Customs Duty in India: BCD, IGST on Imports & the ITS Explained

The Three Layers of Customs Duty You Must Understand

When goods cross the Indian border, they face not one, but three separate levies. Business owners and NRIs often miss this reality and face surprise bills at the port. The Customs Act, 1962 defines the framework; sections 12, 14, and 15 lay out the duty structure.

The three layers are:

• Basic Customs Duty (BCD) - the foundation


• Additional duties - sector-specific protections


• Integrated Goods and Services Tax (IGST) - the GST layer on imports

Each is calculated sequentially, and each compounds the others. That's where most importers go wrong.

Basic Customs Duty: The Foundation Rate

Basic Customs Duty is the primary protective tariff under Section 12 of the Customs Act, 1962. Rates are specified in the Integrated Tariff Schedule (ITS), maintained by the Central Board of Indirect Taxes and Customs (CBIC).

BCD is not flat. It varies by:

• Product category - raw materials typically face lower rates; finished goods, higher


• Country of origin - preferential rates under Free Trade Agreements (FTAs) with ASEAN, SAARC countries, etc.


• Notification-based exemptions - temporary rate cuts announced by the Ministry of Finance

Real example: Importing steel coils attracts ~7.5% BCD under HS Code 7208. Importing finished steel pipes? Expect 10-15% BCD under HS Code 7306. Same material, different rates, different tariff lines.

The ITS is a technical beast. Each product has a unique HS Code (8-digit Harmonised System classification). Mis-classifying a product can invite duty demands, penalties, and legal action under Section 114 of the Customs Act.

Additional Duties: The Hidden Layer

Beyond BCD, importers face Additional Duty under Section 3 of the Customs Tariff Act, 1975. This is calculated as a percentage of (BCD + Basic value of goods).

Additional Duty rates:

• Manufacturing sectors: typically 4%


• Some electronics and telecom: up to 20%


• Agricultural products: varies

Then there's Agriculture Infrastructure Development Cess (AIDC) under Notification No. 38/2021-Customs on select agricultural imports - another layer on top.

Why does this matter? If you import Rs.1,00,000 worth of goods at 7.5% BCD:

• BCD = Rs.7,500


• Additional Duty (4%) on Rs.1,07,500 = Rs.4,300


• Already Rs.11,800 before IGST.

Many importers budget only for BCD and face cash-flow shock when Additional Duty is levied.

IGST on Imports: The GST Surprise

Here's the critical point: IGST applies to the assessable value of imports, which includes BCD + Additional Duty + Basic value.

IGST rate depends on product classification under the GST Tariff Schedule:

• Precious metals: 5%


• Most machinery: 5%-12%


• Electronics: 12%-18%


• Cosmetics and luxury goods: 28%

Using the example above:

• Assessable value = Rs.1,00,000 + Rs.7,500 (BCD) + Rs.4,300 (Add. Duty) = Rs.1,11,800


• IGST at 12% = Rs.13,416

Total duty and tax: Rs.25,216 on Rs.1,00,000 of goods. That's 25.2%.

The moment goods land, you're liable for IGST under Section 3(7) of the IGST Act, 2017. You cannot claim Input Tax Credit (ITC) on import IGST until goods are physically received and bill of entry processed--a critical timing issue for working capital.

The Integrated Tariff Schedule: Your Navigation Tool

The ITS is published on the CBIC website and updated regularly. It lists HS codes (0001-9999), applicable BCD rates, and exemption notifications.

Finding the right HS Code is non-negotiable. A misclassification can result in:

• Differential duty demands under Section 28 of the Customs Act


• Late fees and interest under Section 28A


• Penalties up to 25% of duty under Section 114

Many importers rely on supplier declarations or port freight forwarders. This is risky. The importer--not the supplier--bears liability under Section 17(2) of the Customs Act.

My recommendation: Engage a Customs House Agent (CHA) and verify HS classification with your CA before shipping. The Rs.2,000-5,000 spent upfront saves Rs.50,000+ in avoidable disputes.

Duty Drawback and Exemptions

If you're a manufacturer exporting goods, you can claim duty drawback under Section 75 of the Customs Act for duties paid on imported inputs. The rate is notified product-wise.

For SEZ units, exemption from customs duty applies under Section 65 of the SEZ Act, 2005.

NRI bringing personal goods? You're eligible for concessional rates under Notification No. 50/2017-Customs (personal effects up to Rs.4 lakhs). But the valuation and HS classification still apply.

The Takeaway for Importers

Don't think of customs duty as BCD alone. The duty pipeline is: BCD Additional Duty IGST. Each multiplies the other.

Correct HS classification, timely ITC claims, and proactive duty planning can reduce your effective import cost by 15-20%. Mistakes cost three times that in penalties and delays.

I'm CA Harun Raaj, Visakhapatnam.

If your import bills don't reconcile or you're unsure about HS classification for new products, reach out--let's audit your customs compliance.

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See Also

• EOU and IGCR Compliance: Duty-Free Imports Under Customs Rules 2017
• Anti-Dumping Duty in India: DGTR Investigation, Provisional vs Final Duty, and High Court Challenge
• HSN Classification Disputes at Customs: SVB, Related-Party Pricing, CAAR Advance Ruling & CESTAT Appeal

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