Customs Duty and Tariffs in India 2025: Guide to Import, Export Taxes and HSN Codes

Understanding Customs Duty and Tariffs in India: A Complete Guide for Importers, Exporters, and Consumers

International trade is a vital part of India’s economy, but terms like customs duty, tariffs, HSN codes, and HTS codes can feel overwhelming. Whether you’re a business owner importing goods, an exporter navigating global markets, or a consumer wondering why imported products cost more, this guide breaks it all down. We’ll explore the differences between customs duty and tariffs, their types, rates, and impacts, along with a deep dive into HSN and HTS codes and the ongoing tariff tensions between India and the USA.

What’s the Difference Between Customs Duty and Tariff?

If you’ve ever imported or exported goods, you’ve likely heard customs duty and tariff used interchangeably, but they’re not quite the same. Grasping the distinction can cut costs and simplify compliance with trade laws.

• Customs Duty: This is a specific tax imposed by the government on goods crossing international borders, mainly when they’re imported into India. It’s calculated based on the value, weight, or quantity of the goods and is paid at the time of customs clearance. The goal? Safeguard India’s economy, boost government funds, and manage trade flows. For example, if you import a smartphone, you’ll pay a customs duty based on its value or a fixed rate.
• Tariff: A tariff is a broader term that refers to taxes or charges on both imported and exported goods. Tariffs include customs duties but also cover other trade-related taxes and policies. They’re often used to make imported goods more expensive to protect local industries or to control trade volumes. For example, a tariff on imported steel could raise its cost above Indian-produced steel, motivating consumers to opt for domestic options.

Key Difference: Customs duty is a type of tariff focused on taxing goods at the border, while tariffs encompass a wider range of taxes and trade rules, including duties. Picture customs duty as one gear turning in the machine of trade tariffs.

What Is a Tariff?

A tariff is a tax or fee imposed by governments on goods entering or leaving a country. Tariffs serve multiple purposes:

• Support for domestic industries: Tariffs raise the cost of imports, motivating consumers to choose locally-produced goods.
• Generate Revenue: Tariffs serve as a source of income for the government, helping fund essential services like education and infrastructure.
• Regulate Trade: They control the flow of goods to ensure compliance with safety, environmental, or trade standards.

Tariffs can be applied to imports (most common) or exports (less common) and are calculated either as a percentage of the goods’ value (ad valorem) or a fixed amount per unit (specific tariff). A 10% tariff on a $100 good raises the cost by $10. Meanwhile, a specific tariff might apply a constant fee, say $5 per kilogram, no matter the item's market value.

Tariff Rates on Imports in India

India’s import tariff rates vary based on the type of goods, their country of origin, and their classification under the Harmonized System of Nomenclature (HSN). The Customs Tariff Act, 1975, governs these rates, which are updated periodically, such as in the Union Budget 2025. Here’s an overview of key import duties:

• Basic Customs Duty (BCD): Ranges from 0% to 100%, depending on the HSN code and origin. Lifesaving drugs and equipment often enjoy 0% BCD, while luxury goods like electronics may face higher rates.
• Integrated Goods & Services Tax (IGST): Applied at 5%, 12%, 18%, or 28% on the assessable value (cost of goods + freight + insurance + BCD). For example, most consumer electronics fall under the 18% IGST slab.
• Social Welfare Surcharge (SWS): A 10% surcharge on the total customs duty to fund social welfare programs, replacing older education cesses.
• Countervailing Duty (CVD): Ranges from 0% to 12% to offset subsidies given to goods in their country of origin.
• Anti-Dumping Duty: Applied as per government notifications to prevent foreign companies from selling goods below market value, harming local industries.
• Safeguard Duty: Applied to shield local industries from a sudden spike in imported goods.
• Customs Handling Fee: A 1% fee on the total value, separate from other taxes.

For instance, importing a refrigerator might involve a 20% BCD, 18% IGST, and 10% SWS, significantly increasing its final cost. To check exact rates, visit the Central Board of Indirect Taxes and Customs (CBIC) website or use tools like the Customs Tariff Database.

India’s Tariffs on Exports

Export tariffs in India are less common and apply to specific goods listed under the Second Schedule of the Customs Tariff Act. The goal is to regulate the outflow of certain commodities, ensuring domestic availability or controlling resource depletion. Examples include:

• Crust Leather: Small tanneries receive a 20% exemption on export duties.
• Certain Minerals: Export duties on items like iron ore to prioritize domestic industries.

Under GST, most exports are zero-rated, which means exporters aren't charged tax and can claim input tax refunds. This encourages exports while keeping domestic markets stable. For example, pharmaceutical exports often face no duty to boost India’s global competitiveness.

Taxes on Imports and Exports in India

Apart from customs duties, various other taxes are levied on imports and exports:

• Imports: In addition to BCD, IGST, SWS, and other duties, importers may face a Compensation Cess on goods like tobacco, coal, or cars to offset state revenue losses post-GST. For online services (e.g., streaming platforms), IGST is paid under the Reverse Charge Mechanism by the importer or foreign supplier for unregistered recipients.

• Exports: Most goods and services are zero-rated under GST, meaning no tax is charged, and exporters can claim refunds for taxes paid on inputs. However, export duties apply to specific items like leather or minerals to regulate supply.

Four Types of Tariffs

Tariffs come in various forms, each serving a unique purpose in trade regulation:

1. Ad Valorem Tariff: A percentage-based tax on the value of goods (e.g., 10% on a $100 item = $10). Common for consumer goods like electronics.
2. Specific Tariff: A fixed amount per unit, regardless of value (e.g., $5 per kilogram of rice). Used for commodities like grains or metals.
3. Compound Tariff: Combines ad valorem and specific tariffs (e.g., 5% of value + $2 per unit). Applied to complex goods like machinery.
4. Revenue Tariff: Designed to generate government income rather than protect industries, often applied to non-competitive imports like luxury goods.

These tariff types help India balance trade, protect local industries, and fund public services.

What Is Customs Duty?

Customs duty is a tax levied on goods crossing international borders, primarily imports, to regulate trade, protect domestic industries, and generate revenue. Customs duty is determined using the assessable value (cost, freight, and insurance combined), depending on the product’s HSN code, country of origin, and material makeup. For example, importing a car might incur a high customs duty to protect India’s auto industry, while lifesaving drugs may be exempt.

Types of Customs Duty in India

India’s customs duties are diverse, each addressing specific trade needs:

Type of Customs Duty	Rate	Applicability
Basic Customs Duty (BCD)	0–100%	On all imported goods; rate depends on HSN code, origin, and material. Lifesaving drugs often exempt.
Special Additional Duty (SAD)	At 4%	Applies to imported goods matching locally made products liable for sales tax.
Countervailing Duty (CVD)	0–12%	On subsidized goods from foreign countries to level the playing field.
Social Welfare Surcharge (SWS)	At 10%	funds social initiatives, succeeding the earlier education cesses.
Anti-Dumping Duty	As notified	Prevents foreign goods from being sold below market value.
Compensation Cess	Varies	On goods like tobacco, coal, or cars to offset GST-related state revenue losses.
Safeguard Duty	As notified	Protects local industries from import surges.
Integrated Goods & Services Tax (IGST)	5%, 12%, 18%, 28%	Applied to all imports under GST framework.
Customs Handling Fee	1%	Additional fee for customs processing.

These duties ensure fair trade practices and support India’s economic goals.

What Is the HSN Code in Customs?

The Harmonized System of Nomenclature (HSN), created by the World Customs Organization (WCO), is a worldwide framework for categorizing traded products. It uses 6-digit codes to categorize products, with countries like India adding two more digits for specificity (8-digit ITC-HS codes). HSN codes determine duty rates, trade statistics, and compliance with regulations. For example, the HSN code for yogurt is 0403.10, ensuring uniform classification worldwide.

10 HSN Codes with Product Examples

HSN Code	Product	Example
0403.10.00	Yogurt	Plain yogurt in a supermarket
8516.72.00	Electric toasters	Kitchen bread toaster
6204.42.00	Women’s cotton dresses	Casual summer dress
1006.30.10	Basmati rice	Packaged basmati rice
3004.90.99	Medicines	Paracetamol tablets
8703.23.91	Passenger cars	Mid-size petrol car
9503.00.90	Plastic toys	Children’s action figures
0805.10.00	Oranges	Fresh oranges
3907.61.00	Polyester resins	Industrial plastic resin
7113.19.10	Gold jewelry	Gold necklace

What Is the HTS Code?

The Harmonized Tariff Schedule (HTS) code, a 10-digit framework, is chiefly used in the USA to classify imported products. The first six digits align with the global HSN code, while the additional four digits provide country-specific details for duty rates and regulations. HTS codes are critical for U.S. importers to calculate tariffs accurately.

10 HTS Codes with Product Examples

HTS Code	Product	Example
8516.72.00.30	Electric toasters	Bread toaster for household use
6204.42.30.50	Women’s cotton dresses	Designer cotton dress
1006.30.10.00	Basmati rice	Packaged Indian basmati rice
3004.90.92.90	Medicines	Over-the-counter painkillers
8703.23.01.70	Passenger cars	Compact sedan
9503.00.00.73	Plastic toys	Toy building blocks
0805.10.00.50	Oranges	Imported fresh oranges
3907.61.00.10	Polyester resins	Resin for manufacturing
7113.19.50.00	Gold jewelry	18K gold bracelet
9403.10.00.20	Metal furniture	Office desk

Impact of Duties on Consumers and Businesses

Customs duties and tariffs significantly affect both consumers and businesses:

• Consumers: Duties increase the cost of imported goods, making them pricier. For example, high duties on electronics like smartphones raise retail prices, impacting affordability. The Association of Indian Medical Device Industry (AiMeD) notes that reduced import duties don’t always lower prices, as importers may inflate maximum retail prices (MRPs), leaving consumers paying more.
• Businesses: Importers encounter elevated expenses, potentially cutting profits unless they transfer these costs to customers. Exporters benefit from zero-rated GST but may face export duties on specific goods, affecting competitiveness. Duties also protect local industries by making foreign goods less attractive, as seen with India’s increased duties on refrigerators and footwear to curb imports and support domestic manufacturers.

Tariff War Between India and the USA

The India-USA tariff war has been a hot topic, especially during the Trump administration. In 2019, the U.S. imposed a 26% tariff on Indian imports under a reciprocal trade policy targeting countries with trade surpluses. This hit Indian sectors like textiles, agriculture, and jewelry, though pharmaceuticals were exempted. India retaliated with higher tariffs on U.S. goods like apples, walnuts, and chemicals, escalating tensions. These tit-for-tat tariffs increase costs for businesses and consumers on both sides, disrupt supply chains, and strain trade relations. Ongoing negotiations aim to resolve these disputes, but businesses must stay updated on trade agreements to navigate the changing landscape.

Read also : What Role Do Businesses Play in the Economy?

Public FAQs on Customs Duty and Tariffs in India for 2025

1. How do I calculate customs duty for goods imported into India?

To calculate customs duty in India, add the Basic Customs Duty (BCD, 0–100%), Integrated Goods & Services Tax (IGST, 5–28%), and Social Welfare Surcharge (SWS, 10%) based on the goods’ assessable value (cost + freight + insurance). Additional duties like Countervailing Duty (0–12%) or Compensation Cess may apply for specific items like cars or tobacco. For example, importing a $500 laptop with 20% BCD and 18% IGST could cost over $650 after duties. Use the CBIC’s duty calculator for precise figures.

2. What goods are exempt from customs duty in India?

India exempts certain goods from Basic Customs Duty (BCD) to support public welfare, including lifesaving drugs and medical equipment, fertilizers, food grains, and specific imports under free trade agreements. For instance, importing a dialysis machine may face 0% BCD. However, IGST and other fees might still apply. Check the CBIC exemption list or consult a customs broker to confirm eligibility.

3. What is the difference between HSN and HTS codes for international trade?

HSN (Harmonized System of Nomenclature) codes are 6-digit global codes used worldwide, including India, to classify goods for customs and taxation (e.g., 0902.10 for green tea). HTS (Harmonized Tariff Schedule) codes, used mainly in the USA, extend HSN to 10 digits for specific U.S. tariff rules (e.g., 0902.10.10.00 for packaged green tea). Accurate codes ensure correct duty rates and compliance. For specific details, check the HSN code on CBIC’s portal or use the HTS search tool from USITC.

4. Why does India impose tariffs on exports, and which goods are affected?

To manage local supply and control resource usage, India imposes export tariffs on certain items like iron ore, bauxite, and crust leather. For example, a 20% duty on leather exports supports local tanneries but may exempt small businesses. Most exports, like textiles and pharmaceuticals, are zero-rated under GST to boost global sales. Visit cbic.gov.in for the latest Second Schedule updates.

5. How do India-USA tariff disputes affect imported goods prices?

The India-USA tariff war, intensified by reciprocal tariffs (e.g., USA’s 26% tariff on Indian goods in 2019), raises costs for imported goods like American apples subject to India’s counter-tariffs, and Indian jewelry encountering U.S. import duties. Consumers pay higher prices, while businesses face supply chain challenges. For example, a $50 U.S. product may cost $65 in India after tariffs. Stay updated via CBIC news

Read also : Differences Between VAT and GST

Final Summary: Navigating Customs Duties and Tariffs

Understanding customs duties, tariffs, HSN, and HTS codes is crucial for anyone involved in international trade. These taxes shape pricing, protect local industries, and fund government initiatives. For businesses, accurate classification using HSN or HTS codes prevents costly errors, while consumers can make informed choices about imported goods. Stay updated on India’s tariff policies via the CBIC website or tools like e-SANCHIT for seamless trade compliance.