Customs Duty: Complete Guide to Import

Customs duty is a tax imposed by the Indian government on goods imported into the country. It's calculated as a percentage of your goods' value and must be paid before customs releases your shipment. Customs duty protects Indian manufacturers from cheap foreign competition while generating government much needed revenue. It also helps in monitoring and controlling the movement of restricted and controlled goods. Understanding customs duty is very essential for accurate cost calculation and avoiding delays at customs

What Is Customs Duty & How It Affects Your Imports

Customs duty is a tax levied at the border on imported goods. When you bring products into India from overseas, the government charges you a percentage of the goods' value as customs duty. This amount varies based on what you're importing, how much it costs, and which country it's coming from.

For example, If you import electronics from China costing ₹1,00,000, you might pay an additional ₹20,000-30,000 as customs duty before the goods are released. This tax increases your final landing cost significantly.

Major Components of Customs Duty

When you import goods into India, you don't pay just one tax. You pay multiple taxes combined. Understanding each component helps you calculate correctly.

How Customs Duty Is Calculated

Calculating customs duty involves determining your assessable value first, then applying the correct duty rate. Below process has clear steps:

Step 1: Determine Assessable Value (CIF Value)

Assessable value is the amount on which customs duty is calculated:

Assessable Value = FOB + Freight + Insurance

Where:

FOB = Cost of goods (Free On Board from supplier)

Freight = Shipping charges (actual cost or 20% of FOB if unknown)

Insurance = Insurance cost (actual or 1.125% of FOB if unknown)

Step-by-Step Customs Duty Calculation

How to Pay Customs Duty Online Via ICEGATE. Below are the steps:

Step 1: Log Into ICEGATE

Step 2: Click "e-Payment"

Step 4: Click Search

Step 5: Select Challan to Pay

Step 6: Choose Bank

Step 7: Click "Proceed to Bank"

Step 8: Log Into Bank's Internet Banking

Step 9: Confirm Payment

Step 10: Authenticate Payment

Step 11: Payment Successful

Step 12: Return to ICEGATE

India’s customs system is undergoing significant reforms as of 2025-2026

Here are all the latest updates affecting customs duty for importers and exporters

India-China Trade & Import Duty Impact

India's bilateral trade with China reached USD 155.62 billion in 2025, but India maintains a record trade deficit of USD 116.12 billion. To protect domestic industries, India imposes aggressive anti-dumping duties on Chinese products: USD 223.82/tonne on steel, 30-40% on electronics, and higher rates on chemicals. Chinese imports face 10-40% BCD + 10% SWS + 18% IGST, effectively increasing costs by 40-60%

Budget 2026 Customs Duty Reforms (February 1, 2026)

• The government is planning to reduce customs duty slabs from current 8 to just 5-6 slabs.
• Inverted Duty Structure Correction. Government will align duties so raw materials have lowest duty
• Reduced Cess/Surcharge Rules. Capping at one cess or surcharge per item (from multiple currently).

India's Free Trade Agreements & Duty Changes (2025-26)

India-UK Comprehensive Economic & Trade Agreement (CETA)
Status: Finalized May 2025Duty
Impact: Nearly tariff-free access for 90%+ of Indian exports to UK
Sectors: IT/ITeS, financial services, professional services, education
Timeline: Came into force after ratification

India-Oman Comprehensive Economic Partnership Agreement (CEPA)
Status: Signed December 18, 2025Duty
Impact: 98% of Indian exports get duty-free access to Oman
Benefits: Textiles, gems & jewelry, engineering goods, food processing
Timeline: Expected to come into force early 2026

India-EFTA Trade & Economic Partnership Agreement (TEPA)
Status: Entered into force October 1, 2025EFTA Members: Switzerland, Norway, Iceland, LiechtensteinDuty Impact: Duty-free/reduced access to European marketsInvestment: EFTA committed $100 billion investment in India over 15 years
Timeline: Active now, creating 1 million jobs expected

Ongoing Negotiations: India-EAEU
Status: Terms of Reference signed August 20, 2025
Partners: Russia, Kazakhstan, Belarus, Kyrgyzstan, Armenia (Eurasian Economic Union)

Ongoing Negotiations: India-GCC
Status: In discussions
Partners: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE