What is Export Duty in India & How to Calculate in 2025

source: investopedia

When you are getting a product shipped in or out of this country, you remain responsible to pay the government authorities a certain fee as a tax on this venture. In India, the Central Board of Indirect Taxes and Customs (CBIC) overlooks the rules and regulations related to such custom duty payments.

As overseas shipping emerges as a quintessential contributor to the sustainable economic growth of this developing nation, export duty in India also becomes a crucial factor.

The meaning of export duty is the type of custom that you as an exporter, will need to pay off  to the authorities to send a product abroad via legible means. Please note that in order to claim possession or ownership of an imported or exported product, you will need to settle the customs duties in the first place.

In this country, laws about export duty payments are specified under the 1975 Act to Consolidate and Amend the Law Relating the Customs Duties – known in general as the Customs Tariff Act.

In its Second Schedule, the Act denotes that an export duty will be charged on specific kinds of products that are getting shipped overseas. The Schedule provides an extensive list of these aforementioned goods, along with their Harmonised System of Nomenclature or HSN Code.

Below, a general category of products tariffed and details about goods that come under these categories had been discussed briefly.

1. Spices

• Cardamom [Code 0908 30]: In order to export a kilogram of cardamom, you will have to pay an export tariff of ₹ 50.
• Black Pepper [Code 0904 11]: On the other hand, when you are shipping out black pepper, the charges are levied as ₹ 5/Kg.

2. Minerals

• Granite [Code 2516]: If you are sending granite overseas, it will cost you a 15% rate of export duty.
  
• Barytes [Code 2511 10]: For every tonne of Barytes exporter, you will be charged an export fee of ₹ 50.

3. Beverages

• Tea [Code 0902]: A tax charge of ₹ 5 will need to be paid by you as an exporter to send out every kilogram of this product. 
  
• Coffee [Code 0901]: However, if you are exporting coffee, you must pay ₹ 2,200 as tariff charges against every quintal of this product.

The procedure to calculate export duty in India for the set of products you are shipping out has been discussed below:

Step 1: Navigate to the export-related section of the official website of CBIC. 

Step 2: Locate the product you are exporting by the tariff item number or the description of the article in question.

Step 3: Note down the payable export duty rate as displayed on the website. 

Step 4: If the rate of duty is decided on the amount of product you are shipping out, multiply the given amount as per your exporting goods to find out the sum you will have to submit as customs duty. 

Step 5: However, if the duty rate is given in percentage, follow this formula as mentioned below in order to find out the tariff amount payable:

Export duty = Free on Board [FOB] price of the goods x The given rate percentage 

Additionally, if a product’s export transaction calculations had been made as per the Cost, Insurance and Freight [CIF] value, you will have to determine its FOB beforehand to calculate its export duty in India.

Understanding the meaning of export duty is also important to better interpret how it has a significant effect on this country's socioeconomic development. Some important facets of export duty charges are discussed below:

Tax revenue earning

The global export market can experience a hike in demand for certain indigenous products from one specific country. In that scenario, such a country can enjoy the scope of monopoly profit by providing adequate supply.

So, in an emerging economy like India, the government can levy export duty on such products in high demand to increase its revenue earnings substantially. As a result, the internal welfare development of this country can be affected positively.

Providing a competitive edge to domestic product manufacturers

Export duty in India can also help domestic manufacturers to save up a significant amount in the cost of production. For instance, if specific raw materials are required in manufacturing similar goods in this country and abroad, the government can levy a lump sum as a tariff on the export of these raw materials. This way, the indigenous businesses will be able to manufacture a product at a comparatively lesser price than their counterparts across the borders.

Additionally, in the backdrop of the free market, the export duty can also benefit domestic businesses as it can stabilise international prices of select goods as per the global commodity agreements in place.

Closing wealth gap

Possession of assets being limited to a certain section of society can be detrimental to a country and its citizens. That is why India has a responsibility to minimise wealth inequality here – especially as the fifth-largest economy in the world.

Consequently, the federal government can use export duty implementation as a tool for a redistributive scheme. Enforcing a taxation charge on businesses can be crucial in closing the wealth gap between the manufacturers and consumers of a product via capita reallocation between the two groups. As the government plays the role of an intermediary in such a social mechanism, adequate checks and balances also remain in place.

Managing the supply chain of the export market

Bulk production of certain goods for the targeted purpose of exporting can overrun the market with excess products. As a result, demand for these goods will reduce significantly – affecting their profitability in an adverse manner. Additionally, the quality of inventory management can vary significantly from one business to another. Therefore, excess production can inevitably lead to large-scale wastage.

In order to prevent such unwarranted scenarios from arising, a country’s government must take necessary steps to manage the quantity of production nationally. Export duty in India can be used as a viable method to monitor production, as a higher tariff charge can minimise export-oriented overstocking.

Safeguarding the Interests of Domestic Buyers

Levying customs duty on products can also help a country to stabilise the price of an otherwise exportable commodity for its own citizens. Additionally, if there is inflation, a government may raise its export tariff charges as a method of trade restriction.

This way, the number of homegrown products getting exported can be temporarily minimised so that the domestic market can have an abundance of adequate supply.

Therefore, if the export duty in India, as collected by the customs department can be used adequately, it can lead to a comprehensive restructuring of how businesses function here. Needless to say, such an economic overhaul can also ensure all-inclusive welfare for the country’s future.