Tips to reduce Customs Duty while Importing

By | December 25, 2025
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Many importers assume customs duty is a fixed cost that cannot be changed—but that’s one of the most expensive myths in international trade. In reality, a large part of the duty you pay depends on decisions made before the goods even leave the supplier’s factory. From choosing the right HS code and country of origin to using government schemes and exemptions, there are legal and smart ways to reduce customs duty. This blog breaks down these strategies in simple terms, helping beginners import with confidence, compliance, and better margins.

Below listed are the tips with explanations, for practical and field-tested tips to reduce import duty:

1. Correct HS Classification (Biggest Impact)

  • Ensure accurate HS code selection—duty rates can vary widely for similar products.
  • Check:
    • Customs Tariff Act
    • WCO Explanatory Notes
    • Recent Customs rulings / CAAR decisions

2. Use Preferential Duty Benefits (FTAs / PTAs)

India has Free Trade Agreements (FTA) with countries like:

  • ASEAN
  • Japan
  • South Korea
  • UAE (CEPA)
  • Australia (ECTA)

How it helps:

  • Reduced or zero BCD
  • Requires valid Certificate of Origin (COO)

3. Valuation Optimization (Within Law)

Customs duty is calculated on Assessable Value.

Try to exclude:

  • Post-import inland transport (beyond port)
  • Installation & commissioning (if separately billed)
  • Local taxes paid after import
  • Do NOT undervalue—penalties hurt more than duty savings.

4. Country of Origin Planning

  • Source from FTA partner countries when feasible
  • Even changing supplier country can drop BCD from 10–20% to NIL
  • Sourcing strategy = tax strategy.

5. Check Anti-Dumping (ADD) & Safeguard Duties (SG)

  • Some products attract ADD / SG duty from specific countries
  • Shift sourcing to non-ADD countries where possible

6. Claim IGST Credit (Working Capital Relief)

  • IGST paid at import is 100% creditable (for GST-registered businesses)
  • Ensure:
    • Correct GSTIN in Bill of Entry
    • Proper GSTR-2B reflection

7. Split Consignments / Product Segmentation

  • Import items separately if:
    • Different HS codes attract different duty rates
    • One part qualifies for exemption, the other doesn’t
    • Strategic product breakup = lower overall duty.

8. Use Bonded Warehouse / FTWZ

  • Defer duty payment until goods are cleared
  • Useful for:
    • Cash flow management
    • Re-exports
    • Value addition before clearance
  • Duty is paid only when goods enter the domestic market.

9. Pre-Import Planning / Country of Origin

  • Source from FTA partner countries when feasible
  • Even changing supplier country can drop BCD from 10–20% to NIL
  • Post-import correction is costly; pre-import planning is powerful.

10. Advance Authorization / EPCG (For Manufacturers & Exporters)

If imports are linked to exports:

a. Advance Authorization

  • Zero duty import of raw materials
  • Export obligation applies

b. EPCG Scheme

  • Capital goods at 0% or 3% duty
  • Export obligation spread over years

c. Customs Exemption Notifications (under Section 25):

  • Project imports
  • Capital goods
  • Defense / power / renewable energy items
  • R&D and testing equipment

Important Tip:

Duty saving is done before import, not after clearance.