharge (SWS) is calculated as a percentage of the customs duties (excluding IGST and GST compensation cess) and is used to fund social welfare initiatives.

• Purpose: To generate revenue for social welfare schemes and initiatives.

• Calculation Method: SWS is typically charged at 10% of the aggregate customs duties (excluding IGST and compensation cess).

• Formula: SWS=(BCD+CVD+SAD)×10%

• Example: If the total customs duties (excluding IGST) amount to ₹28,228, then SWS = ₹28,228 × 10% = ₹2,822.8.

• Recent Changes: As per the Union Budget 2025-26, SWS has been exempted on 82 tariff lines already subject to a cess.

7. Protective Duty

Protective Duty is imposed by the government to shield specific industries considered vital for the country’s economy from international competition.

• Purpose: To support and nurture domestic industries that are strategically important or in their infancy.

• Imposition: The duty rate and period are recommended by the Tariff Commission and notified by the government.

• Example: If the government identifies the domestic solar panel industry as needing protection, a protective duty may be levied on imported solar panels for a set period.

• Review: The list of goods and rates is reviewed periodically to reflect changing economic priorities.

Each of these types of customs duty in India can apply individually or in combination, depending on the nature of the goods and the circumstances of their import or export. Staying updated on the applicable types and rates of customs duty in India is crucial for compliance and cost management.

With an understanding of the various types of customs duties, let’s explore how recent policy updates have affected customs duty rates for 2025.

Customs Duty Rates in India: Latest Updates for 2025

The customs duty rates in India have undergone significant changes following the Union Budget 2025-26, with the government aiming to simplify the tariff structure and make it more transparent for importers and exporters. Here are the most important updates and details on customs duty rates in India for 2025:

• Reduction in Tariff Slabs: The total number of customs duty tariff slabs has been reduced to eight, including a zero rate. This move aims to streamline India's customs duty structure and simplify compliance for businesses.

• Revised Duty Rates: Several higher customs duty rates—such as 25%, 30%, 35%, and 40%—have been consolidated and reduced to 20%. Extremely high rates, such as 100%, 125%, and 150%, have been reduced to 70%. This rationalization is expected to make customs duty in India more predictable and business-friendly.

• Single Cess or Surcharge: Only one cess or surcharge can now be levied per item, eliminating the previous practice of multiple levies on a single product. This change further simplifies the calculation of customs duty in India.

• Social Welfare Surcharge Exemptions: The social welfare surcharge has been exempted on 82 tariff lines where a cess is already applicable, reducing the overall customs duty burden for those products.

• Sector-Specific Changes:

• Automobiles: Customs duty on completely built units (CBUs) of cars has increased from 60% to 70% to encourage local manufacturing and reduce reliance on imports.

• Essential Goods: Full basic customs duty exemption has been granted for 36 lifesaving drugs and 25 critical minerals, supporting healthcare and clean energy initiatives.

• Industry Inputs: Duty reductions have been announced for select components in textiles, electronics, lithium-ion batteries, shipping, handicrafts, and leather industries to boost domestic production.

Customs duty in India is calculated as a percentage of the assessable value (CIF value) of the goods based on the product’s classification under the Customs Tariff Act and any applicable exemptions or notifications. 

Importers and exporters should regularly consult official notifications from the Central Board of Indirect Taxes and Customs (CBIC) for the most current rates and compliance requirements.

Knowing the latest rates is only part of the equation. Next, let’s break down how customs duties are actually calculated for imported goods in India.

How Customs Duty in India is Calculated

Calculating customs duty in India is a multi-step process governed by the Customs Act of 1962 and relies on accurate product classification, value declaration, and application of relevant duty rates. Here’s how the calculation works:

1. Determine the Assessable Value

The assessable value forms the basis for calculating customs duty in India. It is typically the CIF (Cost, Insurance, and Freight) value, which includes:

• Declared invoice value of goods

• Shipping (freight) costs

• Insurance charges

• Any additional costs incurred up to the port of import

Formula:

Assessable Value = Cost of Goods + Freight + Insurance + Additional Costs

2. Identify Applicable Customs Duty Rates

Customs duty in India is determined by the product’s classification under the Harmonized System of Nomenclature (HSN) and its country of origin. Importers must refer to the customs tariff schedule to find the correct rates for:

• Basic Customs Duty (BCD)

• Countervailing Duty (CVD)

• Social Welfare Surcharge

• Any other applicable duties (e.g., anti-dumping, safeguard)

3. Apply the Duty Rates

Each duty is calculated as a percentage of the assessable value, sometimes in a specific order. For example:

• Basic Customs Duty = BCD rate × Assessable Value

• CVD = CVD rate × (Assessable Value + BCD)

• Social Welfare Surcharge = Surcharge rate × (BCD + CVD)

• Other applicable duties are added as required

4. Include GST on Imports

After customs duty in India is calculated, Integrated GST (IGST) is levied on the sum of the assessable value and total customs duties, ensuring parity with domestic goods.

5. Apply Exemptions and Concessions

Some goods may qualify for exemptions or concessional rates under Free Trade Agreements (FTAs) or government notifications. Importers should verify eligibility for any such benefits before finalizing the calculation.

6. Documentation and Compliance

Accurate documentation, such as the Bill of Entry, commercial invoice, and packing list, is essential. Misdeclaration or errors can lead to penalties and shipment delays.

Customs duty in India is calculated on the CIF value of goods, applying various duty rates as per the product's classification and origin. Staying updated on current rates, exemptions, and compliance requirements is vital for smooth import operations and cost control.

Accurate calculation is essential, but so is proper documentation. Let’s look at the key compliance requirements and paperwork needed for customs clearance in India.

Compliance and Documentation for Customs Duty in India

Accurate compliance and documentation are essential for smooth customs clearance and correct assessment of customs duty in India. The Central Board of Indirect Taxes and Customs (CBIC) has implemented several digital initiatives and updated rules to streamline the process and reduce physical paperwork.

Key Documents Required

• Bill of Entry: This is the primary import declaration document, filed electronically through the ICEGATE portal. It provides details of the imported goods, including classification, value, and country of origin.

• Commercial Invoice: Issued by the exporter, this document lists the value, quantity, and description of goods. Customs officials use it to verify the declared value for customs duty in India.

• Packing List: Specifies the contents, packaging details, and weight of each item, aiding customs inspections.

• Proof of Origin: As of March 2025, India has replaced the traditional “Certificate of Origin” with a broader “Proof of Origin” requirement under the amended CAROTAR Rules. Importers must now provide valid proof (which could include a certificate, declaration, or other documents) to claim preferential duty rates under Free Trade Agreements (FTAs). This change gives customs authorities greater discretion to request supplementary documents for verifying the origin of goods.

• Import/Export License (if applicable): Certain goods require specific licenses or permits, which must be presented during customs clearance.

• Transport Documents: Bill of Lading (for sea shipments) or Airway Bill (for air shipments) confirms the shipment’s journey and is required for clearance.

• Insurance Certificate: If insurance is part of the CIF value, this certificate supports the declared assessable value.

Digital Compliance Initiatives

• e-SANCHIT: The e-SANCHIT platform, now mandatory for ICEGATE-registered users, allows electronic submission of supporting documents. This initiative reduces physical interaction and speeds up customs clearance.

Best Practices for Compliance

• Accurate Classification: Goods must be classified correctly under the Harmonized System of Nomenclature (HSN) to ensure the proper customs duty in India is applied.

• Timely and Complete Filing: All documents must be submitted promptly and accurately to avoid delays and penalties.

• Stay Updated: Importers and exporters should regularly check for updates from CBIC and DGFT regarding customs duty rates, documentation requirements, and compliance rules.

• Responding to Customs Queries: With the new rules, importers must respond quickly to any requests for additional documentation or clarification, especially regarding proof of origin.

Consequences of Non-Compliance

Failure to comply with customs documentation and procedural requirements can result in:

• Monetary penalties

• Delays in clearance

• Seizure or confiscation of goods

• Loss of preferential duty benefits under FTAs

Proper documentation and strict adherence to compliance requirements are critical for the correct assessment of customs duty in India and for ensuring efficient movement of goods across borders.

As customs processes have evolved, technology has played a pivotal role in simplifying compliance. Here’s how digital solutions are transforming customs duty management in India.

Modern Solutions for Managing Customs Duty in India

Managing customs duty in India is now easier and more efficient thanks to digital innovation. While the government’s ICEGATE portal allows for online filing, document submission, and real-time shipment tracking, businesses need more than just compliance—they need seamless coordination and control.

InstaTrac by Frayto brings all aspects of customs duty management into one intuitive platform. With InstaTrac, you can:

• Organize and securely store all customs documentation in one place

• File and track Bills of Entry and Shipping Bills digitally

• Monitor real-time shipment status and receive instant updates

• Get timely compliance alerts and reminders

• Coordinate smoothly with logistics teams and customs brokers

InstaTrac ensures your paperwork is always accurate and up to date. This minimizes delays, reduces manual errors, and keeps your business fully compliant with the latest customs regulations.

Conclusion

Managing customs duty in India doesn’t have to be overwhelming. With the right understanding of current regulations, digital documentation, and real-time tracking, businesses can ensure smooth and compliant cross-border operations. As customs rules evolve and international trade grows more competitive, having a reliable partner for shipment management is more important than ever.

Today, digital platforms play a key role in simplifying customs processes. Solution such as InstaTrac by Frayto help businesses organize documents, track shipments, and stay on top of compliance requirements. By Instatrac, importers and exporters can reduce errors, speed up clearance, and keep their operations running smoothly, even as customs regulations continue to change.

Ready to make customs duty management easier for your business? Schedule a call and see how Frayto can streamline your customs operations and stay ahead in today’s fast-paced trade environment.