With India's growing population and economy, the country has become an increasingly attractive international trade market for businesses looking to export goods into the country. In fact, the International Monetary Fund (IMF) expects India's GDP to reach US$5 trillion by 2027, making it one of the most promising emerging markets for businesses looking to expand their operations. However, it is important to be aware of India’s trade policies, customs duties, as well as the required documents that may apply to your goods before shipping them to India in order to ensure that your business is compliant. In this article, we will provide an overview of the key customs duties and taxes that businesses should be aware of when exporting goods into India.
Import duties and taxes levied in India
All goods imported into India are subject to customs duty, which is levied at various rates depending on the type of goods being imported. In addition to customs duty, imports are also subject to other taxes such as value-added tax (VAT), excise duty, and service tax. In India, these duties are regulated by the Customs Act 1962 and the Customs Tariff Act 1975.
Depending on the type of goods being exported into India, the amount of duties and taxes levied may differ: they may either be fixed or calculated on an ad valorem basis (i.e. based on the value of the good/s in question). Indian customs authorities impose the following types of custom duties on imports.
1. Basic Customs Duty
Basic Customs Duty or BCD is the main form of taxation levied on all goods imported into the country. The amount payable depends on several factors - such as the country of origin and type of goods in question (e.g., whether the good is a finished product or raw materials).
BCD is calculated using the HS code of the product and how it is being charged is dependent on a variety of factors. For instance, goods produced in countries with which India has a preferential trade agreement may be eligible for a lower rate of BCD. Similarly, raw materials or products considered essential for the manufacturing process in India often attract a lower rate of BCD.
2. Goods and Services Tax
In addition to BCD, all imports into India are subject to the Goods and Services Tax (GST). GST is a consumption-based tax levied on the supply of goods and services. The GST rate differs depending on the type of product being imported.
How the goods and services tax in India works is that under the GST law, goods imported into India are considered inter-state trade and are therefore, subject to the Integrated Goods and Services Tax (IGST). The rate of IGST is applicable at the rates of 5%, 12%, 18%, and 28% on the import of goods. In addition to IGST, imports are also subject to other taxes such as cess (a specific duty that is levied over and above the GST rate) and basic customs duty. The total amount of tax payable on an import is the sum of all these taxes.
3. Countervailing Duty
The Countervailing Duty (CVD) is meant to mirror the Central Excise Duty imposed on local goods. It is imposed on imported products that enjoy preferential tax rates in their country of manufacture. These duties function to maintain fair competition between local and imported goods by preventing businesses from undercutting prices by sourcing goods from countries with lower production costs. The CVD ranges from 0% to 12%, depending on the type and origin of the product.
4. Special Additional Duty
The Special Additional Duty (SAD) is an indirect tax that is levied on imported goods in order to equalise the excise duty levied on similar locally-manufactured products. The SAD is meant to prevent imported goods from gaining an unfair advantage over local products. If applicable, SAD is levied at the standard rate of 4%. The SAD is also calculated on an ad valorem basis.
5. Anti-Dumping Duty
The anti-dumping duty is levied on foreign goods that are sold at below market value in the Indian market. This dumping of goods often results in local businesses being unable to compete and can even lead to them shutting down. The anti-dumping duty is meant to safeguard local businesses and industry by making imported goods more expensive and therefore, less competitive. The amount of anti-dumping duty that is levied depends on the type of product being imported as well as the country of origin.
6. Safeguard Duty
Another similar duty to that of anti-dumping duty is the Safeguard Duty, whose main aim is to protect the local industries. If the government feels that the local industry is being damaged by an increase in the volume of imported goods, it can impose safeguard duties. This duty varies depending on the types and value of products being imported.
7. Social Welfare Surcharge
The Social Welfare Surcharge (SWS) is calculated at the rate of 10% on the aggregate of duties, taxes, and cesses that are levied and collected under section 12 of the Customs Act, 1962. The SWS is used to finance social welfare programmes in India and is thus levied on all imported goods.
Why do such taxes matter for businesses?
As mentioned above, there are several taxes and duties that are levied on goods that are imported into India. These taxes can have a significant impact on the price of goods and can make them much more expensive. For businesses that import goods into India, it is important to be aware of these customs and import duties so that they can factor them into the price of their goods. Not only do businesses need to be aware of the taxes and duties that are levied on imported goods, but they also need to ensure that they are compliant with all the rules and regulations surrounding imports. Non-compliance, such as the failure to pay custom clearance charges can lead to penalties, which can further increase the cost of doing business.
Partner with DHL Express for a smooth customs clearance journey
As explained in the sections above, goods imported into India are subject to customs duties and taxes, which must be paid in order for them to enter the country. Partnering with a knowledgeable and reliable logistics carrier like DHL Express is important, as we ensure that your goods are delivered efficiently and that they do not face any unexpected issues during customs clearance. Sign up for a DHL Express account today to learn more about how we can help you with your importing needs
