India — Import Procedures & Duties

Import procedures and customs duties in India are governed by the Customs Act, 1962 (Act No. 52 of 1962), which states its purpose as "An Act to consolidate and amend the law relating to Customs." The Act extends to the whole of India (Section 1(2)) and provides the legal framework for the levy and collection of customs duties, the prevention of smuggling, and the regulation of import and export clearance.

Administering authority. The Central Board of Indirect Taxes and Customs (CBIC), constituted under the Central Boards of Revenue Act, 1963, is the apex authority responsible for administering the Customs Act. Section 2(6) of the Act defines "Board" as the Central Board of Indirect Taxes and Customs. CBIC exercises its functions through officers appointed under Section 4 of the Act, including Commissioners of Customs (Appeals), Principal Commissioners of Customs, Commissioners of Customs, Additional Commissioners, and other officers. Section 2(34) defines "proper officer" as the officer of customs assigned specific functions by the Board or the Principal Commissioner or Commissioner of Customs under Section 5.

Designated customs stations. Section 7 of the Act empowers the Board to appoint, by notification in the Official Gazette, the seaports, airports, inland container depots (ICDs), land customs stations, routes for land or inland-water transit, coastal ports, foreign post offices, and international courier terminals at which alone goods or specified classes of goods may enter or leave India (Section 7(1)). Section 2(11) defines "customs area" as the area of a customs station or a warehouse, as defined in Section 2(43).

Clearance of imported goods. Chapter VII of the Customs Act (Sections 44–55) governs the clearance of imported goods and export goods; Section 44 excludes baggage and goods imported or exported by post from the Chapter. Under Section 45(1), all imported goods unloaded in a customs area remain in the custody of a person approved by the Principal Commissioner or Commissioner of Customs until the goods are cleared for home consumption, warehoused under Chapter VIII, or transhipped. The custodian must keep a record of the goods and send a copy to the proper officer, and may not permit removal of the goods from the customs area except under written permission of the proper officer (Section 45(2)).

Bill of entry and self-assessment. Section 46 requires an importer to file a bill of entry for clearance of imported goods for home consumption or warehousing. The procedural details are prescribed by regulations made under Section 157 read with Section 46; the current framework is the Bill of Entry (Electronic Integrated Declaration and Paperless Processing) Regulations, 2018, which superseded the 2011 Regulations and moved India toward paperless clearance via the Common Customs Electronic Portal (Section 154C of the Act).

Section 17 of the Act, as amended, establishes a self-assessment regime: under Section 17(1), an importer entering goods under Section 46 must self-assess the duty leviable on the goods. Self-assessment under Section 17(1) includes determining the tariff classification in accordance with the Customs Tariff Act, 1975; the value of the goods as determined under Section 14 (transaction value based on the WTO Valuation Agreement framework, as set out in Section 14(1)); any exemption or concession of duty consequent upon a notification under the Customs Act or Customs Tariff Act; the quantity, weight, volume, or measurement if duty is specific; the origin of the goods under the Customs Tariff Act if origin affects the duty; and any other factor that affects the duty payable. The proper officer may verify the entries and self-assessment by examining or testing the goods (Section 17(2)). If verification reveals that self-assessment was not done correctly, the proper officer may re-assess the duty (Section 17(4)). Where re-assessment is contrary to the importer's self-assessment and the importer does not confirm acceptance in writing, the proper officer must pass a speaking order on the re-assessment within fifteen days from the date of re-assessment of the bill of entry (Section 17(5)).

Customs duty framework. The rates of customs duty are prescribed by the Customs Tariff Act, 1975 (Act No. 51 of 1975), which adopts the Harmonized System of tariff classification. The Customs Act, 1962 itself does not set duty rates but provides the procedural and enforcement machinery for their collection. Importers are also liable for integrated goods and services tax (IGST) on imports under the Integrated Goods and Services Tax Act, 2017, and for applicable cesses and surcharges as prescribed by separate legislation.

Smuggling and enforcement. Section 2(39) of the Act defines "smuggling" as any act or omission that will render goods liable to confiscation under Section 111 (in relation to imported goods) or Section 113 (in relation to export goods). The Act establishes extensive search, seizure, penalty, and prosecution provisions in Chapters XIII, XIV, and XV.

Source: Customs Act, 1962 (Act No. 52 of 1962), consolidated text as of 30 March 2022 Source: Bill of Entry (Electronic Integrated Declaration and Paperless Processing) Regulations, 2018

Imported goods entering India are subject to basic customs duty (BCD) under the Customs Tariff Act, 1975 and integrated goods and services tax (IGST) under the Integrated Goods and Services Tax Act, 2017, in addition to any other applicable cesses and surcharges.

Basic customs duty (BCD). Section 12(1) of the Customs Act, 1962 provides that "duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, on goods imported into, or exported from, India." Section 2 of the Customs Tariff Act, 1975 provides that "the rates at which duties of customs shall be levied under the Customs Act, 1962 (52 of 1962), are specified in the First and Second Schedules." The First Schedule prescribes import duty rates based on the Harmonized System of Nomenclature (HSN), which India adopted through the Customs Tariff Act. BCD rates vary widely depending on the tariff classification of the goods and the country of origin; rates can range from 0% to over 100% for certain goods, though most non-agricultural goods fall within 5% to 35%. The applicable BCD rate is determined by the eight-digit tariff item under the First Schedule corresponding to the goods' HSN classification.

BCD is calculated on the assessable value of the imported goods, which is ordinarily the transaction value determined under Section 14 of the Customs Act, 1962, as amended to incorporate the WTO Valuation Agreement framework. The transaction value is "the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation," adjusted for certain statutory additions enumerated in the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.

BCD rates are subject to frequent revision through annual Finance Acts and interim notifications issued by CBIC under Section 25 of the Customs Act, 1962. Concessional or nil BCD rates for specific goods or specific end-uses are notified in separate exemption notifications (for example, Notification No. 50/2017-Customs dated 30 June 2017, as amended, prescribes concessional rates for project imports and certain capital goods). Importers should verify the current applicable BCD rate by reference to the CBIC website or the Indian Customs Electronic Gateway (ICEGATE) tariff database at the time of import.

Integrated Goods and Services Tax (IGST) on imports. The Customs Tariff Act, 1975 was amended in 2017 to provide for the levy of IGST on imported goods. Under Section 3(7) of the Customs Tariff Act (as inserted by the Finance Act, 2017), goods imported into India are liable to integrated tax "at such rate as is leviable under section 5 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017) on a like article on its supply in India."

Section 5(1) of the IGST Act, 2017 levies IGST on all inter-state supplies of goods or services at rates notified by the Government on the recommendations of the GST Council, not exceeding 40%. The proviso to Section 5(1) specifies that "the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 on the value as determined under the said Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962."

IGST rates on imports are aligned with the domestic GST rate structure and are prescribed in IGST rate notifications issued under Section 5. According to CBIC guidance, the principal IGST rates are nil, 0.25%, 3%, 5%, 12%, 18%, and 28%, with the applicable rate depending on the HSN classification of the goods and the corresponding entry in the IGST rate schedules. The majority of industrial inputs and finished goods attract IGST at 12% or 18%; luxury goods, automobiles, and certain consumer durables attract 28%; essential commodities and specified goods attract lower rates or are exempt.

The value base for IGST differs from the BCD base. According to the GST Council guidance note, IGST is levied on the aggregate of: (a) the assessable value of the goods (transaction value under Section 14 of the Customs Act); plus (b) any customs duty (BCD) levied under Section 12 of the Customs Act; plus (c) any other duty chargeable on the goods under any law "as an addition to, and in the same manner as, a duty of customs." In effect, IGST is calculated on a value that includes BCD and any applicable cess such as the Agriculture Infrastructure and Development Cess (AIDC) or Social Welfare Surcharge (SWS).

Example calculation. If goods with an assessable value of ₹100,000 attract 10% BCD and 18% IGST, the duties are calculated as follows: • Assessable value: ₹100,000 • BCD @ 10%: ₹10,000 • Value for IGST purposes: ₹100,000 + ₹10,000 = ₹110,000 • IGST @ 18%: ₹110,000 × 18% = ₹19,800 • Total customs duties payable: ₹10,000 (BCD) + ₹19,800 (IGST) = ₹29,800

Input tax credit. IGST paid on imports is eligible as input tax credit (ITC) under the CGST Act, 2017 (Section 16 read with Section 3 of the IGST Act), and may be set off against the importer's output GST liability for domestic supplies. In contrast, BCD is not eligible for ITC and constitutes a cost to the importer. This distinction makes the effective landed duty cost for an importer primarily the BCD (and any non-creditable cesses), since IGST is recovered through the GST credit mechanism.

GST compensation cess. Certain specified goods (such as motor vehicles, coal, aerated waters, tobacco products, and pan masala) are also subject to GST compensation cess under the Goods and Services Tax (Compensation to States) Act, 2017. The cess is levied in addition to BCD and IGST, and the value base for cess is the same as for IGST (assessable value plus BCD plus any other customs duties). Cess rates and the list of goods subject to cess are notified separately by CBIC.

Source: Customs Act, 1962 (Act No. 52 of 1962), Section 12 (dutiable goods) and Section 14 (valuation of goods) Source: Integrated Goods and Services Tax Act, 2017, Section 5 (levy and collection of tax) Source: GST Council, Imports in GST Regime guidance note (July 2017) Source: CBIC guidance note for importers and exporters on IGST rates (June 2017)

Not all goods may be freely imported into India. The ITC (HS) Classification of Export and Import Items published by the Directorate General of Foreign Trade (DGFT) assigns each eight-digit tariff item one of four import-policy classifications: Free, Restricted, Prohibited, or subject to State Trading Enterprise (STE). Only goods classified as "Free" may be imported without an import authorization; all other classifications require prior permission from DGFT or another designated authority before clearance by customs.

Legal framework. The Foreign Trade (Development and Regulation) Act, 1992 (FT(D&R) Act) empowers the Central Government to "make provision for prohibiting, restricting or otherwise regulating in all cases or in specified classes of cases … the import or export of goods" (Section 3(2)). The Act defines "licence" as "a licence to import or export and includes a customs clearance permit and any other permission issued or granted under this Act" (Section 2(g)). DGFT is the designated authority that administers the import licensing regime under the Act. Section 3(3) of the FT(D&R) Act deems goods subject to an order under Section 3(2) to be goods "the import or export of which has been prohibited under section 11 of the Customs Act, 1962," meaning that attempted import of restricted or prohibited goods without the required authorization exposes the importer to confiscation and penalties under the Customs Act in addition to enforcement action under the FT(D&R) Act.

ITC (HS) import-policy categories. The current ITC (HS) 2023 classification (effective from 1 April 2022 and updated periodically via DGFT notifications) is published on the DGFT website and lists the import policy for each eight-digit tariff item in Schedule 1. The policy categories are:

• Free — no import authorization required (the majority of goods).
• Restricted — import permitted only upon obtaining an import license or authorization from DGFT or a designated nodal agency. According to DGFT guidance, items which are restricted under the ITC (HS) Import Policy require a license prior to importation. Examples of restricted goods include certain electronics (laptops, tablets, and specified telecom equipment under recent notifications), tyres (used and retreaded pneumatic tyres under specified headings), certain chemicals and pharmaceuticals (acetic anhydride, ephedrine, and pseudoephedrine under licensing notes), live animals and animal products subject to quarantine clearance, certain agricultural commodities, second-hand goods and waste/scrap of specified types, and items subject to Bureau of Indian Standards (BIS) compulsory certification (which effectively restricts import to holders of a BIS license).
• Prohibited — import is not permitted. Under the FTP definitions in Chapter 11, "Prohibited" indicates the import policy of an item "whose import or export is not permitted." Licenses will not normally be granted for prohibited goods. Prohibited categories include specified wild animals and animal products covered by the Wild Life (Protection) Act, 1972 and CITES, certain narcotic drugs and psychotropic substances not covered by licenses under the Narcotic Drugs and Psychotropic Substances Act, tallow and other animal fats for edible use, certain live plants and plant products, and goods that contravene public health, morality, or national-security regulations.
• State Trading Enterprise (STE) — import permitted only through designated government-owned or government-authorized trading entities. Examples historically include petroleum products and certain fertilizers, though many STE categories have been liberalized.

The import policy applicable to a consignment is determined by the policy in force on the date of import, which the Handbook of Procedures (HBP) 2023, Paragraph 2.17, defines as the date of the bill of lading for sea cargo, the airway bill for air cargo, or the goods receipt for land or inland-water transport. If a good's status changes from Free to Restricted or Prohibited after shipment but before arrival, the old policy governs provided the bill of lading predates the change notification.

Application for import license (restricted goods). An importer wishing to import a restricted item must apply online through the DGFT portal at dgft.gov.in for an import authorization for restricted items. According to Chapter 2 of the HBP 2023, applications must be made online and are submitted to the jurisdictional Regional Authority (RA) of DGFT determined by the applicant's registered address. The applicant must hold a valid Importer Exporter Code (IEC) number granted under Section 7 of the FT(D&R) Act; only one IEC is issued per PAN (Permanent Account Number).

The application must specify the tariff classification, the quantity (by weight, volume, or value), the country of origin or supply, the end-use, and supporting documents as prescribed in the relevant licensing note or public notice for the item. Common supporting documents include an end-user certificate, an import license from the nodal ministry (for example, the Ministry of Agriculture for live animals, the Department of Atomic Energy for specified radioactive materials, or the Ministry of Environment for goods under CITES), proof of BIS registration for items subject to compulsory BIS certification, or evidence of actual-user status if the license note imposes an actual-user condition.

Licensing fees and validity. DGFT FAQ guidance for restricted imports (available on dgft.gov.in) states that a registration fee is charged at ₹1 per ₹1,000 of the CIF value of the authorization, subject to a minimum of ₹500 and a maximum of ₹1,00,000 per application. The fee must be paid electronically at the time of submission. The validity period of an import authorization for restricted items is specified in the authorization itself and is typically six months to one year from the date of issue. No extension of validity is available as of the FAQ date; importers must complete the import and file the bill of entry within the validity period, and any unused portion of the license lapses.

Clearance with authorization. When goods covered by an import authorization arrive, the importer must file a bill of entry under Section 46 of the Customs Act, 1962 and present the authorization (electronically via ICEGATE or physically, depending on the customs station's capabilities) to the proper officer of customs. The proper officer verifies that the goods match the description, quantity, and value in the authorization and that the authorization is valid on the date of import (defined as the bill-of-lading date). Under Paragraph 2.06 of the HBP 2023, mandatory documents for import include the bill of lading, commercial invoice, packing list, and "any other document that may be required under the Policy or any other law," which for restricted goods includes the import authorization. Customs will not permit clearance for home consumption of restricted goods without a valid authorization, and attempted import without authorization renders the goods liable to confiscation under Section 111(d) of the Customs Act (goods imported contrary to any prohibition or restriction for the time being in force).

Country-specific restrictions. Unless otherwise specified, imports may be made from any country; however, country-specific prohibitions or limitations are specified in the FTP or the ITC (HS) General Notes. For example, imports from certain countries may be subject to additional end-use verification or restricted under economic sanctions or bilateral-agreement obligations.

Exemptions and special regimes. Certain categories of importers are exempt from licensing requirements for restricted goods. Under Paragraph 2.50 of the HBP 2023, government departments and units of the Central Government may import restricted items required for research and development purposes without an authorization (excluding live animals), subject to certification. Similarly, imports under duty-exemption schemes such as the Advance Authorisation scheme (Chapter 4 of the FTP 2023) may be permitted for restricted inputs needed to manufacture export products, subject to the conditions in the scheme. However, no exemption applies to prohibited goods; the FTP states that "no export or import of an item shall be allowed … if the item is prohibited for exports or imports respectively," even under duty-exemption or export-promotion schemes.

Penalties for non-compliance. Importing restricted or prohibited goods without the required authorization is an offense under both the FT(D&R) Act and the Customs Act. Under the FT(D&R) Act, the importer is liable to penalties and potential placement on the Denied Entity List (DEL), which bars the entity from obtaining future import/export authorizations. Under the Customs Act, the goods are liable to confiscation under Section 111(d), and the importer is liable to a penalty under Section 112 and potential prosecution under Section 135 (imprisonment up to seven years for certain prohibited goods).

Finding the current ITC (HS) classification and policy. Importers should verify the import policy applicable to their goods by consulting the ITC (HS) database on the DGFT website at dgft.gov.in/CP/?opt=itchs-import-export, entering the eight-digit HS code, and reviewing the policy column in Schedule 1 (Import Policy) and any applicable licensing notes or General Notes. DGFT issues frequent public notices amending the classification or policy for specific items, particularly in sensitive sectors such as electronics, steel, chemicals, and agricultural products; importers are responsible for confirming the policy in force on the date of shipment.

Source: Foreign Trade (Development and Regulation) Act, 1992, Sections 2(g), 3(2), 3(3) Source: DGFT, ITC (HS) Import Policy and Import Authorization Module Source: DGFT, Handbook of Procedures 2023, Chapter 2 (General Provisions Regarding Imports and Exports), Paragraphs 2.03, 2.06, 2.17, 2.50 Source: DGFT, Foreign Trade Policy 2023, Chapter 1 (Legal Framework), Paragraph 1.05 and Chapter 11 (Definitions), Paragraph 11.41 Source: DGFT FAQ on Restricted Imports Authorization

Imported goods may be deposited in a customs bonded warehouse without immediate payment of customs duty, allowing an importer to defer duty liability until the goods are cleared for home consumption or to avoid duty entirely if the goods are re-exported. Warehousing is governed by Chapter IX (Sections 57–73A) of the Customs Act, 1962, and is a core cash-flow management tool for importers who do not require immediate domestic sale.

Definition and legal framework. Section 2(43) of the Customs Act defines "warehouse" as "a public warehouse licensed under section 57 or a private warehouse licensed under section 58 or a special warehouse licensed under section 58A." Section 2(44) defines "warehoused goods" as "goods deposited in a warehouse." The Finance Act, 2016 amended these definitions (with effect from 14 May 2016) to replace the prior "appointment" language for public warehouses with "licensing" for all three categories, standardizing the regulatory framework.

Three categories of warehouse. The Customs Act recognizes three types of customs bonded warehouses:

• Public warehouse (Section 57): Licensed by the Principal Commissioner of Customs or Commissioner of Customs at any place, wherein dutiable goods imported by any importer may be deposited. Public warehouses are typically operated by government agencies (such as the Central Warehousing Corporation) or by private operators who accept goods from multiple importers. Any importer may deposit goods in a public warehouse without individual authorization, subject to the warehouse's capacity and terms.

• Private warehouse (Section 58): Licensed for the exclusive use of the licensee to deposit goods imported by that licensee alone. Section 58(1) provides that the Principal Commissioner or Commissioner of Customs may license a private warehouse "subject to such conditions as may be prescribed and as may be specified in the licence." The licensing procedure, conditions, security requirements, and operational obligations for private warehouses are prescribed in the Private Warehouse Licensing Regulations, 2016 (Notification No. 37/2016-Customs (N.T.) dated 6 May 2016, as amended).

• Special warehouse (Section 58A): Licensed under conditions prescribed for the deposit of goods of special nature (such as hazardous materials, arms and ammunition, narcotics under licence, or goods requiring temperature-controlled or high-security storage). The Special Warehouse Licensing Regulations, 2016 (Notification No. 39/2016-Customs (N.T.) dated 6 May 2016) prescribe additional infrastructure, security, and record-keeping requirements.

All three categories operate under the custody and handling obligations set out in the Warehouse (Custody and Handling of Goods) Regulations, 2016 (Notification No. 38/2016-Customs (N.T.) dated 6 May 2016).

Bill of entry for warehousing. An importer who wishes to warehouse imported goods must file a bill of entry for warehousing under Section 46 of the Customs Act at the time of import. The bill of entry is filed electronically via the Indian Customs Electronic Gateway (ICEGATE) under the Bill of Entry (Electronic Integrated Declaration and Paperless Processing) Regulations, 2018. At the time of warehousing, the importer does not pay basic customs duty (BCD) or integrated goods and services tax (IGST); the liability for these duties is suspended. The goods are then moved from the customs area (port, airport, or inland container depot) to the licensed warehouse under customs supervision or under electronic seal, as prescribed by the proper officer.

Execution of bond. Under Section 60 of the Customs Act, before any goods are permitted to be deposited in a warehouse, the importer (or the warehouse licensee, depending on the type of warehouse and the terms of the licence) must execute a bond in the prescribed form, binding himself in a penalty equal to twice the amount of duty assessed on the goods (or such other amount as the Principal Commissioner or Commissioner may fix). The bond secures the proper custody and accounting of the warehoused goods, the payment of rent and warehouse charges, and the payment of duty plus interest if the goods are not cleared within the permitted period or are removed improperly. Section 60 further provides that the Principal Commissioner or Commissioner may, for reasons to be recorded in writing, accept a general bond in lieu of separate bonds for each consignment, and may reduce or dispense with the bond requirement for certain classes of importers or goods.

Permitted warehousing period. Section 61 of the Customs Act prescribes the maximum period for which goods may remain warehoused. Under Section 61(1), goods may ordinarily be warehoused for a period not exceeding one year from the date on which the proper officer makes an order permitting the deposit of goods in the warehouse. The Principal Commissioner or Commissioner of Customs may, on sufficient cause being shown and subject to such conditions as he may impose, extend the warehousing period by a further period not exceeding one year at a time (Section 61(1) proviso). Any goods not cleared for home consumption, exported, or otherwise disposed of in accordance with the Customs Act before the expiry of the warehousing period (including any extension) may be disposed of by customs authorities through sale by public auction or other means as prescribed (Section 72).

Section 61(2) carves out an exception for capital goods and plant and machinery imported for setting up a factory or substantially expanding an existing factory: such goods may be warehoused for an initial period not exceeding three years, extendable by the Principal Commissioner or Commissioner for such further period or periods as he may allow, subject to payment of interest as provided in the proviso to Section 61(1). The proviso to Section 61(1) states that when the warehousing period (including extension) is allowed to exceed one year, the importer must pay interest on the duty at a rate and for the period as prescribed; however, the specific interest rate and calculation are delegated to rules or notifications issued by CBIC. (The commonly cited figure in trade practice is 24% per annum on overdue duty, but I am unable to confirm the statutory or regulatory citation for this rate as of 2026-06-01.)

Operations permitted in warehouse. Goods in a warehouse may be subjected to certain operations to preserve them, to improve their condition or marketability, or (under special permission) to manufacture or process them:

• Section 63 permits the proper officer to allow the owner of warehoused goods to sort, separate, blend, repack, mark, label, or carry out such other operations as may be necessary to render the goods marketable, provided the operations do not amount to manufacture and do not change the essential character or tariff classification of the goods.

• Section 65 (as substituted by the Finance Act, 2016 with effect from 14 May 2016) permits the Principal Commissioner or Commissioner of Customs to allow the licensee of a private warehouse to carry out manufacturing and other operations in the warehouse under conditions prescribed by regulations. The current framework is the Manufacture and Other Operations in Warehouse (No. 2) Regulations, 2019 (Notification No. 44/2019-Customs (N.T.) dated 19 June 2019, commonly known as MOOWR 2019), which allows duty-free import of raw materials and capital goods into a bonded warehouse for manufacturing, with duty payable only when the finished goods are cleared for home consumption (domestic tariff area) and duty fully remitted if the finished goods are exported. MOOWR 2019 imposes no minimum export obligation and no time limit on the warehousing of inputs or capital goods used for manufacturing, making it a flexible duty-deferment and duty-remission scheme for exporters and domestic manufacturers alike.

Clearance from warehouse. Warehoused goods may be cleared in one of several ways:

1. Home consumption (Section 68): The importer files a bill of entry for home consumption (also called an ex-bond bill of entry), pays the full amount of duty leviable on the goods at the rate in force on the date of filing the bill of entry for home consumption (not the date of original import), and obtains an order for clearance from the proper officer. Under Section 15(1)(b), the rate of duty and tariff valuation applicable to warehoused goods cleared for home consumption is determined as of the date on which the bill of entry for home consumption is presented, meaning that if duty rates have increased (or decreased) during the warehousing period, the new rate applies. The value of the goods for duty purposes, however, remains the transaction value determined under Section 14 at the time of original importation.

1. Re-export (Section 69): The owner may file a shipping bill for export and, subject to permission from the proper officer, re-export the warehoused goods without payment of duty. This allows an importer who warehoused goods speculatively or under a conditional sale to avoid duty if the goods are ultimately shipped to a third country or returned to the original supplier.

1. Transfer to another warehouse (Section 67): Warehoused goods may be transferred from one warehouse to another (bond-to-bond transfer) without payment of duty, subject to execution of a fresh bond at the destination warehouse and compliance with prescribed procedures. The CBIC digitized the bond-to-bond transfer procedure via Circular No. 19/2024-Customs dated 30 September 2024, enabling online filing of transfer requests through the ICEGATE Warehouse Module.

1. Consumption in warehouse (if permissible): Certain goods (such as samples destroyed for testing, or goods lost due to natural causes such as evaporation or insect damage within prescribed limits) may be written off without full duty payment, subject to the proper officer's satisfaction under Section 13 (pilferage and damage provisions) and warehouse regulations.

IGST and warehousing. Warehousing defers both BCD and IGST. When warehoused goods are cleared for home consumption, the importer pays BCD at the applicable rate and IGST on the aggregate of the transaction value plus BCD (and any applicable cess), calculated at the IGST rate in force on the date of the ex-bond bill of entry. The IGST paid is eligible for input tax credit under the CGST Act, 2017, as with any import; BCD is not creditable. If the warehoused goods are re-exported, neither BCD nor IGST is payable.

Digitization of warehousing procedures. CBIC Circular No. 19/2024-Customs dated 30 September 2024 launched a Warehouse Module on ICEGATE for online filing of warehouse licence applications (public, private, and special), online submission of bond-to-bond transfer requests, and uploading of monthly returns required under Regulation 11 of the Warehouse (Custody and Handling of Goods) Regulations, 2016. User manuals are published on the ICEGATE portal at icegate.gov.in. The digitization streamlines licensing, transfer approvals, and compliance monitoring, and is part of CBIC's broader National Logistics Policy and ease-of-doing-business agenda.

Prohibited and restricted goods. Goods whose import is prohibited under Section 11 of the Customs Act (read with the Foreign Trade (Development and Regulation) Act, 1992 and the ITC (HS) Import Policy) may not be warehoused; attempted warehousing renders the goods liable to confiscation. Restricted goods may be warehoused only if the importer holds a valid import authorization from DGFT (or the designated nodal ministry) at the time of filing the bill of entry for warehousing, and the authorization covers warehousing or remains valid through the anticipated clearance date.

Source: Customs Act, 1962 (Act No. 52 of 1962), Chapter IX (Warehousing), Sections 57, 58, 58A, 60, 61, 63, 65, 67, 68, 69, and Section 15(1)(b) (date for determination of rate of duty), consolidated text as of 30 March 2022 Source: Private Warehouse Licensing Regulations, 2016, Notification No. 37/2016-Customs (N.T.) dated 6 May 2016 Source: Warehouse (Custody and Handling of Goods) Regulations, 2016, Notification No. 38/2016-Customs (N.T.) dated 6 May 2016 Source: Manufacture and Other Operations in Warehouse (No. 2) Regulations, 2019, Notification No. 44/2019-Customs (N.T.) dated 19 June 2019 Source: CBIC Circular No. 19/2024-Customs dated 30 September 2024, Digitization of Customs Bonded Warehouse Procedures

The assessable value of imported goods for calculation of basic customs duty (BCD) and integrated goods and services tax (IGST) is determined under Section 14 of the Customs Act, 1962 and the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (Notification No. 47/2007-Customs (N.T.) dated 10 October 2007, as amended), which implement the WTO Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade (GATT) 1994 (the WTO Customs Valuation Agreement). India adopted the transaction-value method as the primary basis for customs valuation with effect from August 1988, replacing the prior Brussels Definition of Value notional-value framework.

## Transaction value: the primary method

Section 14(1) of the Customs Act provides that the value of imported goods "shall be the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation," subject to conditions "as may be specified in the rules made in this behalf" and including "in addition to the price as aforesaid, any amount paid or payable for costs and services, including commissions and brokerage, engineering, design work, royalties and licence fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges to the extent and in the manner specified in the rules."

The Valuation Rules, 2007 (made under Section 14) prescribe that transaction value is acceptable when:

• the buyer and seller are not related, or if related, the relationship did not influence the price;
• the price is the sole consideration for the sale; and
• the sale is not subject to a condition or consideration for which a value cannot be determined.

The transaction value is determined as of the date on which the bill of entry is presented under Section 46. The exchange rate applied is the rate notified by CBIC under Section 14 for the date of presentation of the bill of entry.

## Related-party transactions and the two-part acceptance test

A significant portion of India's imports occur between related parties—parent and subsidiary, group companies, or parties under common control. The Valuation Rules define "related persons" by reference to six statutory relationships: officers or directors of one another's businesses; legally recognized partners; employer and employee; any person directly or indirectly owning, controlling, or holding 5% or more of the outstanding voting stock or shares of both; one directly or indirectly controlling the other; or both directly or indirectly controlled by a third person.

When the buyer and seller are related, the Valuation Rules provide that the transaction value is acceptable only if the importer demonstrates (on request of the proper officer) that either:

(a) the relationship did not influence the price—the importer must show that the circumstances surrounding the sale are consistent with normal commercial practice for sales of identical or similar goods in the same industry; or

(b) the transaction value closely approximates one of three "test values":

• the transaction value in sales to unrelated buyers of identical or similar goods for export to India at or about the same time;
• the deductive value of identical or similar goods (resale price in India minus specified deductions);
• the computed value of identical or similar goods (cost of production plus profit).

The proper officer may verify the importer's demonstration by examining agreements (including group transfer-pricing policies), financial statements, and contemporaneous comparable transactions. When a related-party transaction is referred for detailed scrutiny, the investigation is typically conducted by the Special Valuation Branch (SVB) of the customs commissionerate.

If the importer cannot satisfy the proper officer under either limb, the transaction value is rejected, and the proper officer must determine the value by applying the sequential fallback methods described below.

## Statutory additions to the invoice price

Even when a transaction value is accepted, the Valuation Rules require that the following amounts be added to the price actually paid or payable, to the extent they are incurred by the buyer but not already included in the invoice price:

Commissions, brokerage, containers, and packing: Buying commissions are excluded, but selling commissions and brokerage paid by the buyer are added. The cost of containers treated as one with the goods and the cost of packing (materials and labor) are added.

Assists: The value of the following goods and services supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale for export of the imported goods, apportioned in a reasonable manner:

• materials, components, parts, and similar items incorporated in the imported goods;
• tools, dies, moulds, and similar items used in the production of the imported goods;
• materials consumed in the production of the imported goods;
• engineering, development, artwork, design work, plans, and sketches undertaken elsewhere than in India and necessary for the production of the imported goods.

Royalties and license fees: Payments for patents, trademarks, copyrights, and proprietary processes that the buyer must pay, directly or indirectly, as a condition of the sale of the goods being valued, to the extent not already included in the invoice price. CBIC guidance and judicial precedent establish that the royalty addition applies only if three cumulative conditions are met: (i) the royalty relates to the imported goods; (ii) the royalty is a condition of sale of the imported goods (not a separate post-import license for use in India); and (iii) the royalty is paid to the seller or a related party whose receipt benefits the seller. If the royalty is paid for post-import use of intellectual property in India (for example, a trademark license to sell goods in India after import) and is not a condition of the export sale, it is not added to the transaction value.

Proceeds of subsequent resale: The value of any part of the proceeds of any subsequent resale, disposal, or use of the imported goods that accrues directly or indirectly to the seller. (This addition is rare in practice but applies, for example, when the importer agrees to remit to the seller a percentage of the eventual resale proceeds in India.)

Freight, insurance, and handling: The cost of transport, loading, unloading, and handling charges associated with the delivery of the imported goods to the place of importation (the port, airport, or land customs station), and the cost of insurance. These additions bring the transaction value to a CIF (cost, insurance, freight) basis for sea and air shipments. If the invoice is on an FOB or C&F basis, the importer must declare the actual or estimated freight and insurance costs, and these are added to arrive at the assessable value. When goods are transshipped within India to an inland customs station, the cost of domestic transport from the port of entry to the inland station is also included.

The Valuation Rules provide that additions are made on the basis of objective and quantifiable data. If the importer does not possess such data, the proper officer may determine the value under the sequential fallback methods.

The Valuation Rules expressly prohibit additions for:

• charges for construction, erection, assembly, maintenance, or technical assistance undertaken after importation;
• customs duties and other taxes payable in India by reason of importation or sale of the goods.

## Sequential valuation methods when transaction value is not acceptable

The Valuation Rules establish a strict hierarchy of methods, to be applied sequentially only when transaction value cannot be determined:

Transaction value of identical goods imported at or about the same time, sold to unrelated buyers, adjusted for differences in commercial level, quantity, and freight/insurance.

Transaction value of similar goods (goods that are like in characteristics and materials, though not identical), subject to the same conditions and adjustments.

Deductive value: The unit price at which the imported goods (or identical or similar imported goods) are sold in India in the greatest aggregate quantity to unrelated buyers at or about the time of importation, in the condition as imported, minus:

• commission or profit and general expenses usually made in sales of goods of the same class or kind in India;
• usual costs of transport, insurance, and associated costs incurred within India;
• customs duties and taxes payable in India.

The deductive method effectively reconstructs the FOB-equivalent value by working backward from the domestic resale price.

Computed value: The sum of:

• cost of materials and fabrication or other processing employed in producing the imported goods;
• an amount for profit and general expenses usually reflected in sales of goods of the same class or kind made by producers in the country of exportation for export to India; and
• freight, insurance, loading, and handling charges to the place of importation.

The computed-value method requires the cooperation of the foreign producer and is rarely used in practice because producers outside India are not obligated to disclose their cost accounting to Indian customs.

Residual (fallback) method: The value determined using "reasonable means consistent with the principles and general provisions" of the Valuation Rules and Section 14, on the basis of data available in India. The Valuation Rules expressly prohibit the use of:

• the selling price in India of goods produced in India;
• a system providing for acceptance of the higher of two alternative values;
• the price of goods on the domestic market of the country of exportation;
• the cost of production (other than computed values);
• the price of goods for export to a country other than India;
• minimum customs values; or
• arbitrary or fictitious values.

The residual method is the method of last resort and is applied on a case-by-case basis using all available evidence.

## Tariff values (Section 14(2))

Section 14(2) of the Customs Act empowers CBIC to fix tariff values by notification for any class of imported goods, notwithstanding the transaction-value method. When a tariff value is notified, the higher of the transaction value or the tariff value is applied (unless the tariff-value notification specifies otherwise). Tariff values have historically been notified for commodities subject to high volatility (areca nuts, edible oils, brass scrap, certain chemicals) to prevent undervaluation, but the number of items subject to tariff values has declined in recent years, and CBIC now prefers risk-based post-clearance audit over blanket tariff values. Importers should verify whether a tariff value applies to their goods by consulting the CBIC website before filing the bill of entry.

## Documentation and penalties for undervaluation

Under Section 17 of the Customs Act (as amended to establish a self-assessment regime), the importer is responsible for self-assessing the transaction value and the applicable statutory additions. The proper officer may verify the self-assessment and, if the declared value appears incorrect or incomplete, may request additional documents, including:

• the commercial invoice;
• the purchase order and sale contract;
• evidence of payment (bank remittance, letter of credit);
• cost breakdown for freight, insurance, packing, assists, and royalties;
• any other statement, information, or document considered necessary by the proper officer, including transfer-pricing documentation if the parties are related; and
• an invoice of the manufacturer or producer of the imported goods where the goods are imported from or through a person other than the manufacturer or producer (enabling scrutiny of the manufacturer's selling price in triangular or chain transactions).

Deliberate undervaluation (declaring a lower transaction value or omitting statutory additions to evade duty) is an offense under Section 111(m) (goods liable to confiscation if their value is mis-declared), Section 114AA (penalty for use of false documents or furnishing false information up to five times the duty sought to be evaded), and Section 135 (imprisonment up to seven years for fraudulent evasion). Civil penalties under Section 112 also apply, and persistent undervaluation may lead to the importer being placed on a watch list or subjected to 100% examination and Special Valuation Branch referral for all future imports.

Source: Customs Act, 1962 (Act No. 52 of 1962), Section 14 (Valuation of goods) and Section 17 (Self-assessment), consolidated text as of 30 March 2022

The assessable value (also called customs value) of imported goods is the foundation for calculating basic customs duty (BCD), integrated goods and services tax (IGST), and any applicable cesses. India's customs valuation framework is based on the WTO Agreement on Implementation of Article VII of GATT 1994 (the WTO Valuation Agreement), implemented domestically through Section 14 of the Customs Act, 1962 and the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.

Legal framework: Section 14 of the Customs Act, 1962. Section 14(1) of the Customs Act, 1962 (as substituted by the Finance Act, 2007 with effect from 10 October 2007) provides that the value of imported goods shall be the transaction value, defined as "the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation," subject to certain conditions and adjustments prescribed in the Customs Valuation Rules. The proviso to Section 14(1) requires that: (a) there are no restrictions on the disposition or use of the goods by the buyer (other than restrictions imposed by law, restrictions that limit the geographical area in which goods may be resold, or restrictions that do not substantially affect value); (b) the sale or price is not subject to a condition or consideration for which a value cannot be determined; (c) no part of the proceeds of any subsequent resale, disposal, or use accrues directly or indirectly to the seller, unless an appropriate adjustment can be made under the rules; and (d) the buyer and seller are not related, or if related, the transaction value is acceptable under the Customs Valuation Rules.

Six sequential valuation methods. According to the Directorate General of Valuation (DGOV) guidance, the WTO Valuation Agreement and the Customs Valuation Rules, 2007 establish six hierarchical methods for determining customs value, to be applied in strict sequence: (1) transaction value (the price actually paid or payable, adjusted in accordance with Rule 9); (2) transaction value of identical goods (goods that are the same in all respects, including physical characteristics, quality, and reputation); (3) transaction value of similar goods (goods that closely resemble the imported goods in component materials and characteristics and are commercially interchangeable); (4) deductive value, calculated by taking the selling price of the imported goods (or identical or similar goods) in India and deducting selling expenses, profit margin, duties, and taxes; (5) computed value, based on the cost of materials and fabrication in the country of production, plus profit and general expenses and other dutiable factors; and (6) fallback method, which allows flexible application of the previous methods in a manner consistent with Section 14(1) and WTO Valuation Agreement principles. Transaction value (method 1) is the primary method; the fallback methods apply only when transaction value cannot be determined.

Transaction value: Rule 3 and Rule 4 of the Customs Valuation Rules, 2007. Rule 3(i) states that "the value of imported goods shall be the transaction value." Rule 4(i) defines "transaction value" as "the price actually paid or payable for the goods when sold for export to India, adjusted in accordance with the provisions of rule 9." Rule 4(ii) defines "price actually paid or payable" as "the total payment made or to be made by the buyer to, or for the benefit of, the seller for the imported goods," and includes all payments made as a condition of sale of the imported goods by the buyer to the seller or by the buyer to a third party to satisfy an obligation of the seller. The transaction value thus has two components: the base price (price actually paid or payable from the commercial invoice or contract) and the Rule 9 additions (costs and services that must be added to the price if not already included).

Related-party test. DGOV guidance explains that for purposes of the Customs Valuation Rules, persons are deemed to be "related" if they are officers or directors of one another's businesses; legally recognized partners; employer and employee; one person owns, controls, or holds 5% or more of the voting stock or shares of both; one directly or indirectly controls the other; both are controlled by a third person; together they control a third person; or they are members of the same family. When the buyer and seller are related, the transaction value is acceptable only if the importer demonstrates that the relationship did not influence the price. The importer may do so by showing that the transaction value closely approximates (at or about the same time) the transaction value of identical or similar goods sold to unrelated buyers in India, the deductive value of identical or similar goods, or the computed value of identical or similar goods. If the importer cannot demonstrate that the relationship did not influence the price, the proper officer must reject the declared transaction value and proceed to the sequential fallback methods.

Rule 9 additions to the price actually paid or payable. According to DGOV guidance, Rule 9(1) of the Customs Valuation Rules, 2007 requires the following elements to be added to the price actually paid or payable (to the extent they are not already included in that price and provided supporting documents are available):

• Commissions and brokerage, except buying commissions paid by the importer to the importer's own purchasing agent. Selling commissions and all other brokerage are added.

• Cost of containers and packing that are treated as a unit with the goods for customs purposes, including the cost of packing labor and materials.

• Assists: the value, apportioned as appropriate, of goods and services supplied by the buyer free of charge or at reduced cost for use in connection with the production and sale of the imported goods. DGOV guidance identifies four categories of assists that must be added under Rule 9: (i) materials, components, parts, and similar items incorporated in the imported goods; (ii) tools, dies, moulds, and similar items used in the production of the imported goods; (iii) materials consumed in the production of the imported goods (for example, catalysts or lubricants); and (iv) engineering, development, artwork, design work, and plans and sketches undertaken outside India and necessary for the production of the imported goods. The value of an assist must be apportioned over the number of units produced or to be produced, reflecting the economic use of the assist.

• Royalties and licence fees related to the imported goods that the buyer must pay, directly or indirectly, as a condition of sale, to the extent not already included in the price actually paid or payable.

• Proceeds of subsequent resale: the value of any part of the proceeds of any subsequent resale, disposal, or use of the imported goods that accrues, directly or indirectly, to the seller.

Rule 9(2) further requires that the transaction value include (if not already included): (a) the cost of transport (freight) of the imported goods to the place of importation in India; (b) loading, unloading, and handling charges associated with the transport; and (c) the cost of insurance. In other words, India applies CIF valuation (Cost, Insurance, Freight) to the port of discharge or place of importation. If the commercial invoice is on an FOB or other basis, the importer must add actual freight, insurance, and handling charges to arrive at the CIF value for customs purposes.

Documentary evidence requirement. DGOV guidance states that the Rule 9 additions must be based on objective and quantifiable data. Where such data do not exist, the transaction value cannot be determined under the transaction-value method, and the proper officer must resort to the sequential fallback methods. Importers are expected to furnish invoices, agreements, freight and insurance certificates, assist-value calculations, and royalty agreements to support each Rule 9 addition.

Rejection of declared value in cases of doubt. DGOV guidance notes that the WTO Valuation Committee Decision (subsequently incorporated in the Customs Valuation Rules as Rule 10A, per DGOV nomenclature) allows customs authorities to reject the declared transaction value when there is reason to doubt the truth or accuracy of the declared value but no direct evidence of fraud. In such cases, the proper officer may request the importer to furnish further information and evidence. If the doubt is not resolved, the proper officer may reject the declared value and determine the value using the sequential fallback methods. Article 17 of the WTO Valuation Agreement (cited in DGOV FAQ) confirms that nothing in the Agreement restricts the right of customs administrations to satisfy themselves as to the truth or accuracy of any statement, document, or declaration presented for customs valuation purposes, and that customs authorities may make enquiries to verify that the elements of value declared are complete and correct.

Currency conversion. When the price actually paid or payable is in foreign currency, the Customs Act provides that conversion to Indian rupees shall be at the rate of exchange notified by CBIC under Section 14. CBIC notifies daily exchange rates, which are published on the CBIC website and the Indian Customs Electronic Gateway (ICEGATE). The relevant date for determining the exchange rate is ordinarily the date of presentation of the bill of entry; for warehoused goods cleared ex-bond, it is the date of the ex-bond bill of entry, not the date of original import.

Practical application. An importer filing a bill of entry under Section 46 of the Customs Act self-assesses the transaction value under Section 17(1). This requires the importer to: (i) confirm that the transaction meets the Section 14(1) conditions; (ii) take the price actually paid or payable from the commercial invoice or contract; (iii) add all Rule 9(1) elements (commissions, packing, assists, royalties, proceeds) that are not included in the invoice price, supported by documentary evidence; and (iv) add freight, insurance, and handling charges under Rule 9(2) to arrive at the CIF value. The resulting transaction value is the assessable value on which BCD is calculated. IGST is then calculated on the sum of the assessable value plus BCD (and any applicable cess). The proper officer may verify the self-assessment by examining or testing the goods under Section 17(2), and may re-assess the duty if the self-assessment was incorrect (Section 17(4)).

Source: Customs Act, 1962 (Act No. 52 of 1962), Section 14 (valuation of goods for purposes of assessment), consolidated text as of 30 March 2022 Source: Directorate General of Valuation, Brief on Valuation (overview of WTO Valuation Agreement, transaction value, Rule 9 additions, and sequential methods under Customs Valuation Rules, 2007) Source: Directorate General of Valuation, FAQ on Customs Valuation (WTO Agreement on Customs Valuation, Article VII of GATT 1994, and related-party tests)