Indians fancy shopping abroad but they usually abandon the process at checkout due to shipping or handling charges. And a big chunk of that is customs duty. This is mandatory and there are no two ways about it. This tax is usually collected at the entry point; airport or shipping dock. How does it work in case of online purchases?
Do I have to pay import tax for all online purchases in India?
Current information, as per June 2020.
This is subject to change often. Here is a timeline of changes in the threshold amounts for India Import Duty:
- 2016 tax free threshold increased to Rs. 50000
- 2018 threshold reduced to Rs. 5000
- 2020 Indian government bans free duty on gifts in attempt to level playing field against compatition from Chinese ecommerce companies.
In January 2020 The Directorate General of Foreign Trade (DGFT) released a circular stating the following regarding the change in legislation for customs duty/import tax and thresholds for gifts:
Further clarification is found at this link from the dgft.gov.in
This means that all imports including gifts and those from ecommerce websites will be levied import duty at the applicable rate which must be paid by the recipient upon entry into India. The ide for this is that it levels the playing field for deomestic shops.
Historical information, prior to June 2020.
Previously if the value of your online purchase from an international site is less than Rs. 50000, it will not attract any import duty. This has recently come into effect. Earlier it was Rs. 2000. You will have to bear the tax fee if this amount exceeds. You can also evade customs duty if the seller is willing to mark your item as a gift. Shopping sites in Europe and the US usually do not provide this option. Some websites from countries like China, Singapore and Malaysia give this option. However, it does involve some amount of risk. Should the customs find out, you might not receive the product at all. As a responsible citizen, you must not support this either and pay the duty tax promptly.
What is the rate of import tax that I have to bear?
Earlier it was in excess of 40%. Today it is more or less 28% for goods more than Rs. 50000 worth. Apart from basic custom duty there are other taxes like countervailing duty, handling charges, CESS etc. Some parts of it have been replaced by the recent GST 2017 tax. In any case, you will have to rely on the calculations given by the package forwarding service.
Shipping companies are the best people to guide you about the import tax. So when you buy something online from the international website, you can check with the seller which shipping company they are using. Most shipping companies take care of the formalities themselves and you just have to bear its cost. There is fixed duty tax for each type of product and hence some sellers include that cost within the product pricing. Some charge it as extra as shipping and handling charges. So it is always better that you pay for it before to avoid inconveniences.
Are there any items banned from shopping online?
You can't buy products such as printed circuit boards, arms & ammunitions, sharp weapons such as swords, knives, etc, any sort of hand weapons and drugs without a prescription. Most online shopping portals do not allow you to buy things that are banned. Some products are banned from importing but the sellers may not have a ban in their country to sell them. So it is best that you check the customs website and find out if something you want to buy is banned or not.
Is import tax always included in the checkout price?
In case you opt for normal shipping, the product will still be delivered but the local post or courier company will be paying the tax at the port. So they will give you the receipt of tax paid at the time of delivery of the product. You will have to pay that fee in order to collect your item. Some websites charge for the duty fee upfront at the time of checkout. The best way to find out is to read the FAQ and shipping & delivery sections to learn about the tax payment. Each website has its own way of dealing with this import tax and hence it is best that you read their terms before placing the order.
Can there be an error in the duty tax fee levied?
The occurrence of something like this is very rare. However, should you find the product you received is wrongly taxed, do not worry as there is a grievance department. So you can provide the details of the product and the tax receipt. If they find any discrepancies, you will receive the refund. But be ready to wait for days before you get the refund.
Can I pay customs duty in advance?
Normally it is possible to inform the excise and customs department of your shopping and, with the correct paperwork, pay the outstanding tax, if there is any, in advance. One way to do this easily is to use a package forwarder. Many package forwarders will arrange payment of any tax due and arrange the correct paperwork to be completed before shipping your shopping on to your forwarding address.
Choosing a shipping method for online shopping
Most international shopping sites offer multiple shipping methods and the price for each one differs too. Reputed shipping companies like UPS, FedEx and DHL are easily reliable when it comes to paper work and smooth handling of shipping processes. Though they are a bit expensive on service, you can avoid all the inconveniences from a low price shipping company. One way to reduce these costs would be to use a package forwarder that ships to India, because they ship many many packages they are often able to offer you much cheaper shipping rates than if you had arranged shipping yourself.