For global companies entering India, challenges usually start before the goods arrive. This can be in the form of unexpected duty costs and procedural bottlenecks that slow down entry into India. According to provisional government trade data, merchandise imports crossed 710 billion USD in FY 2024 to 2025, which signals a growing volume of checks, documentation, and compliance activity. This creates an urgent need for clarity.
India’s 2025 customs reforms aim to reduce this uncertainty through digital filing, unified notifications, and transparent rate structures. For companies evaluating India as a sourcing or manufacturing destination, understanding these changes early helps build accurate cost models and avoid delays at the border.
History of Customs Duty in India
The framework of customs duty in India began with the Indian Tariff Act, 1894, which laid the foundation for tariff collection and regulation of imports. The modern structure is governed by the Customs Act, 1962 and the Customs Tariff Act, 1975, which aligned India’s tariff system with the Harmonised System of Nomenclature (HSN) for global consistency. These legislations established the statutory provisions for imposition, assessment, collection, and enforcement of customs duties, forming the core of India’s indirect tax administration in cross-border trade.
The major phase of tariff rationalisation was introduced by the 1991 economic liberalisation, which reduced peak customs duty rates from above 150% to an applied average rate of about 13%, in tune with WTO commitments. The introduction of GST in 2017 further integrated several indirect levies, streamlining tax credit flow on imports. More recently, the customs ecosystem has moved towards digital governance and AI-enabled compliance systems such as ICEGATE and e-SANCHIT, which are reshaping customs duty as a tool that strategically balances trade facilitation with protection for the domestic industry.
What are the Types of Customs Duty in India?
India applies different types of customs duties, each for a specific policy purpose.
- Basic Customs Duty (BCD): This is the basic duty that is paid by most products coming in from abroad. It is a percentage charge on the product’s CIF value – the cost, insurance, and freight for the product. The latest Union Budget 2025-26 brought about a rationalisation in the number of BCD slabs where most industrial products currently attract rates of 5%-15%.
- Countervailing Duty (CVD): It is imposed to offset the subsidy given by the exporting country, which distorts the level-playing-field competition. It is selective in application and, for most items, has been integrated into the GST regime.
- Special Additional Duty (SAD): Although traditionally charged to offset local indirect taxes, this duty has mostly been taken under the GST regime. This continues to be charged on certain items that are out of the purview of GST.
- Anti-Dumping Duty: This duty is imposed when products are imported below their usual value and hence cause harm to domestic industry. Rates are fixed through periodic investigations and are periodically reviewed.
- Safeguard Duty: This refers to the temporary protective duty that is imposed whenever there is an unexpected increase in imports that may cause injury to the domestic producers. It is different from anti-dumping duty since it targets the volume of import, not the price.
- Protective Duty: Imposed upon the advice of the Tariff Commission, this duty protects nascent or weak industries needing protection in the short run.
- Integrated GST on Imports: IGST is charged on all the imported items in the same manner in which interstate supplies are subjected to taxation in the country. IGST can be claimed as an input tax credit by businesses registered under GST.
Important Highlights of 2025 Customs Duty Rates
The 2025 customs framework and Import duty in India embodied its emphasis on economic competitiveness and rationalisation. The basic customs duty rates primarily fall within four slabs: 5%, 10%, 15%, and 18%, depending on the product category and economic sensitivity. Gold is among the product that attracts 6% import duty, which is a combination of a 5% Basic Customs Duty (BCD) and a 1% Agriculture Infrastructure and Development Cess (AIDC).
Customs issued in 2025 raised customs duty on chosen electronic components and finished goods to 18%. The move facilitates local manufacturing and is in sync with India’s efforts to enhance its domestic supply chain strengths under the Make in India programme. The government also merged several customs notifications into a single notification from November 1, 2025 (Notification No. 39/2025). The action made compliance easier and enhanced transparency by minimising uncertainty in duty rates and exemptions.
Anti-dumping and safeguard charges are still imposed in some areas where local industries like steel, petrochemicals, tyres, fibre products, and select electronic and solar equipment. These industries need protection against unfair trade or spikes in import in India from other countries. These tariff policies support India’s overall trade facilitation and its congruence with long-term industrial policies.
Recent Reforms and Government Initiatives Affecting Customs
A number of major initiatives were rolled out in 2025 to promote trade facilitation, transparency, and efficiency in compliance.
- AI-Driven Digitisation and Integrated Compliance: The Central Board of Indirect Taxes and Customs (CBIC) unveiled state-of-the-art digitisation in customs clearance using artificial intelligence for quicker risk assessment and consignment clearance. Import and export data systems integration with GST filings and the Indian Customs Electronic Data Interchange (EDI) system enhanced real-time compliance monitoring. ICEGATE supported these improvements by serving as the primary interface for electronic document submission, tracking, and communication between importers, exporters, and customs officials.
- Notification Rationalisation and FTA Duty Reforms: The government rationalised customs notifications by consolidating 31 separate circulars into a single notification in order to reduce redundancy and make procedural requirements clear. India also continues to phase down customs duty under Free Trade Agreements (FTAs) with countries like the UAE, the European Union, and Australia. This action is intended to balance liberalisation with protection of sensitive domestic industries.
- Flexible FTP 2023-28 and Export Growth Initiatives: Foreign Trade Policy (FTP) 2023-28 unveiled a flexible update-on-demand methodology in place of the static five-year cycle. Its focus on digital facilitation of trade, automation, and ease of doing business lowered clearance times and costs of compliance. The policy also aims at the growth of exports to 2 trillion USD by 2030 through strong infrastructure and supply chain incentives.
Guide for Foreign Businesses Engaging in Imports to India
Foreign businesses bringing in goods to India are required to meet a specified system of registration, documentation, and compliance protocols.
- Registration and Licensing: Importers are required to register for an Importer Exporter Code (IEC) from the Directorate General of Foreign Trade (DGFT). GST registration is compulsory for taxation reasons, and special licenses are necessary for controlled or banned products.
- Documentation and Procedures: Bills of Entry are submitted electronically prior to physical importation of goods. Duties are imposed on the transaction value, assessed value, or tariff value under the customs valuation norms in compliance with WTO standards. The customs procedure entails automated risk assessment followed by physical examination where applicable. Importers are also required to adhere to relevant anti-dumping and countervailing duties.
- Practical Advice for Smooth Imports: Foreign companies are recommended to hire authorised customs brokers or consultants who are familiar with Indian regulations. Utilising government portals like ICEGATE allows real-time monitoring, electronic submission, and verification of duty notifications. Keeping an eye on CBIC and DGFT updates ensures continuous compliance with any procedural or rate modifications under the customs duty rules in India.
- Legal, Quality, and Valuation Protocols: Foreign importers should factor in India’s legal methodologies that govern import valuation and classification. Goods covered under BIS compulsory certification must meet prescribed safety and quality norms. The Special Valuation Branch assesses related party imports to ensure fair pricing. Companies that qualify for AEO status can avail operational benefits such as expedited clearances and reduced documentation requirements.
Penalties and Non-Compliance under Indian Customs Law
The customs regime in India imposes strict penalties for non-compliance, misdeclaration, or evasion of duties under the Customs Act, 1962. Penalties are designed to ensure accuracy, transparency, and lawful conduct in import and export transactions.
- Misdeclaration or Undervaluation: Importers declaring incorrect value, quantity, or description of goods are liable for confiscation of goods and a penalty up to the value of the goods involved, in addition to payment of differential duty and interest under Section 114A.
- Evasion of Duty: Wilful evasion of customs duty attracts monetary penalties and may lead to prosecution under Sections 135 and 136, depending on the gravity of the offence.
- Improper Importation or Prohibited Goods: Goods imported in contravention of law can be confiscated under Section 111, with penalties extending to confiscation and fines in lieu thereof.
- Procedural Non-Compliance: Failure to maintain proper documentation, delayed filing of Bills of Entry, or breach of procedural requirements may result in penalties under Sections 117 and 118.
- False or Fraudulent Claims of Exemptions: Wrongful availing of duty exemptions or export incentives may lead to recovery of duty, penalty, and interest along with potential suspension of importer registration.
In addition to monetary fines, repeated or serious violations can result in suspension or cancellation of the Importer Exporter Code and blacklisting of the entity by the Directorate General of Foreign Trade or Customs Department. Ensuring complete adherence to customs compliance procedures and maintaining transparent documentation is critical for avoiding penal exposure.
International Trade Environment and Tariff Impacts
In the recent times, world trade patterns have imparted new dimensions to tariff and customs management. The United States added a further 25% tariff on certain Indian imports, impacting the cost structures and competitiveness of particular industries. However, India’s expanding web of foreign trade agreements has opened up new avenues for tariff lowering and better market access in Europe, the Middle East, and the Asia-Pacific region.
These changes highlight the significance of comprehending not just import in India from other countries and its domestic duty regime but also its interface with foreign trade policies.
*At the time of publishing this blog, trade talks are going on between India and the US with the Indian Economic Advisory team currently negotiating trade talks with US government*
Conclusion
Customs and Import duty in India provide a balance of economic protection, and modernisation. Foreign businesses need to keep abreast of changing tariff structures, regulatory reforms, and compliance mechanisms. With increased digitisation, greater transparency, and policy predictability, India is increasingly a preferred destination for international trade and investment. Those businesses that anticipate and adapt to these trends can reduce costs, ensure compliance, and take advantage of India’s increasing integration into the global trading community.
