Importing goods into India involves multiple levies: Basic Customs Duty (BCD) under the Customs Act 1962, Integrated GST (IGST) under IGST Act 2017, and Compensation Cess under the GST (Compensation to States) Act 2017. Understanding these levies is essential for computing landed cost of imports and availing ITC.
Import Duty Structure
| Duty | Levied Under | ITC Available? |
|---|---|---|
| Basic Customs Duty (BCD) | Customs Tariff Act 1975 | No (not creditable under GST) |
| Additional Customs Duty (ACD/CVD) | Subsumed into IGST post-2017 | N/A (replaced by IGST) |
| Integrated GST (IGST) | IGST Act 2017 | Yes — creditable as ITC |
| Compensation Cess | GST (Compensation to States) Act | Yes — creditable against Cess liability |
| Social Welfare Surcharge (SWS) | Finance Act 2018 | No |
How IGST on Imports is Computed
IGST on imports is computed on the "Value of Import" which is the Customs Assessable Value (CIF + Landing charges):
Customs Assessable Value = CIF Value + 1% Landing Charges Add: BCD (%) on Assessable Value Add: Social Welfare Surcharge (10% of BCD) = Total Customs Duty Paid Value IGST = IGST Rate × (Assessable Value + BCD + SWS) Compensation Cess (if applicable) = Cess Rate × (Assessable Value + BCD + SWS)
Example Computation
| Item | Amount (Rs.) |
|---|---|
| CIF Value | 1,00,000 |
| Add: 1% Landing Charges | 1,000 |
| = Assessable Value | 1,01,000 |
| Add: BCD @ 10% | 10,100 |
| Add: SWS @ 10% of BCD | 1,010 |
| = IGST Taxable Value | 1,12,110 |
| IGST @ 18% | 20,180 |
| Total Duty Payable (BCD+SWS+IGST) | 31,290 |
ITC on Import IGST
IGST paid on imports is available as Input Tax Credit:
- Import IGST can offset CGST, SGST, or IGST output tax liabilities
- Claimed based on Bill of Entry (BoE) as the document evidencing payment
- BoE must be reflected in GSTR-2B (auto-populated from customs data)
- ITC can be claimed in GSTR-3B in the month the import occurred (or when BoE is available)
- BCD and SWS are NOT creditable — they become part of cost of goods
Import of Services: Reverse Charge Mechanism
Import of services is taxable under IGST at the recipient's hands via Reverse Charge Mechanism (RCM):
- If both supplier (outside India) and recipient (in India) are distinct persons
- Place of supply of services from outside India = location of recipient in India
- Recipient pays IGST under RCM and claims it as ITC (if for business purposes)
- No customs duty on service imports (services are not goods)
Exemptions from Import IGST
- Goods imported under advance authorization for re-export after processing: IGST exempted
- Export Oriented Units (EOUs): IGST exemption on capital goods and inputs
- Special Economic Zones (SEZs): Goods imported into SEZ are zero-rated
- Specific goods under project imports: concessional rate schemes
- Passenger baggage: exemptions up to specified limits
Documentation for Import Transactions
| Document | Purpose |
|---|---|
| Bill of Entry (BoE) | Filed by importer for clearance; basis for ITC claim |
| Bill of Lading/Airway Bill | Shipping document for sea/air freight |
| Commercial Invoice + Packing List | Basis for customs valuation |
| Import License (if applicable) | For restricted goods |
| Certificate of Origin | For FTA/preferential duty claims |
FTA Benefit: India has Free Trade Agreements (FTAs) with ASEAN, Japan, Korea, UAE, Mauritius, Sri Lanka, etc. Goods imported from these countries with proper Certificate of Origin may attract concessional or nil customs duty. Always check the applicable FTA before computing import duties.