GST on Imports: Basic Customs Duty, IGST and Compensation Cess on Imports

GST on Imports explained: this guide covers what GST on Imports means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

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.

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Import Duty Structure

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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)

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Example Computation

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