Customs & Foreign Trade Policy

Customs duty is calculated on the assessable value under Section 14 of the Customs Act 1962 — typically the transaction value (CIF: Cost + Insurance + Freight). On this: Basic Customs Duty (BCD) at the HSN-based rate from the Customs Tariff Act 1975, plus Social Welfare Surcharge (10% of BCD), plus IGST at the applicable GST rate. BCD ranges from 0% to 150%; FTAs can reduce BCD to 0% for qualifying goods.

An Advance Authorisation (AA) under Chapter 4 of the Foreign Trade Policy 2023 allows duty-free import of inputs used to manufacture export goods. Linked to Standard Input-Output Norms (SION) published by DGFT. Export obligation: within 18 months (extendable to 24). Non-fulfilment results in customs duty recovery with 15% interest per annum under Section 61(2) of the Customs Act.

Duty Drawback under Sections 74/75 of the Customs Act refunds customs duties (BCD + SWS) paid on inputs used in exported goods — rates notified annually by CBIC, claimed in the shipping bill and auto-credited by ICEGATE. IGST refund under Section 54 CGST Act refunds GST on the export transaction itself. Both can be claimed simultaneously — they cover different taxes.

An advance ruling under Section 28H of the Customs Act provides a binding classification, valuation, or origin determination before goods are imported. Issued by the Authority for Advance Rulings (AAR) — binding on the applicant and customs officers. Valuable where two HSN heads could differ by 20–40 percentage points in duty rate, avoiding costly disputes at import.

FTP 2023–28 offers: (1) Advance Authorisation — duty-free inputs; (2) EPCG — 0% BCD on capital goods against 6x duty-saved export obligation over 6 years; (3) RoDTEP — notified rates credited as scrips on the shipping bill; (4) DFIA — transferable AA post-fulfilment; (5) SEZ/EOU — comprehensive duty and tax benefits for export-oriented units.