India's industrial growth continues to attract businesses that require advanced manufacturing equipment, processing units, and heavy machinery from international suppliers. Whether you are setting up a new production facility or upgrading existing operations, understanding how to import machinery in India is critical. The machinery import procedure involves several regulatory steps, from obtaining trade licenses to navigating customs clearance and duty assessments.
This comprehensive guide covers the entire process of capital goods import, including the benefits available under the Export Promotion Capital Goods (EPCG) Scheme, which can significantly reduce your import costs. Every step has been outlined to help business professionals plan and execute their industrial machinery import efficiently and without unnecessary complications.
Understanding Machinery Import Classification
Machinery imported into India is classified under various chapters of the Harmonized System of Nomenclature. Most industrial machinery falls under Chapters 84 and 85 of the Customs Tariff Act. Chapter 84 covers mechanical machinery, boilers, and parts thereof, while Chapter 85 deals with electrical machinery and equipment. The correct classification of your machinery under the appropriate HS code determines the applicable customs duty rate and any regulatory requirements that must be satisfied.
Capital goods, which include machinery used for manufacturing or production purposes, may qualify for concessional duty rates under specific government schemes. Understanding this classification before placing orders with your international supplier helps avoid duty disputes and ensures cost-effective procurement.
Key Regulatory Requirements
The first and most essential requirement to import machinery in India is an Import Export Code from the DGFT. You can apply for your IEC through Patron Accounting's IEC registration service for a hassle-free application process. Beyond the IEC, importers must register on ICEGATE for electronic filing of customs documents.
An Authorised Dealer Code registration with your bank is also required, as this links your bank account to the customs system for duty payments and foreign exchange transactions. Depending on the type of machinery, additional certifications from BIS or WPC may be necessary. Always verify the specific requirements for your machinery category with your customs broker before placing the order.
EPCG Scheme: Duty-Free Import of Machinery
The Export Promotion Capital Goods Scheme is one of the most beneficial provisions for businesses looking to import machinery at reduced costs. Under this scheme, importers can bring in capital goods at zero customs duty, provided they fulfil an export obligation equivalent to six times the duty saved within a period of six years from the date of issuance of the EPCG authorization.
This scheme is particularly advantageous for export-oriented businesses, manufacturers, and service providers who can demonstrate future export commitments. The EPCG authorization is obtained from the regional DGFT office. Businesses that successfully meet their export obligations effectively import their machinery duty-free, which represents a substantial saving on capital expenditure.
Step-by-Step Machinery Import Procedure
Step 1: Obtain IEC and Register on ICEGATE
Apply for your IEC through the DGFT online portal. Once obtained, register your IEC on ICEGATE to enable electronic filing of customs documents. Also register your AD Code with the customs authority at the port of import for seamless duty payments.
Step 2: Identify the Correct HS Code
Work with your customs broker to determine the exact HS code for your machinery. This step is crucial as it affects duty rates and any applicable restrictions. Incorrect classification is one of the most common causes of customs disputes and unexpected duty demands.
Step 3: Apply for EPCG Authorization
If your business qualifies for the EPCG scheme, apply for the authorization at your regional DGFT office before importing the machinery. The authorization must be obtained prior to shipment to avail the duty benefits.
Step 4: Place Order and Arrange Shipment
Finalize your purchase order with the overseas supplier. Coordinate with a freight forwarder for shipping logistics. Ensure the supplier provides all necessary documents including the commercial invoice, packing list, and certificate of origin in the correct format.
Step 5: Customs Clearance and Duty Payment
Once the machinery arrives at the Indian port, your customs broker files the Bill of Entry on ICEGATE. Customs officials assess the shipment, verify documents, and calculate the applicable duties. Upon payment of duties and clearance of inspection, the machinery is released for delivery.
Documents Required for Machinery Import
The documents required include the IEC certificate, ICEGATE registration, commercial invoice, packing list, bill of lading or airway bill, certificate of origin, insurance certificate, technical catalogue and specifications, EPCG authorization if applicable, and a letter from the importer confirming the end use of the machinery.
Having your GST registration in order is equally important. The IGST paid on imported machinery can be claimed as input tax credit. Ensure your GST registration is current before initiating the import to avoid complications during customs clearance.
Import Duties on Machinery
Basic Customs Duty on most machinery ranges from 0% to 7.5%. Integrated GST is charged at 18% on the assessable value plus customs duty. Social Welfare Surcharge applies at 10% of the Basic Customs Duty. Under the EPCG scheme, the Basic Customs Duty is reduced to zero, making it highly attractive for eligible businesses.
For second-hand or refurbished machinery, additional conditions apply. The Customs Valuation Rules require a chartered engineer's certificate confirming the residual life and value of the used machinery. The duty is assessed based on the depreciated value as certified by the engineer, not the original purchase price.
Challenges in Importing Machinery
Importing heavy machinery comes with logistical challenges, including transportation from the port to the factory site, which may require special vehicles and permits for oversized loads. Delays in customs clearance due to incomplete documentation or HS code disputes are common issues that can result in demurrage charges at the port.
Some businesses also face challenges in meeting EPCG export obligations within the stipulated timeframe, which can result in duty recovery with interest. Working with an experienced customs house agent and Patron Accounting for trade compliance guidance helps mitigate these risks effectively.
