Custom Duty & Anti-Dumping Duty (Customs Act, 1962)

By Dev Rao | Updated March 2026

What Is Custom Duty & Anti-Dumping Duty?

Custom duty is a tax imposed by the Government of India on goods imported into (and exported from) the country under the Customs Act, 1962 and the Customs Tariff Act, 1975. Every shipment entering India is assessed for duty based on its tariff classification (HSN code), declared value, and country of origin. The primary components are Basic Customs Duty (BCD), Integrated Goods and Services Tax (IGST), and Social Welfare Surcharge (SWS). Together, these can add 20% to 70%+ to the landed cost of imported goods.

Anti-Dumping Duty (ADD) is a separate protective levy imposed under Section 9A of the Customs Tariff Act, 1975, read with the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995. It targets goods that are exported to India at a price below their normal value in the exporting country, causing or threatening material injury to Indian domestic industry. The Directorate General of Trade Remedies (DGTR) under the Ministry of Commerce conducts the investigation, and the Ministry of Finance imposes the duty via customs notification.

For foreign companies selling products to India or setting up manufacturing operations, understanding these duties is non-negotiable. Customs duties directly determine your product's competitiveness in the Indian market, and an unexpected anti-dumping investigation can shut off your export channel to India entirely for up to five years.

Legal Basis

• Customs Act, 1962 — The foundational statute governing the import and export of goods, customs procedures, valuation, assessment, and enforcement. Article 265 of the Constitution of India mandates that no tax shall be levied except by authority of law, and the Customs Act provides that authority.
• Customs Tariff Act, 1975 — Establishes the tariff schedule (First and Second Schedules) that assigns HSN-based classification codes and BCD rates to every category of goods.
• Section 12 of the Customs Act, 1962 — Charges Basic Customs Duty on all goods imported into India at rates specified in the First Schedule of the Customs Tariff Act, 1975.
• Section 3(7) of the Customs Tariff Act, 1975 — Levies IGST on imported goods at the rate applicable under the IGST Act, 2017.
• Section 9A of the Customs Tariff Act, 1975 — Empowers the Central Government to impose anti-dumping duty not exceeding the margin of dumping on identified articles.
• Section 8B of the Customs Tariff Act, 1975 — Provides for Safeguard Duty on goods imported in increased quantities causing serious injury to domestic industry.
• Section 9 of the Customs Tariff Act, 1975 — Authorizes Countervailing Duty (CVD) on subsidized imports.
• Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 — Implements WTO valuation principles for determining assessable value.

Types of Customs Duty on Imports

India levies multiple duties on imported goods. Understanding the layered structure is critical because each duty is calculated on a different base, and together they create a compounding effect on the final landed cost.

How BCD Rates Are Determined

BCD rates are set in the First Schedule of the Customs Tariff Act, 1975, organized by 8-digit ITC-HS codes (India's extension of the WTO's 6-digit Harmonized System of Nomenclature). The Union Budget 2025-26 rationalized the tariff structure by removing seven tariff rates for industrial goods, leaving only 8 rate slabs (including zero). The government also capped levies at one cess or surcharge per item, exempting SWS on 82 tariff lines that already attract a cess.

IGST on Imports: The Input Tax Credit Advantage

IGST paid on imports functions identically to IGST paid on domestic purchases. If the importer is GST-registered, the IGST paid at customs is available as Input Tax Credit (ITC), effectively making it a pass-through cost rather than a sunk cost. This is a significant advantage for companies importing raw materials or capital goods for manufacturing in India.

How Customs Duty Is Calculated: Step-by-Step

The assessable value (AV) is the starting point. Under the Customs Valuation Rules, 2007, the primary method is the Transaction Value — the price actually paid or payable for goods sold for export to India, adjusted for freight, insurance, and handling charges up to the Indian port of import (CIF basis).

Calculation Example

A German manufacturer exports industrial machinery to India. CIF value = INR 50,00,000. BCD rate = 7.5%. IGST rate = 18%.

The IGST component of INR 9,74,250 is claimable as ITC if the importer is GST-registered, reducing the effective non-recoverable duty to INR 4,12,500 (8.25% of CIF value).

Anti-Dumping Duty: The DGTR Investigation Process

Anti-dumping duty protects Indian manufacturers when foreign producers export goods to India at prices below their normal value (typically the domestic selling price or cost of production in the exporting country). The investigation and imposition process follows a structured timeline under the 1995 Anti-Dumping Rules.

Investigation Timeline

Duration and Review

Anti-dumping duty, once imposed, remains in force for 5 years. Before expiry, domestic industry can request a Sunset Review. If the DGTR determines that revocation would lead to continuation or recurrence of dumping and injury, the duty is extended for another 5 years. India has extended ADD on several products through multiple Sunset Reviews — some products have been subject to ADD for 15+ years.

India's Anti-Dumping Case Volume

India is one of the most active users of anti-dumping measures globally. In 2024, India registered 43 anti-dumping cases, with China implicated in 34 instances (79% of total). Key sectors include chemicals, steel, textiles, glass, and electronics. Notable recent impositions include ADD on aluminium foil from China (USD 619-873 per metric tonne, March 2025), Soft Ferrite Cores from China (up to 35% of CIF value, March 2025), and solar cells from China (up to 30% for 3 years, recommended September 2025).

Customs Valuation Methods

How goods are valued at customs directly determines how much duty you pay. India follows the WTO Customs Valuation Agreement, implemented through the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. There are six methods, applied sequentially:

1. Transaction Value (Rule 3) — The price actually paid or payable for goods sold for export to India, adjusted for specified additions (commissions, packing costs, royalties). This is the primary method and must be used unless customs has sufficient reason to reject it.
2. Transaction Value of Identical Goods (Rule 4) — Value based on identical goods imported at approximately the same time, same commercial level, and same quantity.
3. Transaction Value of Similar Goods (Rule 5) — Value based on similar (not identical) goods imported under comparable conditions.
4. Deductive Value (Rule 7) — Works backward from the resale price in India, deducting post-import costs, duties, and profit margins.
5. Computed Value (Rule 8) — Built up from cost of materials, fabrication, general expenses, and profit in the exporting country, plus freight and insurance.
6. Residual Method (Rule 9) — Flexible application of the above methods with reasonable adjustments.

For foreign companies with Indian subsidiaries or branch offices, related-party transactions trigger scrutiny by the Special Valuation Branch (SVB) of Indian Customs, which verifies that the relationship has not influenced the transaction price.

Key Duty Exemptions and Concessions (2025-26)

The Indian government regularly issues exemption notifications to reduce or eliminate customs duties on specific goods. Key exemptions from the Union Budget 2025-26 include:

• Critical minerals: Full BCD exemption on cobalt powder, lithium-ion battery waste/scrap, lead, zinc, and 12 additional critical minerals
• Life-saving medicines: 36 drugs fully exempt from BCD; 6 more reduced to 5% concessional rate
• EV and mobile battery manufacturing: Exemptions for 35 capital goods for EV battery production and 28 for mobile phone battery manufacturing
• Seafood processing: BCD on frozen fish paste (Surimi) reduced from 30% to 5% for export manufacturing; fish hydrolysate reduced from 15% to 5%
• Telecom equipment: BCD on carrier-grade Ethernet switches reduced from 20% to 10%
• SWS exemption: Social Welfare Surcharge exempted on 82 tariff lines already subject to a cess

Companies investing under India's Production-Linked Incentive (PLI) schemes or operating in Special Economic Zones (SEZs) enjoy additional duty concessions, including duty-free import of capital goods and raw materials for export production.

How This Affects Foreign Companies Exporting to India

If you are a foreign manufacturer or trader selling goods into the Indian market, customs duties directly impact your pricing strategy, market competitiveness, and supply chain design.

Pricing and Market Entry

A product with a CIF price of USD 100 can attract total duties of USD 25-70 depending on the HSN classification. This makes India a high-tariff market for many goods, particularly finished consumer products. Foreign companies often respond by setting up manufacturing in India (via a wholly-owned subsidiary or joint venture) to avoid import duties on finished goods, importing only raw materials or components at lower duty rates.

IEC Requirement

Every entity importing into India must hold an Import Export Code (IEC) issued by the DGFT. Without an IEC, goods cannot clear customs. Foreign companies without an Indian entity typically export to an Indian buyer who holds the IEC and handles customs clearance.

Anti-Dumping Risk

Foreign exporters face the risk of anti-dumping investigations initiated by competing Indian manufacturers. If the DGTR determines that your goods are being sold in India below normal value and causing injury to domestic industry, anti-dumping duties of 10% to 60%+ can be imposed for 5 years, effectively pricing you out of the market. Maintaining proper cost records, cooperating with DGTR investigations, and filing timely questionnaire responses is essential — non-cooperating exporters receive the highest "residual" duty rates.

Free Trade Agreements

India has Free Trade Agreements (FTAs) and preferential trade agreements with ASEAN, Japan, South Korea, Singapore, and several other nations. Goods originating from FTA partner countries may attract reduced or zero BCD if accompanied by a valid Certificate of Origin. For example, many goods from ASEAN countries attract BCD rates 5-10 percentage points lower than the standard rate under the India-ASEAN FTA.

Common Mistakes

• Misclassifying goods under the wrong HSN code to claim a lower BCD rate. Indian Customs actively audits classifications. A wrong HSN code can trigger a demand for differential duty plus interest (15% per annum) and a penalty of up to 15% of the short-paid duty under Section 28(4) of the Customs Act. Use the 8-digit ITC-HS code precisely — even sub-heading differences of one digit can change the BCD rate from 5% to 20%.
• Ignoring the SWS and IGST compounding effect when pricing products. Many exporters quote prices to Indian buyers based on BCD alone. The actual landed cost includes SWS (10% of BCD) and IGST (18% on the inflated base of CIF + BCD + SWS). A 10% BCD does not mean 10% total duty — it means approximately 30% total duty at 18% IGST.
• Not responding to a DGTR anti-dumping questionnaire within the 30-40 day deadline. Non-cooperating foreign exporters are assigned the highest residual duty rate, calculated using "best facts available" (which invariably means worst-case assumptions). Even if you believe the investigation is baseless, file your response. Silence is treated as an admission.
• Failing to claim preferential tariff rates under applicable FTAs. Many importers pay full BCD when their goods qualify for concessional rates under India's FTAs with ASEAN, Japan, Korea, or other partners. The Certificate of Origin must be obtained before shipment and presented at the time of customs clearance — retrospective claims are difficult.
• Undervaluing goods in related-party transactions without SVB clearance. When a foreign parent company exports to its Indian subsidiary, customs assumes the transfer price may be influenced by the relationship. Without SVB assessment, customs can reject the declared value and assess duty on a higher value determined under Rules 4-9 of the Customs Valuation Rules, creating unexpected duty liabilities plus interest.

Practical Example

NovaTech GmbH, a German industrial equipment manufacturer, exports CNC machine components to its Indian subsidiary, NovaTech India Pvt Ltd. The subsidiary assembles these components with locally sourced parts and sells finished machines in India.

Shipment details:

• CIF value of components: INR 1,20,00,000 (approx. EUR 130,000)
• HSN Code: 8466 (parts and accessories for machine tools) — BCD rate: 7.5%
• IGST rate: 18%

Duty calculation:

• BCD: INR 1,20,00,000 × 7.5% = INR 9,00,000
• SWS: INR 9,00,000 × 10% = INR 90,000
• IGST base: INR 1,20,00,000 + 9,00,000 + 90,000 = INR 1,29,90,000
• IGST: INR 1,29,90,000 × 18% = INR 23,38,200
• Total duty: INR 33,28,200 (27.7% effective rate)

NovaTech India claims the IGST of INR 23,38,200 as ITC against its outward GST liability on machine sales, reducing the effective non-recoverable customs burden to INR 9,90,000 (8.25%).

The anti-dumping risk: Six months later, an Indian manufacturer of similar CNC components files an anti-dumping petition with DGTR, alleging that NovaTech GmbH is exporting components to India at prices 40% below their normal value in Germany. DGTR initiates an investigation. NovaTech GmbH cooperates fully, submitting its cost accounting records, domestic sales data, and export price calculations within the 40-day deadline. After a 12-month investigation including an on-site verification visit to NovaTech's Stuttgart factory, DGTR determines that the dumping margin is only 3.2% and the injury to domestic industry is not material. The investigation is terminated without ADD. Had NovaTech not cooperated, the residual duty rate could have been set at 40%+ based on best facts available, adding INR 48,00,000 per shipment and making the India export channel unviable.

Key Takeaways

• Customs duty in India comprises three core layers: BCD (0-150% by HSN code), SWS (10% of BCD), and IGST (0-28%) — together creating effective rates of 20-70%+ on many goods
• IGST paid at customs is claimable as Input Tax Credit by GST-registered importers, significantly reducing the effective duty burden for businesses
• Anti-dumping duty under Section 9A of the Customs Tariff Act, 1975 is imposed for 5 years (renewable) based on DGTR investigation — India filed 43 ADD cases in 2024 alone, with 79% targeting China
• Customs valuation follows WTO-aligned rules with six sequential methods; related-party transactions are scrutinized by the Special Valuation Branch
• An Import Export Code (IEC) is mandatory for any entity importing goods into India
• Free Trade Agreements with ASEAN, Japan, South Korea, and others can reduce BCD by 5-10 percentage points — but require a Certificate of Origin obtained before shipment

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