Import duties and taxes in India are paid when the goods are entered at customs, and they are built in layers: customs duty on the value of the goods, integrated tax on the value plus that duty, and further duties on particular goods. Because each layer is calculated on the one before, a small error in the value or the classification grows as it passes through. This guide explains the layers, how the value is built, which date fixes the rate, when payment falls due, how a worked example with made-up rates fits together and how to find the rates for your own goods.
For the step where the duty is paid, see customs clearance in India step by step. For the classification that drives the rates, see what an HS code is.
The Layers of Tax on an Import
| Layer | What it is | Legal basis |
|---|---|---|
| Basic customs duty | Duty at the rates specified under the Customs Tariff Act, 1975 | Section 12 of the Customs Act |
| Other duties on particular goods | For example anti-dumping duty and safeguard duty on specified goods | Named in CBIC's guidance note |
| Integrated tax (IGST) | Tax on imports, collected with the customs duty | Section 5 of the IGST Act, and Section 3 of the Customs Tariff Act |
Under Section 12 of the Customs Act, 1962, customs duty on imports is levied at the rates set by the Customs Tariff Act, 1975 or another law. For IGST, the GST Council's flyer on imports explains that Article 269A of the Constitution treats a supply of goods in the course of import as an inter-State supply, and that IGST on imported goods is levied under the Customs Act read with the Customs Tariff Act. The proviso to Section 5(1) of the IGST Act confirms that integrated tax on imported goods is levied and collected under Section 3 of the Customs Tariff Act on the value determined under that Act, at the point when customs duties are levied. The same section says the rates are notified on the recommendations of the GST Council and cannot exceed forty per cent.
How the Value Is Built
Section 14 of the Customs Act makes the transaction value the starting point: what was paid or payable for goods sold for export to India and delivered at the place and time of importation, provided the parties are unrelated and the price is the only consideration, with further conditions in the rules. To that the Act adds, as the rules provide, costs such as commissions and brokerage, royalties and licence fees, carriage to the place of importation, insurance, loading, unloading and handling charges.
In practice, an invoice on FOB terms still leads to a value that includes freight and insurance to the extent the rules provide. That is why the trade term on the invoice matters, and why your broker will ask for the freight and insurance documents as well as the seller's invoice.
How the IGST Base Is Built
CBIC's guidance note for importers, issued ahead of the 2017 GST rollout, explains the base for IGST on an imported article. It is the aggregate of two things: the value under Section 14(1) (or the tariff value, where one is fixed), and any duty of customs chargeable under Section 12 together with any sum chargeable under any law as an addition to, or as duty of customs. The tax itself is not part of the base. The note adds that anti-dumping duty and safeguard duty are included in the value for IGST. So the order is value first, then customs duty, then IGST on the two together.
Which Date's Rate Applies
Section 15 looks to the date the bill of entry is presented. If the entry goes in before the vessel or aircraft arrives, it is deemed presented on arrival day, so a rate that applies on the filing date is not locked in.
A Worked Example With Made-Up Rates
The figures and rates below are made up. They show the order of the calculation and are not the rates for any real product.
| Line | Working | Amount in rupees |
|---|---|---|
| Assessable value | Transaction value including freight and insurance | 10,00,000 |
| Basic customs duty at 10% | 10% of 10,00,000 | 1,00,000 |
| Value for IGST | 10,00,000 + 1,00,000 | 11,00,000 |
| IGST at 18% | 18% of 11,00,000 | 1,98,000 |
| Total duty and tax | 1,00,000 + 1,98,000 | 2,98,000 |
If someone worked out the IGST on the 10,00,000 alone, they would get 1,80,000 and under-pay by 18,000. If an anti-dumping duty of 50,000 also applied, the IGST base would rise to 11,50,000 and the IGST to 2,07,000. A real bill can include other components notified for the goods, so use the example only to see the sequence.
When Payment Is Due
For a self-assessed entry, Section 47(2) makes the duty payable on the day of presentation. An entry that is assessed, reassessed or provisionally assessed has to be paid within a day, holidays excluded, of being returned for payment. Notified classes of importers may be allowed to pay later. Duty paid late carries interest within a range of ten to thirty-six per cent a year, with the exact rate fixed by notification. Budget the cash for the day the entry is filed, not the day the cargo lands.
Registered Businesses and the IGST Paid
The CBIC note explains that the GSTIN is the identifier used for the credit flow of IGST paid on imports of goods, which is why the bill of entry must carry it correctly. Whether and how you can use that credit depends on your own GST position, so take advice from your tax adviser. Our guide to GST on logistics and freight services covers the services side.
If Duty Has Been Short-Paid
Under Section 17(1) the importer self-assesses, and under Section 17(4) the officer may re-assess if the self-assessment is found incorrect. If duty turns out to have been short-paid or not paid after clearance, Section 28(1) allows the officer to serve a notice within two years from the relevant date, and Section 28(4) allows five years where the shortfall results from collusion, wilful mis-statement or suppression of facts. Section 28(1)(b) also allows the person chargeable to pay before the notice, with interest under Section 28AA. Our guide to avoiding documentation errors explains how to stay on the right side of this.
How to Find the Rates for Your Goods
- Classify the goods. The tariff entry decides the basic customs duty and the IGST schedule that applies.
- Read the tariff entry. India's eight-digit tariff is on the CBIC website, and the ICEGATE Compliance Information Portal is described as covering tariffs and duties for each commodity.
- Check notifications. A notification issued under Section 25 can have a bearing on the rate, so ask your broker whether one applies to your goods.
- Check for other duties. Find out whether any anti-dumping or safeguard measure covers the product.
- Consider an advance ruling. Section 28H allows an applicant to seek a ruling in advance on classification, on whether a notification applies and on valuation principles.
Common Duty Mistakes
- Leaving freight and insurance out of the value when they belong in it.
- Calculating IGST on the invoice value instead of on the value plus duty.
- Classifying the goods wrongly, which carries the wrong rate through every layer.
- Overlooking an anti-dumping or safeguard duty on the product.
- Treating an early estimate as final, instead of recalculating with the confirmed value and classification.
- Not having the cash ready on the day the entry is filed.
A Duty Planning Checklist
- The classification is agreed and recorded.
- The value includes everything the rules require.
- The trade term, currency and freight and insurance documents are on file.
- Notifications and other duties have been checked.
- The duty has been calculated in the right order.
- The funds are ready for the date of presentation.
Plan Your Landed Cost With RR Brothers and Logistics
RR Brothers and Logistics helps importers estimate duty before the cargo ships, using the value, the classification and the trade term, as part of our customs clearance service. Send us your shipment details and we will work through the numbers with you.
Frequently Asked Questions
Basic customs duty at the rate in the Customs Tariff Act, integrated tax (IGST) collected with it, and further duties such as anti-dumping or safeguard duty on particular goods.
On the value of the goods plus the customs duty chargeable on them and any sum chargeable as an addition to duty, as CBIC's guidance note explains. The IGST itself is not part of the base.
The rate on the date of presentation of the bill of entry, or on the date of arrival if the entry was presented earlier.
On presentation of the bill of entry where it is self-assessed. Late payment carries interest, between ten and thirty-six per cent a year, at the rate notified.
Section 14 brings in, to the extent the rules provide, the costs of carriage to the place of importation, insurance, loading, unloading and handling.
Section 28H allows an application for an advance ruling on classification, the applicability of notifications and valuation principles, made before the goods are imported.
Sources
- CBIC: Customs Act, 1962 (Sections 12, 14, 15, 17, 25, 28, 28H and 47)
- CBIC: IGST Act, 2017, Section 5 (levy and collection)
- CBIC: Guidance note for importers and exporters on GST
- GST Council: Imports in the GST regime (flyer)
- ICEGATE: Indian Customs National Trade Portal
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 PortCalls Asia on Unsplash. Used under the Unsplash License.
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