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Complete Guide to India's Import Duty Structure: Calculating Your Total Landing Costs
Published: 2026-02-19 | Reading Time: 8 minutes
If you're importing goods into India, understanding how import duties are calculated isn't optional—it's essential for protecting your profit margins. Many Indian businesses lose money on imports simply because they miscalculated their total cost. They focus only on the Basic Customs Duty (BCD) and forget the additional layers that add up quickly.
For businesses exploring SEZ import procedure India benefits, understanding these standard duty calculations provides essential context. It helps evaluate the significant advantages that Special Economic Zones offer through duty exemptions and streamlined customs processes.
This guide breaks down India's complete import duty structure with real calculations, current 2026 rates, and practical steps to ensure you price your products correctly.
India's import duties consist of multiple layers applied sequentially. Understanding this sequence matters because each tax is calculated on a cumulative base, not the original value.
The duty calculation follows a specific order. You cannot simply add the percentages together. Each subsequent duty applies to an increasingly larger base value. This cascading effect means your final duty burden always exceeds the sum of the individual rates.
1. Basic Customs Duty (BCD)
2. Social Welfare Surcharge (SWS)
3. Integrated Goods and Services Tax (IGST)
4. Additional Duties and Cesses
Understanding SEZ import procedure India benefits becomes crucial when evaluating alternatives to standard import channels. Special Economic Zones operate under a fundamentally different framework that can generate substantial cost savings for eligible businesses.
Unlike regular imports where duties are paid immediately at the port, SEZ imports use a bonded warehouse system. Goods enter the SEZ without payment of customs duties. They remain duty-free while used within the zone. Documentation is processed through SEZ Development Commissioners rather than port customs. This typically results in faster clearance times and reduced paperwork.
Duty Exemption: SEZ units enjoy 100% exemption from Basic Customs Duty, Social Welfare Surcharge, and other standard import duties on capital goods, raw materials, and consumables. This eliminates the 25-40% duty burden calculated in the previous sections.
Simplified Documentation: SEZ imports operate under a self-certification model with minimal physical interface with customs authorities. The Single Window Clearance system reduces processing time from days to hours.
Tax Incentives: Beyond duty exemptions, SEZ units benefit from 100% Income Tax exemption under Section 10AA of the Income Tax Act for the first five years, and 50% for the next five years.
Foreign Investment: SEZ units can receive 100% Foreign Direct Investment (FDI) without prior government approval.
For a capital goods import worth ₹50 lakhs:
| Cost Component | Regular Import | SEZ Import |
|---|---|---|
| Basic Customs Duty (15%) | ₹7,50,000 | ₹0 |
| Social Welfare Surcharge | ₹75,000 | ₹0 |
| IGST (18% on cumulative) | ₹10,48,500 | ₹0 (if used in SEZ) |
| Total Upfront Cost | ₹68,73,500 | ₹50,00,000 |
| Savings | - | ₹18,73,500 (27%) |
This comparison demonstrates why evaluating SEZ import procedure India benefits makes financial sense for businesses with significant import volumes.
| Product Category | HS Code Chapter | BCD Rate | IGST Rate | Total Effective Duty |
|---|---|---|---|---|
| Electronics (Mobile Phones) | 85 | 20% | 18% | 44% |
| Textiles & Garments | 50-63 | 10-20% | 5-12% | 16-37% |
| Machinery & Equipment | 84 | 7.5-15% | 18% | 27-38% |
| Chemicals | 28-38 | 2.5-10% | 18% |
*Total effective duty includes BCD, SWS, and IGST on the cumulative base.
> KEY UPDATE: The Union Budget 2026 has maintained most BCD rates, but several notifications from the Ministry of Finance have adjusted specific product categories. Always verify current rates on the CBIC portal before calculating costs.
Follow this exact sequence. Getting the order wrong will give you incorrect totals.
Your assessable value is the CIF (Cost, Insurance, Freight) value of the goods:
Formula: Assessable Value = Product Cost + Insurance + Freight
Multiply your assessable value by the BCD rate for your HS code.
Formula: BCD = Assessable Value × BCD Rate %
Apply 10% on the BCD amount (not on the assessable value).
Formula: SWS = BCD × 10%
Add up the assessable value, BCD, and SWS.
Formula: Value for IGST = Assessable Value + BCD + SWS
Multiply the value for IGST by your product's IGST rate.
Formula: IGST = Value for IGST × IGST Rate %
Add all components together.
Formula: Total Import Duty = BCD + SWS + IGST (+ any additional cess)
Let's walk through a realistic calculation for importing electronic components:
| Calculation Step | Formula | Amount |
|---|---|---|
| Assessable Value (CIF) | Product cost + Shipping + Insurance | ₹10,00,000 |
| Basic Customs Duty (10%) | ₹10,00,000 × 10% | ₹1,00,000 |
| Social Welfare Surcharge | ₹1,00,000 × 10% | ₹10,000 |
| Value for IGST | ₹10,00,000 + ₹1,00,000 + ₹10,000 | ₹11,10,000 |
| IGST (18%) | ₹11,10,000 × 18% | ₹1,99,800 |
| TOTAL IMPORT DUTY | Sum of all duties | ₹3,09,800 |
| Final Landed Cost |
> PRO TIP: Your total duty burden is 30.98% of the original CIF value—not just 28% (BCD 10% + IGST 18%). The cumulative calculation method means you always pay more than simple addition suggests. Budget for this in your pricing.
Never rely on outdated rate sheets or third-party calculators alone. Cross-check with these official sources:
Many importers calculate only BCD + IGST and miss the 10% Social Welfare Surcharge. On a ₹10 lakh import with 10% BCD, that's an unexpected ₹10,000 cost.
An incorrect HS code leads to wrong duty rates. A product classified under one chapter at 10% BCD might be 20% under another. Customs can reassess and demand differential duty with penalties.
IGST applies to (CIF + BCD + SWS), not just CIF. This adds roughly 1.8-2.8% to your expected tax burden.
Products like tobacco, pan masala, luxury cars, and certain electronics attract Compensation Cess (up to 36% on top of everything else). Check Chapter 24 and specific notifications.
> WATCH OUT: Agricultural products often attract an Agriculture Infrastructure and Development Cess (AIDC) of 5-40% on top of standard duties. This is separate from SWS and must be added before IGST calculation.
India has Free Trade Agreements (FTAs) with several countries and blocs that offer reduced or zero BCD rates:
| FTA Partner | Reduced BCD | Certificate Required | Key Benefit |
|---|---|---|---|
| ASEAN | 0-5% (from 10%) | Form D | Electronics, machinery |
| Japan (CEPA) | 0-10% (from 15-20%) | Form J | Auto parts, machinery |
| South Korea (CEPA) | 0-8% | Form K | Chemicals, plastics |
| UAE (CEPA) | 0-5% | Form UAE | Oil, gems, metals |
| Mauritius | 0-100% tariff elimination | Form MI |
To claim preferential rates, you must:
Here's the good news: Unlike BCD (which is a pure cost), the IGST you pay on imports is available as Input Tax Credit (ITC) if you're GST-registered.
> PRO TIP: Always pay IGST through the ICEGATE portal using your GSTIN. Payment through other methods may delay ITC availability. Ensure your GST registration matches the importer name exactly.
Stay current with these key notification sources:
| Regulatory Body | Notification Type | Where to Check |
|---|---|---|
| CBIC | Customs duty amendments, tariff changes | cbic.gov.in → Notifications |
| DGFT | Import policy, prohibited items, licensing | dgft.gov.in → Public Notices |
| Ministry of Finance | Budget-related duty changes | indiabudget.gov.in |
| RBI | Foreign exchange, remittance limits | rbi.org.in → Notifications |
Working with a Customs House Agent (CHA) or licensed customs broker ensures accurate classification and duty calculation. The cost (typically 0.1-0.5% of shipment value) often saves more than it costs through error prevention.
Understanding India's import duty structure protects your margins and prevents unpleasant surprises at the port. For complex products or first-time imports, consulting with a customs expert before you order can save significant costs and compliance headaches.
SEZ manufacturing units receive 100% exemption from Basic Customs Duty, Social Welfare Surcharge, and IGST on imported capital goods, raw materials, and consumables. Additionally, they benefit from 100% Income Tax exemption for the first five years, single window clearance for faster customs processing, and the ability to sell to export markets without domestic tax liabilities.
Unlike regular imports where duties are paid immediately at the port, SEZ imports use a bonded warehouse system. Goods enter the SEZ without payment of customs duties and remain duty-free while used within the zone. Documentation is processed through SEZ Development Commissioners rather than port customs, typically resulting in faster clearance times and reduced paperwork.
Yes, SEZ units can sell goods to the Domestic Tariff Area, but such sales are treated as imports into India. The DTA buyer (or SEZ unit acting as importer) must pay applicable Basic Customs Duty, Social Welfare Surcharge, IGST, and any other cesses as if the goods were imported from a foreign country. The duty is calculated on the transaction value or assessable value determined by customs authorities.
First, obtain approval from the SEZ Development Commissioner and establish a bonded warehouse within the zone. File a Bill of Entry specifically for SEZ home consumption, indicating the goods are for authorized operations. After customs examination, store the capital goods in your bonded facility. Maintain records of usage as the goods must be used for approved activities within the SEZ. No duty payment is required unless the goods are transferred to DTA or removed from the zone.
While SEZ imports are exempt from IGST at the point of entry (unlike regular imports where IGST must be paid upfront), supplies to SEZ units are treated as zero-rated supplies under GST. This means suppliers can claim refund of input tax credit. For SEZ units making supplies to the Domestic Tariff Area, IGST applies on the transaction value. SEZ units can also claim refund of unutilized input tax credits, making the overall GST framework favorable for export-oriented operations within SEZs.
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Feb 22, 2026
Feb 20, 2026
Feb 19, 2026
| 21-31% |
| Auto Components | 87 | 10-15% | 18% | 31-38% |
| Raw Materials (Iron/Steel) | 72-73 | 7.5-15% | 18% | 27-38% |
| Food & Beverages | 16-24 | 30-100% | 12-18% | 49-148% |
| Luxury Items | Various | 60%+ | 28% | 112%+ |
| ₹10,00,000 + ₹3,09,800 |
| ₹13,09,800 |
| Textiles, agriculture |
