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Indirect Tax Laws · Types of Duty

Basic Customs Duty and Levy of Customs Duty

Updated 5 October 2026 · Fact-checked

Basic customs duty (BCD) is the main duty charged on goods imported into or exported from India. Section 12 of the Customs Act, 1962 is the charging section, and the rates come from the Customs Tariff Act, 1975. To solve a question: confirm the goods are dutiable, find the rate, fix the assessable value, then compute BCD and the other levies in order.

Understand Basic Customs Duty and Levy of Customs Duty

Customs duty is a tax on goods crossing India's border. The Customs Act, 1962 says when and how the duty is charged and collected. The Customs Tariff Act, 1975 says how much. Keep this split clear, because exam questions often test it.

Section 12 of the Customs Act is the levy section. It says duties of customs are charged at the rates specified under the Customs Tariff Act, or any other law for the time being in force, on goods imported into or exported from India. The words "or any other law" matter. The Customs Tariff Act itself provides for several duties: the standard rates in its First and Second Schedules (charged under Section 12 of the Customs Act, with Section 2 of the Tariff Act specifying those rates), additional duty (CVD) under Section 3, safeguard duty under Section 8B and anti-dumping duty under Section 9A. IGST on imports is levied under the IGST Act, 2017.

Basic customs duty is the standard duty on imports. Its rates are in the First Schedule to the Customs Tariff Act, arranged by tariff heading. Export duty rates are in the Second Schedule, and most goods have no export duty.

The rate in the Schedule is the standard (tariff) rate. The Central Government can reduce or exempt it by notification under Section 25. The rate you actually apply is the effective rate after any exemption. Always check whether an exemption is given in the question.

BCD is charged on assessable value, which is the value determined under Section 14. The rate that applies is the one in force on the date set by Section 15 for imports (and Section 16 for exports). Other levies, such as IGST on imports, are then worked out on a base that includes BCD.

The social welfare surcharge (SWS) is a separate levy under Section 110 of the Finance Act, 2018. It is charged at 10% of the aggregate of the duties of customs, unless exempted by notification. That aggregate excludes IGST, GST compensation cess, safeguard duty, anti-dumping duty, countervailing duty on subsidised articles and any duty under Section 9 or 9A of the Tariff Act. SWS is not charged on itself. So SWS applies by default unless exempted. In a question, use the rate, the base and the exemption position that the question gives. If the question tells you to ignore SWS or says the goods are exempt, do not charge it.

Key rules to remember

Levy of duty
Duty is leviable on goods imported into, or exported from, India at the rates specified in the Customs Tariff Act, 1975 or any other law (Section 12, Customs Act, 1962)
Charging section. Quote it first in any theory answer on levy.
Basic customs duty
BCD = Assessable value × Effective BCD rate
Use the rate after any Section 25 exemption notification, if one is given.
Social welfare surcharge (where applicable)
SWS = 10% × aggregate of duties of customs, excluding IGST, GST compensation cess, safeguard duty, anti-dumping duty, countervailing duty on subsidised articles and any duty under Section 9 or 9A (Section 110, Finance Act, 2018), unless exempted
SWS applies by default unless exempted by notification. In a question, follow the rate, base and exemption position the question gives, and ignore SWS if the question says so. Where the question says SWS is 10% of BCD, or only BCD is a duty in the question, the base is BCD. IGST, GST compensation cess, safeguard duty and anti-dumping duty are never part of the SWS base.
IGST on imports
IGST = (Assessable value + BCD + SWS, if any) × IGST rate
The base includes BCD and other duties, but not IGST itself.
Total import duty payable
Total = BCD + SWS (if any) + IGST (+ other duties if given)
Add any anti-dumping, safeguard or compensation cess only if the question gives it.
Tariff versus effective rate
Standard rate: Tariff Act Schedule. Effective rate: standard rate as reduced or exempted by notification
Section 25 allows the exemption.

How to solve Basic Customs Duty and Levy of Customs Duty questions

Use this order for both theory and numerical questions on BCD and levy.

  1. 1Identify whether the goods are imported or exported. Imports are generally dutiable. Exports are dutiable only if the Second Schedule lists them.
  2. 2State the charging provision: Section 12 of the Customs Act and the relevant Schedule of the Customs Tariff Act.
  3. 3Find the standard rate for the tariff heading, then check whether any exemption notification gives a lower effective rate.
  4. 4Fix the assessable value under Section 14 and the valuation rules. Use the figure the question gives, including any additions it names.
  5. 5Check which rate applies, using the date for determining the rate of duty in Section 15 (imports) or Section 16 (exports).
  6. 6Compute BCD = assessable value × effective rate.
  7. 7Compute SWS only if the question says it applies, on the base the question gives, then compute IGST on value plus BCD plus SWS.
  8. 8Add up the total duty and write one line of conclusion.

Quickest way: Four-line duty ladder

When to use it: Use it for any numerical question that asks for total import duty or customs duty payable.

  1. Write AV on the first line.
  2. Add BCD (AV × effective rate). Add SWS only if the question says so, at the rate and on the base the question gives.
  3. Write the IGST base as AV + BCD + SWS, then multiply by the IGST rate.
  4. Total duty = BCD + SWS + IGST. Add any other duties only if the question provides them.

Common mistakes in Basic Customs Duty and Levy of Customs Duty

  • Applying BCD or IGST on the wrong base

    Students charge IGST on the assessable value alone.

    Fix: Include BCD, and SWS if it applies, in the IGST base. Write the base on its own line.

  • Using the standard rate when an exemption notification is given

    Students read the tariff rate and ignore the notification.

    Fix: Read the whole question. If an exemption or concessional rate is mentioned, use the effective rate under Section 25.

  • Confusing the Customs Act with the Customs Tariff Act

    Both deal with duty, so students mix up which one gives the levy and which gives the rates.

    Fix: Remember: Section 12 of the Customs Act is the levy section, and the Tariff Act Schedules give the rates.

  • Assuming all exports attract duty

    Students treat import and export alike.

    Fix: Export duty is payable only on goods listed with a rate in the Second Schedule. Otherwise export duty is nil.

  • Adding SWS automatically

    Students memorise SWS as always 10% of BCD.

    Fix: Add SWS only when the question says it applies, and on the base the question gives. It is levied on the aggregate of duties unless exempted, and many questions ignore it or exempt it.

  • Ignoring the date for determining the rate

    Students use the rate on the date of the question, not the statutory date.

    Fix: Check Section 15 for imports and Section 16 for exports before choosing the rate when rates changed.

Worked examples

Example 1

Case: Asha Components Ltd imports machine parts with an assessable value of ₹10,00,000. Basic customs duty is 10%. The question states that social welfare surcharge applies at 10% of BCD (no other duty is given). IGST on the goods is 18%. Compute the total import duty payable.

Show the solution
  1. BCD = ₹10,00,000 × 10% = ₹1,00,000.
  2. SWS, as given in the question, = 10% × ₹1,00,000 = ₹10,000.
  3. IGST base = ₹10,00,000 + ₹1,00,000 + ₹10,000 = ₹11,10,000.
  4. IGST = ₹11,10,000 × 18% = ₹1,99,800.
  5. Total duty = ₹1,00,000 + ₹10,000 + ₹1,99,800 = ₹3,09,800.

Answer: Total import duty payable is ₹3,09,800, with SWS applied only as the question states.

Example 2

Case: Bharat Traders imports goods with an assessable value of ₹5,00,000. The tariff rate of BCD is 20%, but a notification under Section 25 exempts the goods to the extent that the effective BCD is 10%. Ignore SWS. IGST is 18%. Compute BCD and the total duty, and state which rate applies.

Show the solution
  1. The standard rate is 20%, but the notification lowers the effective rate to 10%. The effective rate applies.
  2. BCD = ₹5,00,000 × 10% = ₹50,000.
  3. IGST base = ₹5,00,000 + ₹50,000 = ₹5,50,000.
  4. IGST = ₹5,50,000 × 18% = ₹99,000.
  5. Total duty = ₹50,000 + ₹99,000 = ₹1,49,000.
  6. At the standard rate, BCD would have been ₹1,00,000. The exemption therefore saves ₹50,000 of BCD.

Answer: BCD is ₹50,000 at the effective rate of 10%. Total duty payable is ₹1,49,000.

Exam tips

  • Begin theory answers with Section 12 of the Customs Act, 1962 and the Customs Tariff Act, 1975. That is the provision-and-conclusion pattern examiners expect.
  • In case-scenario MCQs, look for the notification or concession first. It decides whether the standard or effective rate applies.
  • In numericals, show the duty ladder line by line. Even if one figure is wrong, you keep marks for the method.
  • State clearly that export duty applies only to goods with a rate in the Second Schedule.
  • Use only the rates and values the question gives. Do not bring in a rate from memory.

Practice questions from Types of Duty

Basic Customs Duty and Levy of Customs Duty in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Basic Customs Duty and Levy of Customs Duty: frequently asked questions

What is basic customs duty?

Basic customs duty is the main duty on imported goods, charged at the rate in the First Schedule to the Customs Tariff Act, 1975, unless an exemption lowers it. It is computed on the assessable value of the goods.

What does Section 12 of the Customs Act say?

Section 12 is the charging section. It says customs duty is levied at the rates specified under the Customs Tariff Act, 1975 or any other law, on goods imported into or exported from India.

How is basic customs duty calculated?

Multiply the assessable value by the effective BCD rate. Then, if the question requires it, add social welfare surcharge on the base the question gives, and compute IGST on value plus BCD plus surcharge.

Is export duty charged on all exported goods?

No. Export duty is charged only on goods that carry a rate in the Second Schedule to the Customs Tariff Act. Goods not listed there are generally exported without export duty.