Indirect Tax Laws · Classification of Imported and Export Goods

Customs Tariff Act and Structure of the Tariff

Updated 5 October 2026 · Fact-checked

The Customs Tariff Act, 1975 has two Schedules. The First Schedule lists import goods and their duty rates. The Second Schedule lists export goods that attract export duty. Goods are arranged in sections, chapters, headings, subheadings and tariff items based on the Harmonized System. To solve a question, read the heading with the relevant section and chapter notes, then pick the 8-digit item.

Understand Customs Tariff Act and Structure of the Tariff

Customs duty has two parts: the levy and the rate. The Customs Act, 1962 gives the power to levy duty. The Customs Tariff Act, 1975 tells you the rates. It does this through two Schedules. To know the duty on any goods, you must first find where those goods sit in the Schedule. This is classification.

The First Schedule is the import tariff. It follows the Harmonized System of Nomenclature (HS), an international goods coding system developed by the World Customs Organization. Most trading countries use it, so a product gets the same description at the first six digits everywhere. The HS has 21 sections, which cover Chapters 1 to 97. Each section is divided into chapters. Section XXI covers Chapter 97, which is works of art, collectors' pieces and antiques. Chapter 77 is kept reserved in the HS.

The Indian First Schedule adds Section XXII, which covers Chapters 98 and 99 and holds special classification provisions. These chapters are additions in the Indian tariff and are not among the HS chapters (1 to 97). So the Indian First Schedule has 21 HS-based sections plus Section XXII, which makes 22 sections.

Within a chapter, the code gets more specific as the digits increase:

2 digits: chapter.
4 digits: heading.
6 digits: subheading. Digits 1 to 6 are the international HS.
8 digits: Indian tariff item. The last two digits are added by India for finer national detail. This is the code used in the Bill of Entry.

The Schedule also uses dashes in the description column. A heading is the main entry. One dash marks a subdivision of it, and two dashes a further subdivision. A dashed entry is read together with the entry above it.

Each section and chapter begins with legal notes (Section Notes and Chapter Notes). They define terms, include some goods and exclude others. Classification is determined by the terms of the headings and any relative Section or Chapter Notes (General Rule for Interpretation 1), so you must read the notes together with the heading. The tariff is applied with the General Rules for Interpretation, which tell you how to decide between competing headings.

The Second Schedule is the export tariff. It is short. Only goods listed in it can attract export duty. If export goods are not listed there, no export duty applies to them under the tariff.

Key rules to remember

HS code ladder: Chapter (2 digits) → Heading (4) → Subheading (6) → Tariff item (8); The first 6 digits are the international HS. Digits 7 and 8 are India-specific.
Number of sections: HS = 21 sections (Chapters 1 to 97; Section XXI covers Chapter 97); Indian First Schedule adds Section XXII (Chapters 98 and 99) = 22 sections; Sections group chapters. Section XI, for example, covers textiles, Chapters 50 to 63. Chapter 77 is reserved in the HS.
Import vs export Schedule: Import duty rates → First Schedule; export duty rates → Second Schedule; Export duty arises only for goods listed in the Second Schedule.
Order of reading: Heading terms + relative Section Notes and Chapter Notes (GIR Rule 1) → Subheading → Tariff item; The heading and the notes are read together, because the notes can include or exclude goods that the heading wording seems to cover.
Dash convention: Heading (no dash) → "-" subdivision → "--" further subdivision; Read a dashed entry with the entry above it, not alone.

How to solve Customs Tariff Act and Structure of the Tariff questions

Use this order for any question on the structure of the tariff or on finding the right code for given goods.

1Identify the direction of trade. Import means the First Schedule. Export means the Second Schedule.
2For imports, identify the goods, their material, function and form. Note composition and use if the facts give them.
3Find the likely section and chapter. Read the Section Notes and Chapter Notes together with the heading wording for inclusions and exclusions before choosing.
4Select the heading (4 digits) that describes the goods most specifically. Apply the General Rules for Interpretation if two headings seem to fit.
5Go down to the subheading (6 digits) and then the tariff item (8 digits), reading dashed entries together with the entry above.
6For export goods, check whether the goods appear in the Second Schedule. If not, no export duty applies under the tariff.
7State the classification with its reason (note, heading wording or rule), then say what it means for the rate of duty.

Quickest way: Decode-and-trace method

When to use it: Use it for MCQs and short case scenarios that give a code or ask where goods fall in the tariff.

Split the code into pairs: first pair is the chapter, first four digits the heading, first six the subheading, all eight the tariff item.
Map the chapter to its section. Use the chapter's subject to place the section, for example Chapters 50 to 63 sit in Section XI, textiles.
Mark digits 1 to 6 as international HS and digits 7 to 8 as national.
Check the direction: import means First Schedule, export means Second Schedule for export duty only.
Eliminate options that mix up levels, such as calling a 4-digit code a subheading.

Common mistakes in Customs Tariff Act and Structure of the Tariff

Treating all 8 digits as the international HS code.
Students see the 8-digit code on documents and assume it is the global standard.
Fix: Remember that only the first 6 digits are common internationally. India adds digits 7 and 8.
Classifying goods from the heading text without reading Section and Chapter Notes.
Notes are at the start of the chapter and look like background reading.
Fix: Read the notes together with the heading. They can exclude goods that the heading wording appears to cover.
Saying the Second Schedule lists every export good.
Students assume the export tariff mirrors the import tariff.
Fix: The Second Schedule lists only goods that attract export duty. Unlisted goods have no export duty under the tariff.
Mixing up the levy and the rate, crediting the Tariff Act with the power to levy.
Both Acts are called customs laws and are studied together.
Fix: The Customs Act, 1962 provides the levy of duty. The Customs Tariff Act, 1975 provides the rates through its Schedules.
Reading a dashed sub-entry on its own.
Students scan for the product name and skip the parent entry.
Fix: A dashed entry is a subdivision of the entry above it. Read the parent description first, then the sub-entry.
Confusing a heading (4 digits) with a subheading (6 digits).
The terms look alike and answers often mention only 'code'.
Fix: Count digits: 2 chapter, 4 heading, 6 subheading, 8 tariff item.

Worked examples

Example 1

Case: A Tiruppur exporter imports a consignment of cotton knitted T-shirts as samples. The Bill of Entry shows the code 6109 10 00. The customs officer asks the clerk to identify each level of the code and say which part is internationally common. Answer.

Show the solution

Split the code: 61 | 09 | 10 | 00.
Chapter is the first two digits: 61, which covers knitted or crocheted apparel and clothing accessories.
Chapter 61 falls in Section XI, which covers textiles and textile articles (Chapters 50 to 63).
Heading is the first four digits: 6109, which covers T-shirts, singlets and similar garments, knitted or crocheted.
Subheading is the first six digits: 6109 10, which is the cotton subdivision of that heading.
Tariff item is the full eight digits: 6109 10 00.
The first six digits (6109 10) are the international HS. The last two digits (00) are India's national addition.

Answer: Chapter 61, in Section XI (textiles); heading 6109; subheading 6109 10; tariff item 6109 10 00. The first six digits are the international HS and the last two are India-specific. The code belongs to the First Schedule because the goods are imported.

Example 2

Case: Navkar Traders imports industrial machinery and also exports a processed food product. The finance manager asks which Schedule of the Customs Tariff Act, 1975 governs the duty on each, and whether export duty is certain on the food product. Advise.

Show the solution

For the imported machinery, the direction of trade is import, so the rates are found in the First Schedule.
To find the rate, locate the machinery's section and chapter, read the notes, then select the heading, subheading and eight-digit tariff item.
For the exported food product, the direction is export, so the relevant Schedule is the Second Schedule.
The Second Schedule lists only the goods on which export duty is levied. Check whether the food product appears in it.
If the product is not listed, no export duty applies to it under the tariff. If it is listed, the rate shown against that entry applies.
Export duty is therefore not certain. It depends on whether the goods are listed.

Answer: Import duty on the machinery is found in the First Schedule through its eight-digit tariff item. Export duty on the food product depends on the Second Schedule: duty applies only if the goods are listed there, and otherwise no export duty arises under the tariff.

Exam tips

Be ready to give the digit ladder (2, 4, 6, 8) with what each level is called. This is a favourite MCQ.
In written answers, state first that the Customs Act provides the levy and the Tariff Act provides the rates. Then describe the two Schedules.
Where a case gives a code, decode it level by level before answering. Marks follow the steps.
Mention Section and Chapter Notes whenever you justify a classification. Examiners look for it.
Do not quote current duty rates from memory. Rates change by notification and Finance Act, so the question will give them.

Practice questions from Classification of Imported and Export Goods

Customs Tariff Act and Structure of the Tariff: frequently asked questions

What is the difference between HSN and the customs tariff code?

HSN is the Harmonized System of Nomenclature, the international coding system whose digits 1 to 6 are common across countries. The Indian customs tariff code is an 8-digit code built on HS, with two extra digits added by India. For customs, you use the 8-digit tariff item.

How many sections and chapters are in the First Schedule?

The HS has 21 sections covering Chapters 1 to 97, and Section XXI covers Chapter 97, works of art, collectors' pieces and antiques. The Indian First Schedule adds Section XXII, which covers Chapters 98 and 99 and holds special classification provisions. This gives 22 sections in the Indian tariff. Chapter 77 is kept reserved in the HS.

What does the Second Schedule of the Customs Tariff Act contain?

It is the export tariff and lists the goods on which export duty is levied, with the rate. Goods not listed there do not attract export duty under the tariff.

Why are Section and Chapter Notes important in classification?

They define terms and say which goods are included in or excluded from a section or chapter. Classification is determined by the terms of the headings and any relative Section or Chapter Notes, so the notes are read together with the heading wording. A classification that ignores them can be wrong even if the heading seems to fit.