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What is custom duty? Meaning, types, calculation & payment
Customs duty is the tax imposed by governments on imports and exports. Understand duty types, rates, and calculation methods in this blog.
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For businesses engaged in cross-border trade, understanding customs duty is crucial for pricing, compliance, and profitability. Customs duties in India, like in many countries, are taxes levied on goods imported into or exported out of the country. These charges vary based on product type, country of origin, and applicable trade agreements.
This blog explains the different types of customs duties, their objectives, current customs duty rates, and how to calculate customs duty using official formulas and portals.
This blog explains the different types of customs duties, their objectives, current customs duty rates, and how to calculate customs duty using official formulas and portals.
What is customs duty?
Customs duty is a tax charged by the central and state governments on the import and export of goods and services across international borders. It is commonly referred to as import duty for incoming goods and export duty for outgoing goods. The main purpose of customs duty is to regulate the movement of goods and safeguard the country’s economy, employment opportunities, and environment. Customs duties also control the movement of restricted and prohibited goods between countries.
Every product has a predefined duty rate based on factors like where the goods were made, how they were sources, and what raw materials were used to manufacture them. Any product brought to India for the first time must be declared according to the customs rules.1
Every product has a predefined duty rate based on factors like where the goods were made, how they were sources, and what raw materials were used to manufacture them. Any product brought to India for the first time must be declared according to the customs rules.1
Custom duty updates - Union Budget 2026
If you're importing goods into India, customs duty is probably the biggest surprise in your landed costs. In February 2026, the Union Budget made several important changes that affect what custom duty rates you'll pay in India.
1. Reduction in Basic Customs Duty (BCD) on select goods
To help manufacturers cut costs, the government lowered Basic Customs Duty (BCD), which is the main import tax on raw materials and components. If you're importing electronics parts, you'll pay less duty now.¹ This supports India's Make in India initiative to build electronics locally.
2. Exemptions extended for EV components
To help EV manufacturers save money, the government removed customs duties on EV batteries and manufacturing equipment. If you're importing these items to make EVs, you'll see immediate savings. This extends a cost-cutting plan that started in 2023.²
3. BCD increased on select finished goods
On the flip side, the government raised BCD on finished textiles, footwear, and plastic products to protect Indian manufacturers. If you're importing these items, your costs will go up. This is part of a strategy to encourage buying from Indian suppliers instead of importing finished goods.³
4. Changes to the Social Welfare Surcharge (SWS)
SWS is 10% of your BCD only, not your total duty. Many importers miss this distinction. Check the CBIC website before each shipment to see if the SWS rate has changed for your product category. Also, recent Budget changes have simplified duty rates and removed SWS on some items.4
Note: All duty changes listed above are as of February 2026. Customs charges in India are subject to revision. Verify the latest applicable rates directly at the CBIC website before making import or export decisions.
Objectives of customs duty
Governments levy customs duties for several key reasons, such as:
1. Revenue generation
Customs duties are a source of revenue for governments. They fund public services and infrastructure projects.
2. Protection of domestic industries
Customs duties on imported goods can help protect local industries from foreign competitors that may have cost advantages like cheap labor or subsidies.
3. Regulation of trade:
Duties can be used as a tool to control the volume and type of goods entering a country, thereby managing the balance of trade.
4. Discouraging consumption of certain goods
Higher duties may be imposed on goods deemed harmful or non-essential, such as tobacco or alcohol, to discourage their consumption.
5. Retaliation or negotiation
Customs duties can be used as a retaliatory measure in trade disputes or as a bargaining chip in international trade negotiations.
6. National security
Duties can restrict the import of goods that might pose a threat to national security.
Types of custom duties
When you import goods, you'll pay several different taxes bundled together. This is because custom duty in India is a combination of several taxes. Here's what each one is and why you pay it:
Type of duty
What it means
Who bears it
Indicative rate*
Basic Customs Duty (BCD)
The main import tax. It changes based on what product you're importing.
Importer
5-40%5
Integrated Goods and Services Tax (IGST)
A tax you pay on imports, similar to the GST you'd pay if you bought locally. You can claim it back as a credit.
Importer
0%, 5%, 18%, or 40% depending on HSN classification6
Customs Handling Fee
A fee customs charges to clear your shipment through the port. About 1% of your goods' value.
Importer
1% of the value of goods7
Social Welfare Surcharge (SWS)
An extra 10% charge on your BCD that funds government welfare programs.
Importer
10% of BCD8
Anti-Dumping Duty
An extra tax if you're importing goods at suspiciously low prices. Protects Indian manufacturers from unfair competition.
Importer
Varies product-to-product
Countervailing Duty (CVD)
An extra tax you pay if a foreign government is subsidizing the product you're importing. Levels the playing field.
Importer
Varies; determined through investigation
Safeguard Duty
A temporary tax the government adds if too many imports flood the market and hurt Indian businesses.
Importer
Varies; time-limited
Export Duty
If you're exporting certain raw materials that India needs domestically (like minerals), you'll pay this tax.
Exporter
Varies; applied selectively
*Note: Customs charges in India are subject to revision. Verify the latest applicable rates directly at the CBIC website before making import or export decisions.
Factors affecting customs duty calculation
Several factors influence the calculation of customs duty in India. Knowing these can help businesses avoid costly errors:
● Country of origin: Goods from FTA-partner countries may have reduced duties.
● Product classification: The HS code of the goods determines the applicable rates.
● Declared value of goods: Customs duties are calculated based on the value of the goods.
● End-use of product: Some items used in critical industries may have concessions.
How to calculate customs duties and taxes?
You're probably wondering how much you'll actually pay in customs duty. However, customs duty isn't one simple percentage. Multiple taxes stack on top of each other, and they build in a specific order.
The section below helps you understand how to calculate custom duty and avoid surprises when your shipment arrives.
The section below helps you understand how to calculate custom duty and avoid surprises when your shipment arrives.
The key inputs you need
Before you calculate, you'll need these three values:
Assessable value (AV): Add up your product's cost, shipping, and insurance. This total (called CIF value) is what you'll pay duty on.
HSN code: This is a universal product classification number. You'll use it to find the right duty rate for your product.
IGST rate: This is the tax rate for your product type. You'll find it by looking up your HSN code.9
HSN code: This is a universal product classification number. You'll use it to find the right duty rate for your product.
IGST rate: This is the tax rate for your product type. You'll find it by looking up your HSN code.9
The calculation sequence
Here's how you can calculate how much custom duty you have to pay, step by step.
Step 1 – Find your assessable value (AV)
Add your product's cost, insurance, and freight together. This total is called the CIF value. Convert it to Indian Rupees if needed. This is your starting point.
AV = Cost of goods + Insurance + Freight
AV = Cost of goods + Insurance + Freight
Step 2 – Apply Basic Customs Duty (BCD)
Now multiply your AV by the BCD rate for your product. You'll find your product's BCD rate using its HSN code.
BCD = AV × BCD rate
BCD = AV × BCD rate
Step 3 – Calculate the Social Welfare Surcharge (SWS)
Now calculate SWS. SWS is 10% of your BCD only, not your total duty. This catches a lot of importers off guard, so double-check this step.
SWS = BCD × 10%
SWS = BCD × 10%
Step 4 – Build your IGST base
Now add your BCD and SWS back onto your AV. This new total is what you'll use to calculate IGST.
IGST base = AV + BCD + SWS
IGST base = AV + BCD + SWS
Step 5 – Calculate IGST
Now multiply your new total by the IGST rate for your product.
IGST = IGST base × IGST rate
IGST = IGST base × IGST rate
Step 6 – Add it all up
Add BCD + SWS + IGST. That's your total duty.
Total duty = BCD + SWS + IGST
Total duty = BCD + SWS + IGST
Worked example: Importing ceramic tableware from Vietnam
Let's walk through a real example. Say you're importing ceramic dishes from Vietnam. Here's the shipment details and the duty rates that apply:
Component
Value
Cost of goods (FOB)
₹1,00,000
Freight
₹8,000
Insurance
₹2,000
Assessable value (CIF)
₹1,10,000
BCD rate (ceramic tableware, HSN 6912)
10%
IGST rate (ceramic tableware)
12%
Step 1 – Assessable value
AV = ₹1,00,000 + ₹8,000 + ₹2,000 = ₹1,10,000
Step 2 – BCD
BCD = ₹1,10,000 × 10% = ₹11,000
Step 3 – Social Welfare Surcharge
SWS = ₹11,000 × 10% = ₹1,100
Step 4 – IGST base
IGST base = ₹1,10,000 + ₹11,000 + ₹1,100 = ₹1,22,100
Step 5 – IGST
IGST = ₹1,22,100 × 12% = ₹14,652
Step 6 – Total duty payable
Total = ₹11,000 + ₹1,100 + ₹14,652 = ₹26,752
On a ₹1,10,000 CIF shipment, the total duty comes to approximately ₹26,752. This works out to an effective rate of around 24.3% on the assessable value.
Pro tip
Use ICEGATE's customs duty calculator to estimate what you'll owe before your shipment arrives. Knowing your numbers in advance helps you price accurately and manage cash flow. You can also check the custom value methodology for guidance on how goods are valued for duty purposes.
Latest custom duty rates in India in 2026
Duty rates change depending on what you're importing. Here's a quick reference for common products (as of February 2026):
Product category
HSN chapter
Basic Customs Duty (BCD)
Mobile phones, PCBA & chargers
85
15% (phones), 0–15% (components)
Gold & silver
71
~6%
Platinum
71
~6.4%
Broodstock, polychaete worms, shrimp and fish feed
03 / 23
~5%
Capital goods (solar manufacturing equipment)
84 / 85
0%
Cancer drugs (specified pharmaceuticals)
30
0%
Ferro-nickel & blister copper
72 / 74
0%
Ammonium nitrate
31
5%
PVC flex banners (plastic products)
39
~25%
PCBA for telecom equipment
85
~15%
Critical minerals & rare earths (lithium, cobalt, silicon)
28
0%11
Energy inputs (coal, lignite, crude inputs)
27
~2.5%12
Industrial metals (ferro-nickel, copper inputs)
72 / 74
0%13
Note: These rates are as of February 2026 and may change. Check the CBIC Customs Tariff portal for the current rate for your product's HSN code before you make your import decision.14
Exemptions and concessions under customs duty
The Indian government offers several exemptions and concessions to promote trade and manufacturing:
● Export Promotion Capital Goods (EPCG)
Reduced duties on imported machinery under the EPCG scheme to promote export-oriented production.
● SEZ and EOU benefits
Special Economic Zones and Export-Oriented Units get customs duty exemptions.
● Advance Authorization scheme
Advance Authorization scheme allows the duty-free import on goods and products incorporated into an exported product.
● FTA exemptions
Products covered under FTAs enjoy duty concessions or exemptions.
How to pay custom duty online?
You can pay custom duty charges in India online through the ICEGATE portal. Here's the complete step-by-step process:
Step 1 – Register or log in to the ICEGATE portal
Go to the ICEGATE portal and log in.15 If you're new, select "New Registration." You'll need:
● Your IEC (your import-export license number)
● Protect local industries against international giants.
● Your business details
You'll receive your login credentials by email after ICEGATE approves your registration.
● Your IEC (your import-export license number)
● Protect local industries against international giants.
● Your business details
You'll receive your login credentials by email after ICEGATE approves your registration.
Step 2 – Navigate to the e-payment section
Once you're in, click the "Services" tab and select "e-Payment." You'll see any pending duty payments here. (Or you can go straight to "Bills of Entry" if you already know which shipment you're paying for.)
Step 3 – Select the relevant Bill of Entry
A Bill of Entry (B/E) is the customs form you or your broker submit to declare your shipment. Find the right one by searching for its number, the date you imported, or your port. Double-check the duty amount matches your shipment. This is crucial to avoid overpaying.
Pro tip
Verify the B/E and amount before you pay. If the amount looks wrong, contact your customs broker before proceeding.
Step 4 – Choose your payment method
ICEGATE accepts these payment methods:
● Net banking: instant, but has limits on large payments
● NEFT: takes a few hours, good for most transfers
● RTGS: fastest bank transfer, best for large amounts
For big duty payments, use NEFT or RTGS. They're more reliable than net banking for high amounts.
● Net banking: instant, but has limits on large payments
● NEFT: takes a few hours, good for most transfers
● RTGS: fastest bank transfer, best for large amounts
For big duty payments, use NEFT or RTGS. They're more reliable than net banking for high amounts.
Step 5 – Generate the ICEGATE challan
Confirm the B/E and amount. The portal will create a challan (payment slip) with a unique ID number. Save this number. You'll use it to track your payment and complete customs clearance.
Step 6 – Complete the payment through your bank
If you're using NEFT or RTGS, copy the account details and IFSC code (your bank's routing code) from the challan and send the money through your bank's portal.
If you're using net banking, you'll be redirected to your bank's login page. Either way, save your transaction reference number.
If you're using net banking, you'll be redirected to your bank's login page. Either way, save your transaction reference number.
Step 7 – Confirm payment status on ICEGATE
Go back to ICEGATE and check your payment status under "e-Payment" or "Challan Status." Net banking shows instantly. NEFT and RTGS can take up to four hours on business days. Don't submit the payment twice if it shows as pending. Just wait for the banking channel to update.
Step 8 – Download the payment receipt and proceed to customs clearance
Once your payment shows as confirmed, download your receipt. You'll give this receipt to customs along with your Bill of Entry and shipping documents for customs clearance. Keep the receipt. You'll need it to claim GST credit and for record-keeping later.
Pro tip
ICEGATE works on mobile with the same payment options, so you can pay custom duty online while on the go.
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Frequently Asked Questions
1. What are the main features of customs duty?
The following are some of the features of customs duty:
○ It is applied to the movement of goods across borders regardless of sales or purchase.
○ It is applicable on physical goods.
○ It also includes education cess.
○ It is applied to the movement of goods across borders regardless of sales or purchase.
○ It is applicable on physical goods.
○ It also includes education cess.
2. What is the purpose of customs duty?
The purpose of customs duty is to:
● Protect local industries against international giants.
● Offer businesses a fair and equal chance to expand in new markets.
● Introduce a revenue source to the government.
● Promote India’s exports.
● Protect local industries against international giants.
● Offer businesses a fair and equal chance to expand in new markets.
● Introduce a revenue source to the government.
● Promote India’s exports.
3. What is the difference between customs duty and import tax?
Customs duty is imposed by the central government on goods when they cross international borders. It can be levied on imports and exports. On the other hand, import tax is the tax collected on imports.
4. What is the difference between customs duty and tariff?
Customs duty is an indirect tax on imported goods, while tariffs are direct taxes imposed on importers for goods brought from outside the country.
5. How should you check customs duty for your product?
You can check the applicable customs duty by visiting the ICEGATE portal. Use your product’s HS code to find detailed rates and calculate duties based on assessable value.
6. What is customs duty, and why is it charged?
When goods cross borders, whether you're importing or exporting, you pay customs duty to the government. Customs duty serves three purposes: increasing government revenue, shielding domestic industries from foreign competition, and controlling the flow of certain goods.
7. What are the main types of customs duties in India?
The two you'll encounter most often are BCD (Basic Customs Duty) and IGST. But depending on your product and where it comes from, you might also pay anti-dumping duty, countervailing duty, safeguard duty, or export duty.
8. What is the process of custom duty?
Your goods arrive at an Indian port. You (or your customs broker) file a Bill of Entry, declaring the goods, their value, and their HSN code. Customs officers review your declaration, verify the custom value, and check what duties you owe. Once you pay the duty, customs release your goods.
9. How does customs duty in India impact international trade?
Customs duty raises the cost of your imports. High duties make imports expensive, so you're more likely to buy from Indian suppliers instead. Low or zero duties help manufacturers keep their production costs down.
10. What are the factors that help determine the customs duty of a product in India?
You can check the applicable customs duty by visiting the ICEGATE portal. Use your product’s HS code to find detailed rates and calculate duties based on assessable value.
11. What documents are required for customs clearance?
You'll need to submit these documents for customs clearance:
● Bill of Entry
● Commercial invoice
● Packing list
● Bill of Lading (ship) or Airway Bill (plane)
● Import license
● Certificate of origin
● ICEGATE payment receipt
● Bill of Entry
● Commercial invoice
● Packing list
● Bill of Lading (ship) or Airway Bill (plane)
● Import license
● Certificate of origin
● ICEGATE payment receipt
12. Where can I pay custom duty in India?
You can pay custom duty in India online through the ICEGATE portal. Online payment via ICEGATE also integrates directly with the Bill of Entry clearance workflow. Authorized banks partnered with the Central Board of Indirect Taxes and Customs (CBIC) also accept customs duty payments.
Published on December 29, 2022.
Updated on May 15, 2026.
Sources:
1. https://www.indiabudget.gov.in/doc/cen/dojstru1.pdf
2. https://www.pib.gov.in/PressReleseDetailm.aspx?PRID=2098364&lang=1®=3
3. https://www.pib.gov.in/PressReleseDetailm.aspx?PRID=2098364&lang=1®=3
4. https://www.pib.gov.in/PressReleseDetailm.aspx?PRID=2098364&lang=1®=3
5. https://eximpe.com/blog/b2b/customs-duty-complete-guide-to-import
6. https://www.pib.gov.in/FactsheetDetails.aspx?Id=150302®=3&lang=2
7. https://www.dhl.com/discover/en-my/logistics-advice/import-export-advice/guide-to-import-duty-and-taxes-in-india
8. https://kcba.org.in/documents/circulars/1/4/9/3/61fe292547ba5.pdf
9. https://www.dhl.com/discover/en-in/logistics-advice/import-export-advice/import-duty-in-india
10. https://cleartax.in/s/customs-duty-india
11. https://www.khaitanco.com/sites/default/files/2026-02/Annexure%20B%20-%20Rate%20Changes.pdf
12. https://www.khaitanco.com/sites/default/files/2026-02/Annexure%20B%20-%20Rate%20Changes.pdf
13. https://www.khaitanco.com/sites/default/files/2026-02/Annexure%20B%20-%20Rate%20Changes.pdf
14. https://www.cbic.gov.in/entities/customs
15. https://www.icegate.gov.in/
Updated on May 15, 2026.
Sources:
1. https://www.indiabudget.gov.in/doc/cen/dojstru1.pdf
2. https://www.pib.gov.in/PressReleseDetailm.aspx?PRID=2098364&lang=1®=3
3. https://www.pib.gov.in/PressReleseDetailm.aspx?PRID=2098364&lang=1®=3
4. https://www.pib.gov.in/PressReleseDetailm.aspx?PRID=2098364&lang=1®=3
5. https://eximpe.com/blog/b2b/customs-duty-complete-guide-to-import
6. https://www.pib.gov.in/FactsheetDetails.aspx?Id=150302®=3&lang=2
7. https://www.dhl.com/discover/en-my/logistics-advice/import-export-advice/guide-to-import-duty-and-taxes-in-india
8. https://kcba.org.in/documents/circulars/1/4/9/3/61fe292547ba5.pdf
9. https://www.dhl.com/discover/en-in/logistics-advice/import-export-advice/import-duty-in-india
10. https://cleartax.in/s/customs-duty-india
11. https://www.khaitanco.com/sites/default/files/2026-02/Annexure%20B%20-%20Rate%20Changes.pdf
12. https://www.khaitanco.com/sites/default/files/2026-02/Annexure%20B%20-%20Rate%20Changes.pdf
13. https://www.khaitanco.com/sites/default/files/2026-02/Annexure%20B%20-%20Rate%20Changes.pdf
14. https://www.cbic.gov.in/entities/customs
15. https://www.icegate.gov.in/
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