Indirect Tax Laws · Types of Duty

Additional Customs Duty, IGST and Cesses on Imports

Updated 5 October 2026 · Fact-checked

On imports, you pay basic customs duty first, then social welfare surcharge on that duty, then IGST as additional duty under section 3 of the Customs Tariff Act, and compensation cess if the goods attract it. IGST and cess are charged on assessable value plus the customs duties before them. Compute in that order.

Understand Additional Customs Duty, IGST and Cesses on Imports

When goods enter India, the customs duty is not one number. It is a stack of levies, each with its own base. Your job in the exam is to build the stack in the right order.

The first layer is Basic Customs Duty (BCD). It is charged as a percentage of the assessable value (AV). AV is the transaction value of the imported goods plus the additions required by the valuation rules, such as freight, insurance and landing charges.

The second layer is Social Welfare Surcharge (SWS). It is levied as a duty of customs at 10% of the aggregate of the duties of customs, excluding SWS itself, IGST and compensation cess. In most problems the only duty in that aggregate is BCD, so SWS is 10% of BCD. Notifications exempt many goods from SWS, so read the question for any exemption note. If the goods are exempt, SWS is nil. IGST, compensation cess and SWS itself are not part of the SWS base, because IGST and cess are levied under section 3 of the Customs Tariff Act and are not duties of customs under section 12 of the Customs Act.

The third layer is additional duty under section 3 of the Customs Tariff Act. After GST, this additional duty is equal to the IGST that would be charged on a similar domestic supply. Its base is the value determined under section 3(7) of the Customs Tariff Act. That value is the value of the imported article plus the customs duties chargeable on it under section 12 of the Customs Act, plus any sums chargeable on it under any law as an addition to, and in the same manner as, a duty of customs. SWS is levied as a duty of customs, so it is included. In practice the base is AV + BCD + SWS (plus any other customs duty). This is why it is called a cascade. Where the goods also attract GST compensation cess, an additional duty equal to that cess is levied on the same section 3(7) value. IGST is not a customs duty and is not part of that value, so it is not in the cess base.

One practical point decides many questions. A registered importer can usually take credit of the IGST paid at import, subject to the ITC rules. BCD and SWS are a cost. So when a question asks for the cost of the goods, include BCD and SWS but leave out the IGST that is creditable.

Key rules to remember

Assessable value: AV = Transaction value (CIF) + other additions under the valuation rules; If freight and insurance are not in the price, add them. Landing charges are added at 1% of CIF value unless the question gives actual figures.
Basic Customs Duty: BCD = BCD rate × AV; Use the rate given in the question. Do not rely on memorised tariff rates.
Social Welfare Surcharge: SWS = 10% × (aggregate of duties of customs, excluding SWS, IGST and cess); Usually this aggregate is just BCD. It is charged on duty, not on AV. Many goods are exempt from SWS by notification, so apply it only if the question does not say the goods are exempt.
IGST on imports (additional duty): IGST = IGST rate × (AV + BCD + SWS + any other customs duty in the base); The base is the section 3(7) value of the Customs Tariff Act: the value of the goods plus customs duties, including SWS. IGST is not charged on IGST or cess.
Compensation cess on imports: Cess = cess rate × (AV + BCD + SWS + any other customs duty in the base); Applies only if the goods are cess goods and the question gives a rate. The base is the same section 3(7) value as for IGST. IGST is not part of that value, so do not add it to the cess base.
Total payable at import: Total = BCD + SWS + IGST + cess (if any) (+ other duties if given); Cost of goods for a registered importer = AV + BCD + SWS, if IGST is creditable.

How to solve Additional Customs Duty, IGST and Cesses on Imports questions

Use this order for any question on the import duty stack. Write each line with its base so the examiner can award method marks even if one figure slips.

1List the data: transaction value, freight, insurance, landing charges, and all rates given (BCD, SWS, IGST, cess, any other duty).
2Work out the assessable value. Add freight, insurance and landing charges as the question and valuation rules require.
3Compute BCD on the AV.
4Compute SWS at 10% of the aggregate of customs duties (usually just the BCD), unless the question states that the goods are exempt from SWS.
5Add AV, BCD, SWS and any other customs duty in the base to get the value for IGST.
6Compute IGST on that value. If cess applies, compute it on the same value, not on a value that includes IGST.
7Add all the duties for total payable. If the question asks for cost, or for ITC, separate the creditable IGST from the cost elements.
8State the final answer with a one-line note on the base used for each duty.

Quickest way: Running-total cascade

When to use it: Use it for any numerical question with BCD, SWS, IGST and possibly cess. It takes about two minutes.

Write AV on the first line.
Next line: BCD = rate × AV. Then SWS = 10% of BCD. Add a column of cumulative value.
Sum AV + BCD + SWS. Box this figure. It is the base for both IGST and cess.
Multiply the boxed figure by the IGST rate, and by the cess rate if any.
Add BCD + SWS + IGST + cess for the total. Re-check that IGST was not put into the cess base.

Common mistakes in Additional Customs Duty, IGST and Cesses on Imports

Charging SWS on assessable value instead of on BCD
Students treat the surcharge like BCD, as a percentage of the invoice value.
Fix: Remember that SWS is 10% of the aggregate of customs duties (usually just BCD), not of AV. With a 10% BCD rate, SWS is 1% of AV. Also check the question for a notification exempting the goods from SWS.
Charging IGST on AV alone
Students forget that IGST on imports is an additional duty that cascades over customs duties.
Fix: Always add BCD and SWS to AV before applying the IGST rate.
Including SWS or IGST in the cess base wrongly
Students mix up the cess base with the IGST base. Some add IGST into the cess base, others leave out SWS.
Fix: Use one boxed value, the section 3(7) value: AV + BCD + SWS (and other customs duties). IGST is not part of that value. Apply IGST and cess separately to it.
Taking credit for BCD and SWS in the cost of goods
Students assume all duty paid at import is creditable because IGST is.
Fix: Only the IGST (and cess, where allowed) can be credited under the ITC rules. BCD and SWS go into the cost.
Adding landing charges when actual freight and insurance are already in the price, or missing them when absent
Students do not check whether the given value is FOB or CIF.
Fix: Read the basis of the price first. Add freight and insurance only if the price excludes them. Apply the 1% landing charge on CIF only if the question does not give actual landing charges.
Applying SWS to goods stated to be exempt from it
Students apply the standard formula without reading the question's notes.
Fix: Scan the question for exemption notes. If SWS is exempt, SWS is nil and the IGST base is AV + BCD.

Worked examples

Example 1

Case: Meridian Tools Pvt Ltd, a registered person, imports a machine at a CIF value of ₹10,00,000. Landing charges are to be taken at 1% of CIF. BCD is 10%, SWS is 10% of BCD and IGST is 18%. Compute the total customs duty payable and the cost of the machine to Meridian, assuming IGST is fully creditable.

Show the solution

CIF value = ₹10,00,000. Landing charges = 1% × ₹10,00,000 = ₹10,000.
AV = ₹10,00,000 + ₹10,000 = ₹10,10,000.
BCD = 10% × ₹10,10,000 = ₹1,01,000.
SWS = 10% × ₹1,01,000 = ₹10,100.
Value for IGST = ₹10,10,000 + ₹1,01,000 + ₹10,100 = ₹11,21,100.
IGST = 18% × ₹11,21,100 = ₹2,01,798.
Total duty payable = ₹1,01,000 + ₹10,100 + ₹2,01,798 = ₹3,12,898.
Cost of the machine = AV + BCD + SWS = ₹11,21,100, as the IGST of ₹2,01,798 is creditable.

Answer: Total duty payable is ₹3,12,898 (BCD ₹1,01,000, SWS ₹10,100, IGST ₹2,01,798). The cost of the machine is ₹11,21,100.

Example 2

Case: Kalpa Traders imports goods that attract compensation cess. Assume these rates: CIF value ₹5,00,000, landing charges 1% of CIF, BCD 20%, SWS 10% of BCD, IGST 28% and compensation cess 15%. Compute the total import duty payable.

Show the solution

Landing charges = 1% × ₹5,00,000 = ₹5,000. AV = ₹5,05,000.
BCD = 20% × ₹5,05,000 = ₹1,01,000.
SWS = 10% × ₹1,01,000 = ₹10,100.
Common base for IGST and cess = ₹5,05,000 + ₹1,01,000 + ₹10,100 = ₹6,16,100.
IGST = 28% × ₹6,16,100 = ₹1,72,508.
Compensation cess = 15% × ₹6,16,100 = ₹92,415. IGST is not added to this base.
Total = ₹1,01,000 + ₹10,100 + ₹1,72,508 + ₹92,415 = ₹3,76,023.

Answer: Total import duty payable is ₹3,76,023 (BCD ₹1,01,000, SWS ₹10,100, IGST ₹1,72,508, cess ₹92,415).

Exam tips

Show the cascade as a short table-style list of lines in your answer: AV, BCD, SWS, IGST base, IGST, cess, total. Method marks follow the lines.
Use only the rates given in the question. Question setters change rates, and a memorised rate can cost marks.
Read the notes under the question for SWS exemption, actual landing charges and whether ITC is available. These notes change the answer.
In theory questions, state that additional duty under section 3 of the Customs Tariff Act is equal to IGST (and to compensation cess on cess goods), and say what base it is levied on: the section 3(7) value, being the value of the goods plus customs duties including SWS.
In case-based MCQs, the trap is usually the base. Check whether the option applies IGST on AV only or on the cascaded value.

Practice questions from Types of Duty

Additional Customs Duty, IGST and Cesses on Imports: frequently asked questions

What is additional customs duty under section 3 of the Customs Tariff Act?

It is a duty levied on imported goods that is equal to the IGST (and, for cess goods, the compensation cess) that would apply to a similar domestic supply. It is charged on the value determined under section 3(7): the value of the goods plus the customs duties payable, including SWS. It puts imports and domestic goods on the same tax footing.

How do I calculate social welfare surcharge on customs duty?

Take 10% of the aggregate of the duties of customs, which is usually just the BCD. Do not apply it on assessable value. IGST, cess and SWS itself are not part of the SWS base. Many goods are exempt from SWS by notification, so check whether the question says the goods are exempt.

Is IGST on imports charged on the CIF value?

No. It is charged on the assessable value plus BCD, SWS and any other customs duty in the base. The assessable value is the transaction value plus the required additions, so the IGST base is higher than the invoice value.

Can I claim credit of BCD and SWS paid on imports?

No. Under the ITC rules, the IGST paid on import may be creditable for a registered person who meets the conditions. BCD and SWS are not creditable and form part of the cost of goods.