Table of Contents
Introduction
Customs duty remains a vital pillar of India’s fiscal policy in 2025. Governed by the Customs Act, 1962, and the Customs Tariff Act, 1975, it serves to regulate international trade while protecting domestic manufacturing. The 2025-26 budget brought a major “digital overhaul,” simplifying the tariff structure from multiple complex slabs down to just eight primary tariff rates (including a ‘zero’ rate) for industrial goods.
Understanding Custom Duty:
Customs duty is an indirect tax levied on the movement of goods across national borders. In 2025, the focus has shifted from mere revenue collection to Strategic Protectionism—using duties to encourage the domestic production of high-tech components like semiconductors, EV batteries, and solar modules.
Types of Custom Duty:
The duty structure was significantly streamlined in November 2025, merging dozens of notifications into a single master framework.
Basic Customs Duty (BCD): The standard tax on imports, now rationalized into slabs primarily between 5% and 18%.
Integrated Goods and Services Tax (IGST): Levied on all imports to ensure a level playing field with domestic GST-paying goods.
Social Welfare Surcharge (SWS): Calculated at 10% of the BCD. Update: The 2025 Budget exempted SWS on 82 tariff lines that are already subject to other cesses.
Anti-Dumping & Safeguard Duties: Targeted taxes imposed to prevent foreign companies from “dumping” cheap goods (like specific steel or chemical products) that could harm Indian manufacturers.
Agriculture Infrastructure and Development Cess (AIDC): A specialized cess used to fund rural infrastructure, often applied to items like gold, silver, and certain luxury vehicles.
How is Custom Duty Calculated?
The calculation in 2025 follows a strict sequential order:
Assessable Value (AV): Transaction Value + Freight + Insurance (CIF Value).
BCD: Calculated on AV.
SWS: 10% of the BCD amount.
IGST Value: .
IGST: Calculated on the total IGST Value.
Key Developments in Union Budget 2025-26
The 2025 budget introduced specific measures to lower costs for essential sectors while raising barriers for non-essential imports:
Healthcare & Life-Saving Relief
Full Exemption: 36 life-saving drugs (including those for cancer and rare diseases) are now fully exempt from BCD.
Concessional Rate: 6 other chronic disease medicines are now at a reduced 5% duty.
Electronics & “Make in India”
Mobile & EV Batteries: 35 additional capital goods used in EV battery manufacturing and 28 items for mobile batteries are now duty-free to boost local production.
TV Displays: BCD on Open Cells for LED/LCD TVs was reduced to 5% (or fully exempt in some cases) to fix “inverted duty structures.”
Critical Minerals & Industrial Inputs
Critical Minerals: Full BCD exemption on 25 minerals like Lithium, Cobalt, and Copper, which are essential for the green energy transition.
Luxury Hike: Duties on high-end items like Interactive Flat Panel Displays (IFPDs) were increased to 20% to encourage local assembly.
Compliance & Filing (The ICEGATE 2.0 Era)
In 2025, the customs process is almost entirely paperless via the ICEGATE 2.0 portal.
SWIFT (Single Window Interface for Facilitating Trade): All NOCs (No Objection Certificates) from agencies like FSSAI or AQCS are now processed exclusively through this portal.
Voluntary Revision: A new Section 18A was introduced in 2025, allowing importers to voluntarily revise their entries (Bill of Entry) post-clearance to correct honest mistakes without facing heavy penalties.
Automated Payments: ICEGATE now supports auto-populated NEFT/RTGS details, eliminating manual data entry for duty payments.
Conclusion
Disclaimer: The views expressed here are of the author and do not reflect those of Dhanvantree. Mutual funds are subject to market risks, please read the scheme documents carefully before investing.