Customs Duty on Imports: Understanding BCD, IGST, and Anti-Dumping Duty

If you import goods into India — whether raw materials for manufacturing or finished goods for trading — you need to understand the multiple layers of customs duty that apply. I have seen importers pay lakhs extra because they did not understand the structure.

THE BASIC STRUCTURE OF CUSTOMS DUTY
When goods arrive at an Indian port, you pay:
1. Basic Customs Duty (BCD) — the primary duty, rate depends on the HS Code (Harmonized System classification) of your product
2. Social Welfare Surcharge — 10% on BCD (for most goods)
3. IGST — calculated on assessable value + BCD + SWS. Rate is same as domestic GST rate (5%, 12%, 18%, or 28%)
4. Compensation Cess — on certain luxury/demerit goods (aerated beverages, tobacco, motor vehicles)

THE CRITICAL POINT: IGST IS RECOVERABLE AS ITC
Unlike BCD (which is a cost), the IGST paid on imports is available as Input Tax Credit in your GSTR-3B. So if you pay Rs 5 lakh IGST on an import, you get Rs 5 lakh credit to offset against your output GST. The real cost of import is BCD + SWS only.

HS CODE CLASSIFICATION — WHERE MISTAKES HAPPEN
The Harmonized System has over 5,000 product codes at the 8-digit level. Classifying your product under the wrong HS code can mean:
- Paying higher BCD than required (I have seen differences of 5-20%)
- Losing benefit of concessional duty under FTA (Free Trade Agreement)
- Facing anti-dumping duty that does not apply to your product category

Always get your HS classification reviewed by a customs specialist before the first import. The cost of a classification opinion (Rs 15,000-50,000) is nothing compared to overpaying duty on every shipment for years.

ANTI-DUMPING DUTY — THE HIDDEN COST
India imposes anti-dumping duty on specific products from specific countries where the product is being exported at below normal value. This is OVER AND ABOVE regular customs duty. Check the DGTR (Directorate General of Trade Remedies) notifications before importing. Products like certain chemicals, steel products, rubber goods, and optical fibre from China frequently attract anti-dumping duty.

FREE TRADE AGREEMENTS — LEGITIMATE SAVINGS
India has FTAs with ASEAN, Japan, South Korea, and others. Under these agreements, BCD can be reduced to 0-5% for qualifying products. But you need:
- Certificate of Origin from the exporting country
- Direct shipment (transhipment through a third country may disqualify)
- The product must meet Rules of Origin criteria

PRACTICAL ADVICE
1. Get a customs broker, but verify their HS classification yourself
2. Register on ICEGATE for electronic filing and tracking
3. Maintain import documentation meticulously — any customs audit goes back 5 years
4. Consider duty drawback if you export finished goods made from imported inputs