Importing from China to sell online: IEC, customs duty and IGST

To import stock from Alibaba or any Chinese supplier for resale, you need an IEC from DGFT and, in practice, a GST registration whose GSTIN goes on the bill of entry. At the border you pay basic customs duty, a 10% Social Welfare Surcharge on that duty, and IGST. The IGST comes back to you as input tax credit.

Why does a small order from Alibaba need an IEC?

Because the moment you buy to resell, it is a commercial import, whatever the size. Para 2.05 of the Foreign Trade Policy says no export or import of goods shall be made without an IEC unless specifically exempted. The exemptions cover personal use and a few border trades, not stock for your Amazon or Meesho listing.

Alibaba is only the meeting place. The supplier ships, but customs in India sees you as the importer. So the IEC, the duty and the paperwork are yours. If you have not got the code yet, our guides on what an IEC is and the documents it needs cover it in ten minutes of reading.

What duties will you pay at customs?

Think of it as three layers, each built on the one before.

The assessable value is what customs values the goods at: the price you paid plus freight and insurance up to the Indian port, converted to rupees at the exchange rate customs notifies. So a supplier quoting a low price with "free shipping" does not escape duty on the shipping.

Where do you find your rates? On ICEGATE, the customs portal, the Know your Import Duty enquiry lets you enter your 4 to 8 digit tariff heading and the country of origin. It lists every duty that applies, including any anti-dumping duty on goods from China. Do this before you place the order, not after the goods land.

A worked example with rupee numbers

Ravi sells desk accessories on Amazon from Pune. He orders 500 pieces from a supplier on Alibaba. With freight and insurance, the assessable value comes to Rs 2,00,000. Say the ICEGATE lookup for his heading shows BCD of 10% and IGST of 18%. These two rates are only for the arithmetic. Yours will depend on your heading.

Ravi pays Rs 61,960 at the border. But Rs 39,960 of it is IGST, which appears in his GSTR-2B and offsets the GST he collects on his sales. His real extra cost is Rs 22,000, plus the courier or customs broker's clearing charges. His landed cost before those charges is Rs 2,22,000 for 500 pieces, or Rs 444 a piece. That is the number he should price from, not the Alibaba price.

Courier or cargo: which route?

Small first orders usually come by express courier. The courier company files a courier bill of entry for you and collects the duty. CBIC's courier portal says duty on courier imports is paid through the electronic cash ledger from 1 March 2024. Trade sources describe a simplified courier form for low-value dutiable parcels up to an invoice value of Rs 1 lakh, with larger ones on a different form. Ask your courier which applies to your parcel and make sure it has your IEC and GSTIN.

Bigger orders by sea or air cargo need a regular bill of entry, filed through a licensed customs broker. The duty is the same. What changes is who files it and the handling charges.

How to import your first batch: step by step

1. Get GST registration if you sell on marketplaces. You will need the GSTIN on the bill of entry to claim the IGST back.
2. Apply for your IEC on dgft.gov.in. The government fee is Rs 500.
3. Find the HSN code and tariff heading of the product. Our guide on finding the HSN code helps here.
4. Look up the duty on ICEGATE with China as the country of origin. Note BCD, SWS, IGST and any anti-dumping duty.
5. Check whether the product is restricted or needs BIS certification. Toys, for example, need the BIS Standard Mark under the Toys (Quality Control) Order, 2020, and many electronic goods must be registered with BIS before import.
6. Ask the supplier for a proper commercial invoice and packing list showing the real price.
7. Let the courier or customs broker file the bill of entry with your IEC and GSTIN, and pay the duty.
8. After clearance, check that the IGST shows in your GSTR-2B before you claim it in GSTR-3B.

The mistake that costs the most

Many suppliers offer to write a lower value on the invoice "to save duty". Do not accept it. Customs compares declared prices with similar imports, and an undervalued parcel can be held, re-valued and penalised. You also lose IGST credit on the part you hid, and your books will never match your sales.

The second costly slip is a bill of entry filed without your GSTIN, or with someone else's. The IGST then never reaches your GSTR-2B, and you have paid 18% you cannot recover. Check the bill of entry copy every time.

Is it worth hiring help? For a single courier parcel, the courier handles most of it. Once you import by cargo, or the product needs BIS registration, a customs broker earns their fee.

Frequently asked questions

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