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As Asia’s third largest economy, India’s imports have been growing rapidly over the last few months. According to Statista, the annual growth of imports has increased by 68.3%. This is due to the rise in global commodity prices which raised the cost of imported goods.
India’s main imports include oil, precious stones, machinery and equipment, as well as organic chemicals. For importers looking to import products from Malaysia, this article will provide you with the information on India’s customs duty, the type of goods exempted from tax, and how to make duty payment.
All goods imported into India are subject to duty. The duty is levied at the time of import and is paid by the importer of the goods. The main purpose of import duty is to protect Indian industries from cheaper foreign goods. Goods & Services Tax (GST) is levied on all imported goods, with the tax rate being 10% of the value of the goods. In addition, there is the Integrated GST or IGST which is applied to the value of the imported goods plus all applicable customs duties. Other than the standard GST taxes, a levy known as GST Compensation Cess is imposed. GST Cess is levied on the supply of certain reportable goods, usually goods in the luxury and low-value categories.
In order to work out custom duty rates in India, you will need the HS code for your products. Known as the HSN code in India, this is the code used in the Harmonised Commodity Description and Coding System, a globally known technique of identifying product types.
Do note that there does exist a list of goods that are exempt from custom duty in India. According to Central Board of Indirect Taxes & Customs (CBIC), there is a need to apply for the following licences:
Special Advance Licence
Value Based Advance Licence
The table below is a list of the types of custom duties with corresponding rates in India.
|Type of custom duty||Rate|
Basic Customs Duty (BCD)
|BCD is applied depending on the HS code of the item and its origin. It can range between 0% and 100%.|
|Countervailing Duty (CVD)||0% to 12% depending on the product|
|Special Additional Duty (SAD)||4% where applied|
|Social Welfare Surcharge (SWS)||10% where applied|
|Safeguard Duty||By government’s notification|
|Anti-dumping Duty||By government’s notification|
|Compensation Cess||Applied in accordance with the type of product, for items like tobacco products and items that are pollutive in nature, they include the likes of coal and cars|
|Integrated Goods & Services Tax (IGST)||5%, 12%, 18%, 28% as stated in the IGST Act, 2017|
|Customs Handling Fee||1%|
All imported goods in India shall be assessed at the BCD. The actual amount of the fees will depend on various factors, two of which being the country of origin of the goods and the materials from which the goods are made. Certain items like capital goods used for manufacturing electronic goods may be exempt from custom duty, for which the rate of BCD is zero.
CVD is levied on goods for which benefits such as tax breaks or subsidies are granted in countries they are produced in. The purpose of these duties is to prevent these goods from being unfairly favoured over domestically produced goods.
A SAD is levied on certain imported goods, which their locally produced counterparts are subject to sales tax. This ensures that local manufacturers do not lose out. The calculation of SAD is based on the sum of the taxable value of the items and other taxes paid, like BCD and CVD.
The SWS was first implemented in 2018 to help government social welfare projects. The fee would replace the Education Cesses that were used in the past. Do take note that goods that were exempt from Education Cesses in the past have a high chance of being exempted from SWS as well.
Selling goods below their market value or cost of production in a foreign market is known as ‘dumping’, which is an unjust practice in international trade. Anti-dumping duties are imposed when necessary as it helps prevent local industry from being seriously affected as a result.
The purpose of the Compensation Cess Is to compensate high producing states that suffer revenue loss due to IGST. The five-year tax was intended to help smoothen the transition into the IGST for the states concerned.
The IGST was introduced in 2017. It merged a range of other existing taxes into one category. To ensure a balance between imported goods and domestic products, both of which are dependent on various taxes, IGST is levied on imported goods at one of seven distinct rates.
An additional customs processing fee of 1% will be charged, payable in addition to other taxes due.
Depending on the value of the individual product, you can either pay a fixed or computer-based amount of custom duty. In this case, you will have to apply an ad valorem basis calculation. Ad valorem computations are governed by the rules outlined in Rule 3(i) of the Customs Valuation Rules, 2007. If your individual items are not covered by this regulation, the value is computed according to the hierarchy outlined below.
Custom duty can be paid online by following the steps given below:
Open the ICEGATE e-payment portal
Key in the Import/Export code or login credential provided by ICEGATE
Click on e-payment
All unpaid invoices of challans in your name will be provided
Choose the challan that you wish to pay and choose a payment method
You will be redirected to the particular bank’s payment gateway
Carry out the payment
You will be redirected to the ICEGATE portal, click print to save a copy of your payment.
India’s custom duties or taxes are multifaceted and highly conducive to trade and business as the classification of goods into different tariff categories would help create a comfortable environment for businesses of different sizes. Apart from knowing the custom duty and import tax rates in India, it is also essential to work with trusted international delivery providers who offer business solutions that speed up customs clearance and make shipping overseas a breeze.
Keen to export to other countries? Check out our guides on the duty rates in China or Indonesia’s import taxes and customs regulations.