India landed cost

How import duty is calculated in India

Indian customs duty is not a single percentage applied to your invoice. It is a chain, and each link is charged on a different base. Getting the order wrong is the most common reason a landed cost estimate misses by five or ten percent.

1. 1
   Start from CIF, not FOB Assessable value is built from Cost, Insurance and Freight in rupees. Convert at the exchange rate notified by CBIC for the month, not the market or bank rate. Where insurance is not evidenced, customs allows a notional 1.125% of FOB.
2. 2
   Basic Customs Duty BCD is charged as a percentage of assessable value. The rate depends on the ITC-HS classification and the country of origin — a valid preferential certificate under a free trade agreement can reduce it to nil.
3. 3
   AIDC and Customs Health Cess Agriculture Infrastructure and Development Cess and Customs Health Cess apply only to specified tariff lines. Check the basis carefully: these are normally charged on assessable value, though some brokers compute AIDC on Basic Duty instead.
4. 4
   Social Welfare Surcharge SWS is 10% of the aggregate customs duty — that is, BCD plus AIDC plus cess, not BCD alone. Charging it on BCD only understates your liability.
5. 5
   IGST last, on everything Integrated GST is charged on assessable value plus all the duties above. This is why IGST is the largest single line on most bills of entry even at a modest rate.
6. 6
   Add what customs does not charge Clearance, CFS, DO charges, detention and inland transport sit outside the duty chain but inside your landed cost. They carry their own GST at 12% or 18%.

The number most landed-cost sheets get wrong

IGST paid at import is recoverable. A GST-registered importer claims it as input tax credit against output liability. Basic Customs Duty, AIDC, cess and Social Welfare Surcharge are not recoverable — they are absorbed permanently into the cost of the goods.

A sheet that adds every duty together and calls the total "landed cost" overstates your true cost and will lead you to price too high. One that ignores duty entirely understates the cash you need on the day of clearance. Both numbers matter, and they are different numbers. This calculator reports them separately: gross landed cost, cash required at clearance, and effective cost after credit.

Worked example

20,000 kg of an agricultural commodity at USD 0.82 per kg FOB, USD 4,000 ocean freight, notified rate 97.28, 15% BCD, 10% SWS, 5% IGST and ₹1,50,000 clearance:

Duty incidence is 22.3% of CIF, but only 16.5% is unrecoverable. Price against the 16.5%.