The import tariff structure for machinery and equipment entering India consists of three tiers: ① BCD (Basic Customs Duty): 7.5% for Chapter 84 (machinery) and 7.5–10% for Chapter 85 (electrical equipment); ② SWS (Social Welfare Surcharge): 10% of the BCD; ③ IGST (Integrated Goods and Services Tax): 18% (calculated cumulatively based on CIF + BCD + SWS). The combined effective tax rate for machinery and equipment is approximately 28–30% of the CIF value (data from Sea Air Cargo Systems, 2026). Manufacturers can utilize the EPCG scheme to reduce the BCD to 0%.
1.
How the three-tier tax is calculated
Taxable Basis: CIF value (converted using the official exchange rate set by the Indian CBIC, not the market exchange rate); Step 1 (BCD): CIF × 7.5% (for Chapter 84 general machinery); Step 2 (SWS): BCD × 10% (e.g., if BCD is 7.5%, SWS is 0.75%); Step 3 (IGST): (CIF + BCD + SWS) × 18%; Total: Approximately 28–30% of CIF value (taking a CIF value of 100 million INR as an example, the total duty would be approximately 28–30 million INR). These three tiers are stacked and calculated cumulatively; the IGST is applied to the total value including BCD and SWS (rather than solely on the CIF value).
II. HS Codes Determine Tax Rates
Chapter 84 (Machinery & Equipment): Mostly 7.5%; Chapter 85 (Electrical Equipment): 7.5–10%; Special Categories: Higher rates for certain construction machinery/specific equipment (check via 8-digit HSN); Lookup Tools: India’s CBIC official website + online tariff calculators (e.g., tariffdutycalculator); Changes: Rates adjust with the fiscal year budget (e.g., Notification No. 02/2026-Customs)—check the 8-digit HSN first, then calculate the tax (range: 0–150%; machinery mostly falls within 7.5–10%).
III.
EPCG Duty Reduction Scheme
What it is: Export Promotion Capital Goods (EPCG) Scheme; Effect: BCD (Basic Customs Duty) reduced to 0% (requires a commitment to export obligations over 6 years: typically 6 times the import value); Applicability: Capital goods used to produce goods for export; Process: Apply for EPCG authorization → Duty-free import → Fulfill export obligations for clearance/redemption; Total Cost: Approx. 18% under EPCG (IGST only)—highly recommended for export-oriented manufacturers (reduces total duties from 28–30% to approx. 18%).
IV.
Additional Considerations for Used Equipment
Restrictions: Age limits apply to most used machinery imports (usually within 10 years; some within 5 years); Conditions: Used equipment requires a certificate of conformity (issued by an inspection agency); Customs Clearance: 10–15 working days for new machines; 15–25 days for used equipment (including inspection); Duties: Used equipment is subject to BCD + SWS + IGST (no exemptions based on age)—Importing used machinery to India: Verify age compliance before shipping (rejection upon arrival results in significant losses).
V. Cost Breakdown and Recommendations
Five Cost Components: CIF + BCD + SWS + IGST + Customs House Agent (CHA) fees (approx. 12,000–35,000 INR); Others: Inland freight, warehousing, and inspection fees; Recommendations: First, check the 8-digit HSN tax rate; second, evaluate eligibility for the EPCG scheme (export-oriented); third, use the official CBIC exchange rate for estimates; fourth, engage an Indian customs broker to pre-review documents; fifth, consider FTA Certificates of Origin (for preferential rates applicable to certain countries)—Indian machinery tariffs: BCD 7.5% + SWS 0.75% + IGST 18% ≈ 28–30% aggregate; EPCG can reduce this to 18%;
key steps: check HSN, evaluate EPCG eligibility, and calculate tax based on official exchange rates.
