Customs Duty in India: Types, Calculation & 2026 Rates
TL;DR - Summary
- How is customs duty calculated in India? - Customs duty is calculated as the sum of the CIF value of the goods, plus the Basic Customs Duty (BCD), 10% Social Welfare Surcharge on that BCD, and IGST on the combined value.
- What were the major changes in Budget 2026? - Key changes include the removal of the ₹10 lakh limit for courier exports, a reduction in duty on personal imports to 10%, and an increase in the duty-free baggage allowance for travelers to ₹75,000.
- Who is responsible for paying customs duty? - The importer of record, whether an individual or a business, must pay the duty before goods are cleared for domestic use.
- Do freelancers and service exporters pay customs duty? - Customs duty applies only to physical goods crossing borders, while services are exempt from these specific levies.
- How is a customs duty challan paid? - A customs duty challan can be paid through the ICEGATE portal using bank gateways, UPI, or credit/debit cards.
What Is Customs Duty?
Customs duty is a direct tax levied on physical goods crossing international borders. The Indian government regulates this process through the Customs Act, 1962, and the Central Board of Indirect Taxes and Customs (CBIC) oversees the collection and administration of these levies across all ports.
The government collects customs duty for three reasons:
- First, it acts as a primary revenue stream for government revenue
- Second, the tariffs act as a buffer for domestic manufacturers against cheaper foreign manufacturing output.
- Third, customs duties regulate the volume of restricted or sensitive physical goods entering the domestic market.
You might confuse customs duty with tax, but there’s a difference.
A standard tax applies to goods transacted within domestic state lines. A customs duty targets physical cargo moving across defined national boundaries. Items falling under this umbrella comprise raw materials, heavy machinery, consumer electronics, and agricultural output.
⚠️ COMMON MISCONCEPTION
"Customs duty" and "import duty" are often used interchangeably, but technically customs duty covers both imports and exports; export duty applies to very few categories in India.
Who Pays Customs Duty in India?
The Importer of Record (IOR) pays customs duty in India. An IOR can be an individual or registered business importing foreign goods into Indian territory. They’re also responsible for filing documents and ensuring that the goods meet all standards and certifications.
Commercial importers represent the biggest group that pays customs duty. This group comprises manufacturers buying raw material inputs, factories purchasing heavy production machinery, and retailers sourcing finished goods. Every commercial shipment requires full customs duty payment before the customs officer releases the cargo from the port facility.
Individual travelers carrying foreign-purchased items exceeding the permissible duty-free allowance must declare the excess cargo. They must pay the calculated customs duty directly to the officers at the arrival terminal.
Do Service Exporters Have to Pay Customs Duty?
Service exporters do not pay customs duty. That means Indian freelancers, software developers, and independent consultants are exempt from paying customs duty on their foreign income. As no physical goods have crossed borders, no duty applies.
Which Physical Commodities Are Exempt From Customs Duty?
Emergency medical drugs, designated agricultural fertilizers, and specific emergency food grains receive full exemptions or are charged at a reduced rate. The government applies these zero-rating strategies to maintain affordability for necessary commodities.
💡 QUICK INSIGHT
If you are a freelancer or software consultant receiving payment from a foreign client, you have no customs duty obligation. You are exporting a service, not importing goods.
What Are the Different Types of Customs Duty in India?
Several types of customs duties apply to a single international shipment. Knowing these types and the individual rates will help you project the final cost of your cargo landing in an Indian port:
- Basic Customs Duty (BCD): This is the primary charge on almost all imported items. The exact BCD rate ranges from 0% to 100%, which one applies to your product depends entirely on the Harmonised System of Nomenclature (HSN) code and the designated country of origin.
- Integrated Goods and Services Tax (IGST): IGST applies to incoming cargo alongside the BCD. The IGST rate is the exact GST rate applicable if the product originated domestically. For example, 18% for most electronics sold in India. Authorities calculate the IGST on the total assessable value, plus the BCD, and all other applicable border surcharges.
- Social Welfare Surcharge (SWS): This was introduced in 2018 to fund specific state-sponsored education and medical programs and replace the education cess. SWS is calculated as a flat 10% of the BCD amount.
- Countervailing Duty (CVD): CVD ranges from 0% to 12%. The CBIC levies CVD on goods when the origin country grants financial subsidies or tax benefits to its manufacturers. This specific duty neutralizes the price advantage of subsidized foreign goods in the Indian market and protects domestic producers.
- Special Additional Duty (SAD): A standard 4% rate applied to foreign goods to offset the localized sales taxes or VAT applied to competing domestic products. SAD is calculated on the total assessable value.
- Anti-Dumping Duty: This type of duty prevents foreign entities from deliberately undercutting domestic pricing. The government notifies specific rates when foreign suppliers dump products at prices below their true market cost. This intervention prevents predatory pricing strategies from destroying domestic manufacturing sectors.
- Safeguard Duty: The finance ministry activates safeguard duty when sudden, massive volume spikes in specific imports threaten a domestic industry.
- Compensation Cess: Designated product classifications, like tobacco, coal, and luxury automobiles, face compensation cess. The revenue generated from this duty compensates state governments for GST-related revenue deficits.
- Protective Duty: The role of protective duty is to establish a financial shield for vulnerable domestic sectors. The tariff raises the final retail cost of foreign alternatives, forcing parity with locally manufactured options.
Table comparing different types of customs duty
| Type of Duty | Rate | What Triggers It / Calculation Basis |
|---|---|---|
| Basic Customs Duty (BCD) | 0%–100% (Standard) 10% (Personal Imports) | The primary tax on most goods crossing international borders. Varies by HS code and country of origin. |
| Integrated GST (IGST) | Same as domestic GST rate (5%, 12%, 18%, or 28%) | Applied to all imports to match domestic tax levels. Calculated on the combined value of Assessable Value + BCD + SWS |
| Social Welfare Surcharge (SWS) | 10% of BCD | Introduced in 2018 to fund social schemes, replacing the education cess |
| Countervailing Duty (CVD) | 0%–12% | Levied on imported goods that received subsidies or tax benefits in their country of origin |
| Anti-Dumping Duty (ADD) | Per notification (up to 550%) | Imposed when foreign companies sell goods in India below their fair market value to protect domestic industries from predatory pricing |
| Special Additional Duty (SAD) | 4% | Applied to imported items that are equivalent to locally produced goods subject to VAT or sales tax |
| Compensation Cess | Varies by product category | Levied on luxury or goods like tobacco, coal, and certain automobiles to offset state revenue losses from GST. |
| Safeguard Duty | Per notification | A temporary measure triggered by a sudden surge in imports that threatens a domestic industry. |
| Protective Duty | Varies by notification | Specifically intended to shield domestic industries from foreign competition by making alternatives more expensive |
Which Goods Attract Customs Duty in India?
Almost all goods entering Indian borders attract customs duty. The final percentage depends on the HSN code and country of origin. Here’s a quick breakdown of different goods and their indicative rates:
- High duty categories: Consumer electronics consistently attract a 20% tariff, while automobiles face a steeper 25% levy. Textile imports carry a 15% rate. Agricultural commodities hover near 10%, whereas pharmaceutical inputs often benefit from lower 5% rates. The finance ministry changes these percentages annually during the official budget presentation.
- Exempt or reduced rate goods: Exemptions apply to predefined necessity items. Emergency medications, agricultural fertilizers, and food grains frequently receive a zero percent tariff rating.
- Goods attracting compensation cess: Unmanufactured tobacco and metallurgical coal attract a mandatory compensation cess. It also applies to luxury items or environmentally detrimental goods.
- Country of origin: Countries holding an active Free Trade Agreement (FTA) with India receive discounted BCD rates under preferential tariff schemes. Importers must supply a valid Certificate of Origin to claim these reduced FTA percentages.
- Budget 2025-2026: Budget 25-26 removed tariffs entirely on specific capital goods. Exemptions now cover lithium-ion cell manufacturing machinery and specific minerals. This policy shift lowers production costs for the domestic electric vehicle manufacturing sector.
- Export duty: Export duties apply to a specific list of raw materials. The state taxes the export of specific iron ores and petroleum products to protect domestic interests.
⚠️ WATCH OUT
Misclassifying goods under the wrong HS code, intentionally or accidentally, can result in penalties, additional duty demands, or clearance delays.
How to Calculate Custom Duty in India?
Follow these exact steps to calculate customs duty on products imported into India:
- Step 1: Find your product's 8-digit HSN code to find the exact BCD and IGST rates. Check out the India Trade Portal website to get started.
- Step 2: Determine the taxable value. Add the exact invoice cost of the goods, the total freight charges, and the insurance premium to know the CIF cost. The assessing officer will reject the declaration if you undervalue the sum.
- Step 3: Calculate Basic Customs Duty (BCD). Multiply the BCD rate with the CIF cost. If the CIF sum equals ₹10,000 and the BCD rate stands at 10%, the BCD equals ₹1,000.
Check Customs Duty- Step 4: Calculate Social Welfare Surcharge (SWS) as a flat 10% on the calculated BCD. From the previous step, 10% of the ₹1,000 BCD is an SWS of ₹100.
- Step 5: Add the CIF cost, the BCD, and the SWS. Multiply this new sum by the applicable GST rate. For an 18% IGST rate, multiply 18% with (₹10,000 + ₹1,000 + ₹100 = ₹11,100), resulting in an IGST of ₹1,998.
- Step 6: Add compensation cess if applicable. Apply the cess percentage to the same baseline used for IGST.
- Step 7: Add the BCD, SWS, IGST, and any applicable Cess. This final sum represents the exact customs duty you must pay to the government.
Worked Example of Custom Duty Calculation
Scenario: Importing a commercial electronic component. BCD Rate: 10%, IGST Rate: 18%
- Taxable Baseline (CIF): ₹10,000
- Basic Customs Duty (BCD): ₹1,000 (10% of ₹10,000)
- Social Welfare Surcharge (SWS): ₹100 (10% of ₹1,000)
- IGST: ₹1,998 (18% of ₹11,100)
- Total Customs Duty Payable: ₹3,098 (Sum of BCD + SWS + IGST)
- Total Landed Cost: ₹13,098 (Taxable baseline + total duty)
Active trade agreements or specific end-use exemptions can change these figures. Registered entities mostly claim the IGST as an input tax credit, to reduce their net tax burden over the financial year.
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How to Pay Customs Duty on ICEGATE?
You can pay customs duty online through the ICEGATE portal. It supports online payments through UPI transfers, standard debit cards, and credit cards. Follow this step-by-step process to complete the payment:
Step 1: Visit the ICEGATE website: icegate.gov.in
ICEGATE Home PageStep 2: Log in to your account with ICEGATE credentials. You can also use Importer-Exporter Code (IEC) if you’re not a registered user
ICEGATE LoginStep 3: Click on Services, then E-Payment from the dropdown
ICEGATE ServicesStep 4: Enter duty type, document, location, and identification number (IEC code)
ICEGATE IECStep 5: You will see all the unpaid challans
ICEGATE ChallansStep 6: Select the challans you want to pay for, then click Confirm Challan
ICEGATE Challans ListStep 7: Click on Pay Now and you’ll see different options to complete the payment
ICEGATE PaymentStep 8: Finish the payment process and save the digital receipt as proof
How to Claim Refunds for Customs Duty?
You can claim refunds for customs duty if any of the following three most-common scenarios apply:
Section 27 (excess duty paid): Refunds for excess payments because of mathematical errors or applied rates. In such a case, you must file the official refund application within one year from the exact date of tax payment.
Section 74 (Re-export): If you import a physical item and later export that identical item, the state will refund up to 98% of the customs duty. However, you must follow a strict timeline and conditions.
Reassessment-based refund: If your original bill of entry needs to be corrected, you must claim a refund through this module. This might arise because of wrong classification, miscalculation, or even if the goods were passed under a provisional assessment.
Follow these steps to claim a refund on customs duty:
Step 1: Visit icegate.gov.in and log in to your ICEGATE account
ICEGATE Home pageStep 2: Click on Services, then Re-assessment cum Refund, then again the same option
ICEGATE Re-assessment
ICEGATE re-assessment-cum-refundStep 3: Click on the Re-assessment Dashboard if you want to re-assess the bill of entry. Or click on the Refund Dashboard for other types of refund (following screenshots are for other refunds), then click on Create New Refund Request - Other Refund
ICEGATE refund Dashboard
ICEGATE New Refund RequestStep 4: Enter all the relevant details like IEC, document type and date, and port code
ICEGATE relevant detailsStep 5: Select the Refund Claimed Under
ICEGATE refunds claimedStep 6: Choose Grounds of Refund Claim in the next step
ICEGATE Grounds of refundStep 7: Select Annexure Type and upload the relevant document
ICEGATE annexure typeStep 8: Enter bank account details
ICEGATE bank detailsStep 9: Complete the declaration and click on Submit
ICEGATE declarationStep 10: Keep checking the refund status from the dashboard
ICEGATE refund status
ICEGATE refund status assignedWhat Are the Latest Customs Duty Changes in Budget 2026?
Budget 2026 modified customs duty to scale export volumes and reduce the financial burden on individual consumers. Here are the major updates:
For exporters and e-commerce sellers:
The courier export limits have been removed. Earlier, the CBIC enforced ₹10 lakh maximum cap on individual courier consignments. Now that the ceiling has been removed, e-commerce merchants can export high-cost commodities, like premium jewelry and specialized laboratory equipment, without restrictions.
The marine export sector received immediate relief on input costs. The duty-free import allowance for specialized aquaculture inputs increased from 1% to 3% of the turnover. This will aggressively lower the operational production costs for shrimp and seafood processors.
The leather and footwear manufacturing industry gained expanded raw material exemptions. Shoe uppers, synthetic components, and designated chemical inputs have been added to the list after Budget 2026.
BCD on specific petrochemical inputs and advanced polymers dropped to 5%. This specific reduction lowers the baseline production costs for the domestic pharmaceutical and plastics industries.
The finance ministry eliminated BCD on 25 specific minerals, covering lithium, cobalt, and rare earth elements to subsidize domestic fabrication of advanced batteries and electric vehicles.
The garments and textiles sector received an extended timeline for exporting finished goods. The period allowed under duty-free input schemes increased from 6 months to 12 months.
The BCD rate was dropped to flat 10% for individuals importing items for personal use. The duty-free baggage allowance for international passengers has been increased to ₹75,000.
For freelancers
The budget presented zero modifications for cross-border service exports. Freelancers, software engineers, and IT consultants face zero custom duty on their foreign remittance income.
How Does Skydo Help?
Indian exporters face two burdens when receiving foreign payments: compliance paperwork and hidden fees. They often have to visit bank branches multiple times to get a Foreign Inward Remittance Advice (FIRA) or a Bank Realisation Certificate (BRC), both critical to prove they have received foreign income in India. On top of that, traditional banks charge 5% to 10% of the income in inward remittance charges and currency markup.
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- For payments under $2,000: $19 flat fee
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Why does the government levy customs duty on imports?
The state levies customs duty to generate revenue, protect domestic manufacturing sectors from cheaper foreign output, and restrict the volume of sensitive or hazardous materials entering the domestic market.
What factors determine your customs duty rate?
Do service exporters and Indian freelancers pay customs duty on cross-border earnings?
How much customs duty do I pay on personal imports to India?
What is the difference between customs duty and excise duty?
How do I find the HS code for my product on ICEGATE?
What is the difference between BCD and IGST on imports?
Can I get a refund if I overpaid customs duty?
What is an HS code and why does it matter for customs duty?
