Import Landed Cost in India: BCD, SWS, IGST and Clearing Costs

The purchase order said USD 40,000 for a thousand pump housings, procurement budgeted ₹35.4 lakh, and the first goods receipt valued them at ₹49.7 lakh. Somewhere between the supplier's invoice and the warehouse shelf, the cost model picked up a notional insurance figure the company never paid, a customs exchange rate that differed from the bank's, and ₹7.6 lakh of IGST that should have gone to the credit ledger instead of inventory.

Import landed cost in India is predictable once two numbers are kept apart: the assessable value that customs uses to compute duty, and the cost that Ind AS 2 puts into inventory. Build each from its own rules, reconcile the gap line by line, and the per-unit cost stops drifting between the purchase order, the bill of entry and the stock ledger.

• What this guide covers: assessable value under the Customs Valuation Rules, the exchange rate on the bill of entry, the BCD, SWS and IGST stack, clearing charges, and IGST credit through GSTR-2B.
• What it adds: a worked USD invoice taken to INR cost per unit, a reconciliation of customs value to book value, a US entry of the same goods for contrast, and ERP controls.

Two different numbers: customs assessable value and book cost

Customs computes duty on assessable value; finance capitalises the amounts the company actually incurred. The two start from the same invoice but diverge on insurance, exchange rate and clearing charges, so a landed cost model that copies the bill of entry value into inventory is wrong by design.

Assessable value comes from section 14 of the Customs Act, 1962, and rule 10(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, which add transport and insurance to the place of importation. Inventory cost comes from Ind AS 2, paragraph 11: purchase price, import duties and other taxes that are not subsequently recoverable, and transport and handling directly attributable to acquiring the goods.

Building assessable value from FOB, freight and insurance

Assessable value is the transaction value plus the cost of transport, loading, unloading and handling to the place of importation, plus insurance to that place. When freight or insurance cannot be ascertained, rule 10(2) fills the gap with fixed percentages of the free on board value.

The rule was substituted by Notification No. 91/2017-Customs (N.T.) on 26 September 2017. It defines the place of importation as the customs station where goods are cleared for home consumption or removed to a warehouse, and its provisos set the fallbacks that importers meet most often when a supplier's invoice is on CFR or FOB terms without supporting papers.

• Freight not ascertainable: taken as 20% of the FOB value of the goods.
• Insurance not ascertainable: taken as 1.125% of the FOB value.
• FOB not ascertainable: the same percentages apply to the known sum of FOB plus the other cost.
• Air shipments: where actual air freight is known, the amount included is capped at 20% of FOB value.
• Transshipment inside India: transport, insurance and handling for moving goods from the first port to another customs station are excluded.
• Chartered vessels: the explanation adds ship demurrage, lighterage and barge charges to the cost of transport.

The practical lesson is documentary. If the importer holds a marine policy or a freight invoice, uploading it lets customs use the actual figure. If not, the formula applies, and on low-premium cargo the 1.125% default can exceed what an open policy would have cost. That notional amount raises duty but is not an expense the company incurred, so it does not belong in inventory.

The notified exchange rate versus the rate in the supplier ledger

Customs converts the foreign currency value at the rate in force on the date the bill of entry is presented; the books record the supplier invoice at the spot rate on the transaction date. Expect a difference on every import and reconcile it, rather than forcing one rate onto both.

Section 14 of the Customs Act requires the price to be calculated with reference to the exchange rate in force on the date the bill of entry is presented under section 46, using the rates CBIC notifies for imported goods. Ind AS 21, paragraph 21, records a foreign currency transaction at the spot rate on its date, and paragraph 22 allows an average weekly or monthly rate when rates do not move significantly.

Import landed cost in India uses two exchange rates: the bill of entry applies the CBIC rate in force on presentation under section 14 of the Customs Act, 1962, while the ERP books the invoice at the Ind AS 21 paragraph 21 spot rate; a ₹0.30 gap on USD 42,600 moves value by ₹12,780.

Stacking BCD, Social Welfare Surcharge and IGST line by line

The duty stack is sequential: basic customs duty on assessable value, Social Welfare Surcharge on the customs duties, then IGST on a base that includes both. Getting the order right matters because each layer is a percentage of the one before.

Basic customs duty comes from the First Schedule to the Customs Tariff Act, 1975, reduced where an exemption notification such as Notification No. 50/2017-Customs applies to the tariff line. Social Welfare Surcharge is levied under section 110 of the Finance Act, 2018, at 10% of the aggregate customs duties; a CBIC public notice from Bengaluru Air Cargo shows it computed as 10% of BCD.

AV      = (FOB + Freight + Insurance) × R_boe
          R_boe = CBIC rate in force on the date the bill of entry is presented
          Freight = 0.20 × FOB and Insurance = 0.01125 × FOB only when not ascertainable
BCD     = AV × r_bcd                    r_bcd = effective rate for the tariff line
SWS     = 0.10 × BCD                    (10% of aggregate customs duties)
IGST    = (AV + BCD + SWS) × r_igst     Customs Tariff Act s.3(8): value + customs duties,
                                         excluding IGST itself and GST compensation cess
Duty paid on the bill of entry = BCD + SWS + IGST

Book cost per unit (Ind AS 2 para 11)
        = [ Invoice × R_book + Freight_paid + Insurance_paid + BCD + SWS
            + Clearing charges net of recoverable GST ] ÷ Units received
IGST    → input tax credit ledger when eligible (Rule 36(1)(d) document: bill of entry)

IGST on imports is levied under the proviso to section 5(1) of the IGST Act, which applies section 3 of the Customs Tariff Act at the point customs duties are levied under section 12 of the Customs Act. Section 3(8) then fixes the value as the assessable value plus any customs duty and any sum charged like a customs duty, excluding the IGST and compensation cess themselves.

Port, CFS, broker and inland charges that join landed cost

Charges incurred after the goods reach the port are not part of assessable value but are part of inventory cost when they are needed to bring the goods to the warehouse. Tag each invoice to the bill of entry number so it can be added to the right receipt.

• Container freight station: handling, storage within free days and examination charges; storage beyond free days caused by a late filing is an abnormal cost to expense.
• Shipping line delivery order: delivery order fee and terminal handling at destination, invoiced in INR by the line or its agent.
• Customs broker: agency fee for filing and clearing, plus any reimbursed port charges, which should be passed through at cost with receipts.
• Inland haulage: transport from port or CFS to the receiving warehouse, which joins inventory like any inbound freight.
• Detention and demurrage: include only where they are a normal part of the lane; penalty-type delays are period costs.

GST on these service invoices is a separate question from the customs IGST. Where it is recoverable, it goes to the credit ledger and stays out of inventory under the same Ind AS 2 paragraph 11 exclusion. Our guide to reconciling broker imprest advances against port and CFS receipts covers the payment side, which is where most clearing-charge leakage starts.

Claiming IGST credit from the bill of entry through GSTR-2B

IGST paid at customs is normally a credit, not a cost, and the bill of entry is the document that supports it. Treat it as a receivable from the moment duty is paid, and clear it when the entry appears in GSTR-2B and is claimed in GSTR-3B.

Rule 36(1)(d) of the CGST Rules, 2017 lists a bill of entry or similar customs document assessing integrated tax on imports as a valid basis for input tax credit. The GST portal's FAQ on GSTR-2B confirms that the statement includes import of goods data received from the ICEGATE system, which is what the indirect tax team should match against the ERP's open IGST receivable.

• Match key: port code, bill of entry number and bill of entry date, which together identify the record ICEGATE sends to the GST portal.
• Amount check: IGST in GSTR-2B against the IGST in the duty payment challan for the same bill of entry, to the rupee.
• Timing: a paid bill of entry that is not yet visible in GSTR-2B stays an open receivable; do not post the credit from the duty challan alone.
• Eligibility: goods used for exempt supplies or for blocked purposes do not carry full credit; the unrecoverable share then joins cost.

IGST paid on an Indian bill of entry belongs in the input tax credit ledger, not inventory, because Ind AS 2 paragraph 11 excludes recoverable taxes and Rule 36(1)(d) of the CGST Rules accepts the bill of entry as the credit document; match each GSTR-2B import record to the duty challan to the rupee.

Worked consignment: USD invoice to INR landed cost per unit

One sea shipment of 1,000 pump housings shows both numbers side by side. The tariff rates, exchange rates and charges are illustrative, chosen to make the arithmetic visible; real figures come from the tariff line, the CBIC notification in force and the actual invoices.

The supplier invoiced USD 40,000 FOB. The buyer paid ocean freight of USD 2,600 to its forwarder and bought no cargo insurance. No policy was filed with the bill of entry, so customs applied the 1.125% default. The CBIC rate in force on presentation was ₹88.10; the ERP booked the invoice and freight at a spot rate of ₹88.40.

The bridge between customs value and book cost of goods plus freight is ₹26,865.00. The notional insurance adds ₹39,645.00 (USD 450 × ₹88.10), and the lower customs exchange rate removes ₹12,780.00 (₹0.30 × USD 42,600). Holding that bridge on file for each bill of entry answers the auditor's first question about why inventory does not equal assessable value.

The US column uses CBP's fiscal year 2027 fee table (CBP Dec. 26-14, in force for entries from 1 October 2026), which pairs the 0.3464% merchandise processing fee with a $34.58 minimum and $670.86 maximum, and charges harbor maintenance at 0.125% on ocean cargo. The 4.0% duty is an illustrative HTS rate. A US entry values goods without international freight and insurance, which is the biggest structural difference from the Indian CIF basis.

Duty arithmetic the ERP should lock and checks a reviewer owns

Every number that follows from a formula and an assessed document should be computed by the ERP and locked; classification, valuation disputes and eligibility belong to named people. Keep software suggestions to the tasks where a reviewer still signs.

The incident below is what happens when those boundaries are missing. Nothing in it is an error by customs; every number on the bill of entry was right. The failures are in how the ERP took those numbers into stock.

1. 3 Nov 2026, 10:05: the ERP posts supplier invoice INV-SH-2291 for USD 40,000 at ₹88.40 against PO 4500018826.
2. 6 Nov 2026, 14:20: bill of entry 4417823 is presented at Nhava Sheva; no insurance document is filed, so the 1.125% default is applied and AV is ₹37,92,705.00.
3. 6 Nov 2026, 16:45: ₹11,74,980.01 is paid through an ICEGATE challan; the analyst posts the whole amount to the goods receipt as a landed cost condition.
4. 30 Nov 2026, 18:10: month-end valuation shows the housings at ₹49,67,685.01 before clearing invoices, because IGST and the AV basis entered inventory; the IGST credit is missing from the November claim.
5. Controlled version: the posting rule sends IGST to the credit ledger, duties are added to book cost, the ₹26,865.00 bridge is filed, and inventory shows ₹42,49,537.55.

Allocating duty and freight, and where drawback guides take over

After the duty lines are posted, the remaining question is how freight and clearing charges spread across the items in the shipment. Use one allocation key per charge type and make the allocated total equal the invoice to the rupee.

Value is the usual key for BCD and SWS, because duty is a percentage of value; weight or volume suits ocean freight and haulage; a per-line split by bill of entry line suits broker fees charged per item. Our article on freight GL coding and allocation keys sets out how those keys sit in the ledger and how accruals reverse when late invoices arrive.

• BCD and SWS: allocate by the assessable value of each bill of entry line, which is how customs computed them.
• Ocean freight: allocate by gross weight or cubic metres from the packing list.
• CFS and line charges: allocate by container or package count when charges are per unit.
• Rounding difference: post the remainder to the largest line so the split ties exactly.

This article builds the Indian duty stack and the book cost of one import; it does not cover recovering duty on re-export or spreading cost across many SKUs. Those are separate controls with their own documents.

Our page on duty drawback traceability and SKU-level landed cost allocation starts from duty that has already been paid and follows imported lots into exports, with US drawback as the main case. For the ICEGATE side of filing and reconciling bills of entry and shipping bills, see the ICEGATE bill of entry and shipping bill reconciliation guide.

Landed cost controls to set up before the next shipment lands

Most of the controls are configuration, not headcount: two exchange rates, one bridge report, a locked IGST posting rule and an accrual per bill of entry. Put them in place before the next container rather than fixing the last one.

An Indian import landed cost process needs a monthly bridge from bill of entry assessable value under Customs Valuation Rules 2007 rule 10(2) to ERP book cost, explaining notional insurance and exchange differences; the worked shipment bridged ₹26,865 and kept ₹7,57,782 of IGST out of inventory.

Landed cost is one of several import and freight controls in our logistics and supply chain library. If you are scoping an ERP landed cost module or a trade compliance tool that reads bills of entry from ICEGATE, you can describe your ports, volumes and ledgers in our request for proposal form.