Landed cost is the total cost of getting a product from your supplier's door to yours, shown per unit. It includes the price you pay the supplier, every freight and handling charge on the way, the duty and tax collected at the border and the costs of clearing and delivering the goods. It matters because the supplier's quotation is only the first line of it. If you price from the quotation, you will price too low. This guide lists the components, shows which of them enter the customs value under Indian law, sets out the order in which duty and integrated tax are built, works through an example with made-up numbers and ends with a stress test and a checklist.
For the freight part of the calculation, see how to calculate shipping costs from China. For the duty rules in more depth, see import duties and taxes in India.
The Components of Landed Cost
| Component | When it arises | Customs treatment |
|---|---|---|
| Supplier's price | At the order | The starting point of the value |
| Pickup, inland haulage and export clearance in China | Before loading | Carriage and loading costs enter the value to the extent the rules provide, so ask your broker about the other origin charges |
| Main freight, by sea or air | In transit | Enters the value to the extent the rules provide |
| Cargo insurance | In transit | Enters the value to the extent the rules provide |
| Customs duty | When the bill of entry is filed | Added to the value to form the IGST base |
| Anti-dumping or safeguard duty, if any | When the bill of entry is filed | Also included in the IGST base |
| Integrated tax (IGST) | When the bill of entry is filed | Charged on the value plus duty |
| Terminal, storage and demurrage charges | After arrival | Not listed in Section 14, so ask your broker whether the rules bring them in |
| Broker and clearance fees | At clearance | Not listed in Section 14, so ask your broker |
| Delivery inside India | After clearance | Section 14 refers to transport to the place of importation, so inland delivery is outside that wording |
| Bank and remittance charges, finance cost | Around payment | A cost to you, not a customs item |
| Testing and certification | As required | Depends on the goods, so ask your broker |
Section 14 of the Customs Act, 1962 starts the value from the transaction value and adds, as the rules provide, costs including carriage to the place of importation, insurance, loading, unloading and handling charges. The rules decide how those additions are measured, so let your broker handle that step.
The Order of Calculation
The order matters because each step feeds the next:
- Take the supplier's invoice value.
- Add the freight, insurance and other costs the rules bring in, to reach the assessable value.
- Apply the basic customs duty rate to the assessable value.
- Add any other duty chargeable on the goods.
- Add the duties to the assessable value to form the base for integrated tax. CBIC's guidance note describes the base as the value plus the customs duty and any sum chargeable as an addition to or as duty of customs, and says the tax itself is not part of the base.
- Apply the IGST rate to that base. Section 5 of the IGST Act provides for integrated tax on imports to be levied under Section 3 of the Customs Tariff Act.
- Add the costs that sit outside the customs value: clearance, port, delivery and bank charges.
- Divide the total by the number of units.
A Worked Example With Made-Up Numbers
Every figure and rate here is made up, and the rates are not those of any real product. The consignment is 1,000 units.
| Line | Working | Amount in rupees |
|---|---|---|
| Supplier's invoice (FOB value) | Given | 6,00,000 |
| Freight | Given | 60,000 |
| Insurance | Given | 6,000 |
| Assessable value | 6,00,000 + 60,000 + 6,000 | 6,66,000 |
| Customs duty at 10% | 10% of 6,66,000 | 66,600 |
| IGST base | 6,66,000 + 66,600 | 7,32,600 |
| IGST at 18% | 18% of 7,32,600 | 1,31,868 |
| Clearance and port charges | Given | 18,000 |
| Delivery inside India | Given | 12,000 |
| Bank charges | Given | 4,000 |
| Landed cost | 6,66,000 + 66,600 + 1,31,868 + 34,000 | 8,98,468 |
| Landed cost per unit | 8,98,468 divided by 1,000 | 898.47 |
If you can use the IGST as credit, the cost that matters for your margin is lower. In this example it would be 8,98,468 less 1,31,868, which is 7,66,600, or 766.60 a unit. Whether and how you can use the credit depends on your GST position, so confirm it with your tax adviser and keep both figures.
Stress-Test the Result
A landed cost sheet is only useful if you test it. Using the same made-up numbers:
- A higher duty rate. If the duty rate were 20% instead of 10%, the duty would be 1,33,200, the IGST base 7,99,200 and the IGST 1,43,856. The landed cost would rise by 78,588 to 9,77,056, about 8.7% more.
- Higher freight. If freight were 30,000 higher, the assessable value would be 6,96,000, the duty 69,600 and the IGST 1,37,808. The landed cost would rise by 38,940, which is 30,000 multiplied by 1.298 (1.10 for the duty and 1.18 for the IGST). At these made-up rates, each extra rupee of freight or insurance in the value costs about 1.30 rupees landed.
The second result is the one people miss. Because duty and IGST are charged on a value that includes freight and insurance, freight increases are more expensive than they look. The first shows why classification deserves care. See our guide to how product classification affects import duties.
Mixed Consignments
When one consignment holds several products, split the costs before you divide by units. Allocate the freight and insurance by weight or volume, whichever you used to quote them. Apply the duty by each product's own classification, because different products can carry different rates. Then divide each product's share by its own units. A single average cost per unit across the whole consignment hides which products earn their place and which do not.
Currency
The supplier's invoice may be in a foreign currency, and the cost to you depends on the rate at which you actually buy it from your bank. Use that rate in your landed cost sheet, and keep it separate from the rate customs applies when it converts the invoice value for duty, which your broker will confirm. Update both when the payment or the filing happens, and treat a currency move as one more line to stress-test.
Landed Cost Is Not the Cash You Need on Day One
The timing of the payments differs from the timing of the cost. Under Section 47(2), duty on a self-assessed entry is payable when the bill of entry is presented. The Reserve Bank's Master Direction on Import of Goods and Services expects remittances against normal imports to be completed within six months from the date of shipment and sets conditions on advances. So plan the cash in three places: the supplier, the freight and charges, and the duty and tax on the day the entry is filed.
Mistakes in Landed Cost Calculations
- Pricing from the supplier's quotation instead of the full cost.
- Calculating IGST on the invoice value instead of on the value plus duty.
- Leaving freight and insurance out of the assessable value.
- Using an assumed duty rate without confirming the classification.
- Forgetting storage and demurrage for cargo that waits.
- Mixing estimates and actuals, and never updating the sheet when the real freight or classification is known.
- Ignoring the difference between the gross cost and the cost net of IGST credit.
A Landed Cost Checklist
- The classification and duty rates are confirmed.
- The trade term is clear, so you know which freight and insurance lines are yours.
- The assessable value includes what the rules require.
- Duty and IGST are calculated in the right order.
- Costs outside the customs value are listed.
- The cost is shown per unit, gross and net of credit.
- The sheet is updated with actual figures at booking and again at filing.
Get a Full-Cost Quotation From RR Brothers and Logistics
RR Brothers and Logistics can quote freight and clearance line by line, so that your landed cost sheet is built on real numbers. See our sea freight and customs clearance services, and send us your shipment details.
Frequently Asked Questions
The total cost of getting a product to your door, shown per unit: the supplier's price, freight and insurance, customs duty and integrated tax, clearance, port and delivery charges and bank costs.
Section 14 starts from the transaction value and adds, as the rules provide, costs including carriage to the place of importation, insurance, loading, unloading and handling charges.
On the value plus the customs duty and any sum chargeable as an addition to duty, as CBIC's guidance note explains. The IGST itself is not part of the base.
It is paid at import, but whether it is a net cost depends on whether you can use it as credit. Keep the gross and the net figures and confirm the treatment with your tax adviser.
The quote covers the goods, and at best the freight. Duty and tax are charged on a value that includes freight and insurance, and clearance, port, delivery and bank charges are added on top.
At the quotation, at booking and when the bill of entry is filed, replacing estimates with actual freight, value and classification each time.
Sources
- CBIC: Customs Act, 1962 (Sections 14 and 47)
- CBIC: IGST Act, 2017, Section 5 (levy and collection)
- CBIC: Guidance note for importers and exporters on GST
- Reserve Bank of India: Master Direction, Import of Goods and Services (updated 12 January 2026)
This article is general information, not legal, tax or customs advice. Rules, rates and procedures change; confirm current requirements with the relevant authority or a licensed customs professional before you ship. Regulatory references were checked against the official sources listed above on 26 October 2026.
Image credits: header photo by Jakub Żerdzicki on Unsplash; photo by Alba Calbetó on Unsplash. Used under the Unsplash License.
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