Understanding custom duty payment is essential if you have recently imported goods into India or are planning to. While the GST system has brought some uniformity, customs duties still follow a layered calculation method.
If you are a business importing raw materials or a consumer bringing in personal goods, this guide is worth a read. It explains how custom duty payments are calculated step-by-step.
Table of Contents
Understand the Steps to Calculate Custom Duty Payment
Let us break it down.
Start with the Assessable Value (AV)
The calculation of customs duty starts with the Assessable Value (AV), which is based on the CIF value of the imported goods.
- CIF stands for Cost + Insurance + Freight– all the expenses incurred until the goods reach an Indian port.
- Add 1% landing charges to this CIF value to get the final AV.
Formula:
AV = CIF Value + 1% of CIF (landing charges)
Add Basic Customs Duty (BCD)
Once the AV is determined, Basic Customs Duty (BCD) is applied. This is the first layer of tax on the imported item.
- The BCD is calculated on the AV.
- The rate of BCD varies based on the product’s HSN code (Harmonised System of Nomenclature).
- It can range from 0% to 150%, depending on the item category.
Add Social Welfare Surcharge (SWS)
Next comes the Social Welfare Surcharge (SWS).
- SWS is charged at 10% of the BCD amount.
- This surcharge helps fund education, health, and social welfare schemes in India.
Add Integrated GST (IGST)
After BCD and SWS, Integrated GST (IGST) is added to the bill.
Here’s how you calculate IGST:
IGST = (AV + BCD + SWS + any other applicable cess or duty) × IGST rate
- IGST rates generally follow GST slabs—5%, 12%, 18%, or 28%, depending on the nature of the product.
- This is where you will notice how tax-on-tax applies, as IGST is calculated over a value that already includes duties.
Add Compensation Cess (If Applicable)
If you are importing luxury or sin goods (like tobacco, aerated drinks, or high-end cars), an additional Compensation Cess might apply.
- This cess is charged on top of the IGST component.
- The rate and applicability depend on the product.
Illustrative Example
Let’s simplify this entire process with an example:
| Component | Calculation | Amount (₹) |
| CIF Value | Invoice + Freight + Insurance | 100,000 |
| Landing Charges (1%) | 1% × CIF | 1,000 |
| Assessable Value (AV) | CIF + Landing | 101,000 |
| Basic Customs Duty (20%) | 20% × AV | 20,200 |
| Social Welfare Surcharge | 10% × BCD | 2,020 |
| IGST (18%) | 18% × (AV + BCD + SWS) | 22,179.6 |
| Total Duty | BCD + SWS + IGST | 44,399.6 |
| Total Landed Cost | CIF + Total Duty | 144,399.6 |
Key Takeaways
- Custom duty payment is not a flat charge. It includes multiple layers: BCD, SWS, IGST, and sometimes Compensation Cess.
- The IGST is calculated on a value that includes BCD and SWS, not just the cost of goods.
- Custom duty payment online is possible through portals like ICEGATE and other authorised platforms.
- Use an HSN code for your item to determine the exact duty rates. You can use official duty calculators like ICEGATE, or platforms like Wise or ClearTax for ease.
- Exports usually do not attract these duties. They are largely applicable only to imports.
Final Word
Calculating custom duty payment after GST may seem complex, but once you understand the layers, it becomes easier to manage. Whether you are importing goods as a business or for personal use, knowing this structure helps you avoid surprises and budget better.
Always check the latest rate slabs and rules, as they may change with each budget or government update. For a smoother experience, consider using verified duty calculators and paying your custom duty online for added convenience.