Includes information on average tariff rates and types that U.S. firms should be aware of when exporting to the market.
Last Published: 8/1/2017
The Foreign Trade (Development & Regulation) Act, 1992 and India’s Export Import (EXIM) Policy govern the import and exports in India.  The new guidelines on Foreign Trade Policy (2015-2020) were released in April 2015. The new government made efforts to support its initiative of ease of doing business in India.

The office of the Director General of Foreign Trade mandates registration for all importers before engaging in EXIM activities. Each importer receives an Importer Exporter Code Number (IEC) issued against their Permanent Account Number (PAN).

Tariff Rates:  
The structure of India’s customs tariff and fees system is complex and characterized by a lack of transparency in determining net effective rates of customs tariffs, excise duties, and other duties and charges.  The tariff structure of general application is composed of a basic customs duty, an “additional duty,” a “special additional duty,” and an education assessment (“cess”).  The additional duty, which is applied to all imports except for wine, spirits, and other alcoholic beverages, is applied on top of the basic customs duty, and is intended to correspond to the excise duties imposed on similar domestic products.  The special additional duty is a four percent ad valorem duty that applies to all imports, including alcoholic beverages, except those imports exempted from the duty pursuant to an official customs notification.  The special additional duty is calculated on top of the basic customs duty and the additional duty.  In addition, there is a three percent education cess (surcharge) applied to most imports, except those exempted from the cess pursuant to an official customs notification.  India charges the cess on the total of the basic customs duty and additional duty (not on the customs value of the imported product).  A landing fee of one percent is included in the valuation of all imported products unless exempted through separate notification.  While India publishes applied tariff and other customs duty rates applicable to imports, there is no single official publication publically available that includes all relevant information on tariffs, fees, and tax rates on imports. However, as part of its computerization and electronic services drive, in 2009 India initiated a web-based Indian Customs Electronic Commerce/Electronic Data Interchange Gateway, known as ICEGATE (http://icegate.gov.in). It provides options for calculating duty rates, electronic filing of entry documents (import goods declarations) and shipping bills (export goods declarations), electronic payment, and online verification of import and export licenses.  In addition to being announced with the annual budget, India’s customs rates are modified on an ad hoc and arbitrary basis through notifications in the Gazette of India and contain numerous exemptions that vary according to the product, user, or specific export promotion program, rendering India’s customs system complex to administer and open to administrative discretion.

India’s tariff regime is also characterized by pronounced disparities between bound rates (i.e., the rates that under WTO rules generally cannot be exceeded) and the most favored nation (MFN) applied rates charged at the border.  According to the latest WTO data, India’s average bound tariff rate was 48.5 percent, while its simple MFN average applied tariff for 2015 was 13.4 percent. Given this large disparity between bound and applied rates, U.S. exporters face tremendous uncertainty because India has considerable flexibility to change tariff rates at any time. India’s average WTO-bound tariff for agricultural products is 113.5 percent.  Applied rates are also relatively high since the average applied agricultural tariff is 3232.7 percent.  On a trade-weighted basis, the average agricultural tariff is 47.2 percent.  In addition, while India has bound all agricultural tariff lines in the WTO, over 25 percent of India’s non-agricultural tariffs remain unbound (i.e., there is no WTO ceiling on the rate).

Despite its goal of moving toward Association of Southeast Asian Nations (ASEAN) tariff rates (approximately 5 percent on average), India has not systematically reduced the basic customs duty in the past six years.  India also maintains very high tariff peaks on a number of goods, including flowers (60 percent), natural rubber (70 percent), automobiles and motorcycles (60 percent to 75 percent), raisins and coffee (100 percent), alcoholic beverages (150 percent), and textiles (some ad valorem equivalent rates exceed 300 percent).  Rather than liberalizing its customs duties, India instead operates a number of complicated duty drawback, duty exemption, and duty remission schemes for imports. Eligibility to participate in these schemes is usually subject to a number of conditions.  In 20166, India increased tariffs on certain categories of telecommunications equipment. U.S. companies have raised significant concerns with this action.  India maintains very high basic customs duties, in some cases exceeding 20 percent, on drug formulations, including life-saving drugs and finished medicines listed on the World Health Organization’s list of essential medicines. 

India also imposes a 7.5 percent basic customs duty, 12.5 percent additional duty, and a 4 percent special additional duty for medical equipment and devices, such as pacemakers, coronary stents and stent grafts, and surgical instruments; and for parts of medical devices, such as medical grade polyvinyl chloride sheeting for the manufacture of sterile Continuous Ambulatory Peritoneal Dialysis bags for home dialysis  Essentially impeding some of India’s climate goals, customs tariffs on some products were increased in March 2016 to include Industrial solar water heaters - from 7.5 percent to 10 percent and solar tempered glass/solar tempered (anti-reflective coated) glass for use in manufacture of solar cells/modules/panels - from nil to 5 percent.  Additionally, India raised tariffs on specified telecommunication equipment  - from nil to 7.5/10 percent, and on E-readers  - from nil to 7.5 percent.

Many of India’s bound tariff rates on agricultural products are among the highest in the world, ranging from 100 percent to 300 percent.  While many Indian applied tariff rates are lower (averaging 32.7 percent on agricultural goods in 2015), they still present a significant barrier to trade in agricultural goods and processed foods (e.g., potatoes, apples, grapes, canned peaches, chocolate, cookies, and frozen French fries and other prepared foods used in quick-service restaurants).  The large gap between bound and applied tariff rates in the agriculture sector allows India to use tariff policy to make frequent adjustments to the level of protection provided to domestic producers, creating uncertainty for importers and exporters.  For example, in January 2013, India issued a customs notification announcing an immediate doubling of the tariff on imports of crude edible oils.

Imports are subject to state level value-added or sales taxes and the Central Sales Tax as well as various local taxes and charges.  India allows importers to apply for a refund of the special additional duty paid on imports subsequently sold within India and for which the importer has paid state level value-added taxes.  Importers report that the refund procedures are cumbersome and time consuming.  In addition, U.S. stakeholders have identified various state-level taxes and other charges on imported alcohol that appear to be higher than those imposed on domestic alcohol. The central government has taken steps and continues to work with state governments to adopt a national goods and services tax (GST) that would replace most indirect taxes, including various charges on imports.  In 2015, India’s government introduced the GST Bill in Parliament, but political hurdles stalled its passage till July 2016. Implementation of a national GST first required amending the Indian Constitution.  The GOI is working on the implementation of the GST law, which is designed to be a two-part system. One, a “State GST” will be based on fees associated with a single set of rates on consumer products and the other an “Integrated GST” which will cover products moving between all Indian states.  The GOI intends to begin GST implementation in April 2017.  The GST is designed to simplify the movement of goods within India, but political discord in implantation risks reducing some of the potential benefits.

Classification: 
As there are thousands of goods that are imported into India, it is not possible to prescribe rates of duty for each type of merchandise.  The basic applicable legislation is the Indian Customs Act of 1962, and the Customs Tariff Act of 1975.  The Customs Act of 1962 was created to control imports and prevent Illegal imports and exports of goods.  The Customs Tariff Act specifies the tariffs rates and provides for the imposition of anti-dumping and countervailing duties.

The Indian customs classification on tariff items follows the Harmonized Commodity Description and Coding System (Harmonized System or HS).

Customs uses six-digit HS codes, the Directorate-General of Commercial Intelligence and Statistics (DGCI&S) uses eight-digit codes for statistical purposes, and the Directorate General of Foreign Trade (DGFT) has broadly extended the eight-digit DGCI&S codes up to 10 digits.

It is also worth noting that the excise authorities use HS codes for classifying goods to levy excise duty (manufacturing taxes) on goods produced in India.

How Customs Duty is calculated:
All goods imported into India are subject to duty.  There are several factors that go into calculating customs duty, including:

Basic Customs Duty (BCD):  
This duty is levied either as 1) a specific rate based on the unit of the item (weight, number, etc.), or more commonly, 2) ad-valorem, based on the assessable value of the item.  In some cases, a combination of the two is used.

Additional Customs Duty (ACD):  
This duty is typically referred to as Countervailing duty or (CVD) and is levied on the assessed value of goods plus basic customs duty.  Goods that fall into this category are imported goods that have similar goods manufactured in India.  The objective is to protect domestic industry from imports.

Special Additional Customs Duty (known as Special CVD):  
Earlier known as surcharge, Special CVD tax is applicable on all items. It is levied at the rate of 4% of the basic and the excise duty on all imports.

Anti-dumping Duty:  
This is levied on specified goods imported from specified countries, including the United States, to protect indigenous industry from injury.

Safeguard Duty:  
The Indian government may by notification impose a safeguard duty on articles after concluding that increased imported quantities and under current conditions will cause or threaten to cause serious injury to domestic industry.

Customs Education Cess (duty):
Effective July 2004, India introduced a new education cess assessment.  The current rate is 3% of Basic Customs Duty (BCD) and Additional Duty of Customs (ACD).  Goods bound under international commitments have been
exempted from this cess.

Customs Handling Fee:  
The Indian government assesses a 1% customs handling fee on all imports in addition to the applied customs duty.

Total Duty:  
Therefore, for most goods, total duty payable = BCD + ACD + Special CVD + Education Cess + Customs Handling Fee.
Tariff rates, excise duties, regulatory duties, and countervailing duties are revised in each annual budget in February, and are published in various sources, including BIGs Easy Reference Customs Tariff edition.  A copy of this book is kept at the USA Trade Information Center in Washington DC and more specific information from this guide is available to U.S. Companies by calling 800-USA-TRADE.

While the Indian government publishes customs tariffs rates there is no single official publication that has all information on tariffs and tax rates on imports.  Moreover, each Indian State levies taxes on interstate trade and commerce, which adds to the confusion.  Effective April 2005, the Indian government implemented a Value-Added  tax (VAT)  system  meant  to  replace  the  inter-state  taxes,  but  implementation  is  not  yet universal in all the States.

Duty exemption plan:  The Duty Exemption Plan enables duty free import of inputs required for export production.  An advance license is issued under the duty exemption plan.  The Duty Remission Plan enables post export replenishment remission of duty on inputs used in the export product.  Duty Remission plan consists of (a) DFRC and (b) DEPB. DFRC permits duty free import charges on inputs used in the export product.  The government has wide discretionary power to declare full or partial duty exemptions “in the public interest” and to specify conditions such as end-use provisions.  Almost half of India’s total inputs enter under  concessional  tariffs,  though  the  use  of  exemptions is  falling  in  tandem  with  the  tariff-reduction program.

 

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.



India Tariff Rate Quotas Import Duties