Custom Duty Concession

The Custom Duty Concession scheme is a provision administered by the Ministry of Heavy Industries , Government of India, under which manufacturers in selected sectors can apply for a concessional rate of customs duty under the “Project Import” route when importing machinery and equipment for initial setting up or substantial expansion of projects. The purpose of this scheme is to reduce the cost of critical imported machinery/equipment and thereby enhance competitiveness of domestic manufacturers engaged in specified sectors. The benefit to you as an MSME manufacturer is that if you are eligible and you import approved machinery under this route, you may pay a lower customs duty - thereby lowering your capital cost and improving viability.

Key Features
Financial Assistance
Eligibility Criteria
Documents Required
Application Process for the Scheme

Key Features

Concessional rate of customs duty on selected machinery/equipment: Instead of paying the full Basic Customs Duty (BCD) and other import duties for imported machinery, if your project is approved under the scheme, you will pay a lower rate (as specified in the sanction letter) for the imported machinery/equipment. This lowers your upfront capital cost and improves your incentive to invest.
Applicable for new projects or substantial expansion: The scheme requires that the import of machinery must be for a “project” – either setting up a new manufacturing unit or significantly expanding an existing one. This ensures only growth-oriented investments benefit rather than routine imports.
Application to the nodal ministry division: To avail the benefit, you as an MSME manufacturer must submit an application to the specified division (for example, Auto Division in MHI) with necessary details of the project, cost, machinery list etc. MHI then issues an approval or sanction letter stating the machinery list and duty concession terms.
Targeted at specific sectors/manufacturers: The scheme is not generic for all imports; it is meant for manufacturing enterprises in certain sectors as notified. For example, for the automotive sector you must apply under the Auto Division of MHI. This sector-targeting helps align the scheme with national industrial policy.
Project Import route requirement: The imported machinery must come under the “Project Import” classification in customs (imports for a project). The sanction letter will specify the list of machinery and tariff headings that qualify. Only those imports after the sanction letter and within conditions will get the concession.
Prior approval requirement: You cannot simply import and later claim concession. The approval (sanction letter) must be obtained before import so that customs duty concession is available at the time of clearance. Without prior sanction you may lose benefit.

Financial Assistance

Component	Assistance Provided	Detailed Explanation & Example
Customs duty concession on imported machinery	Reduced customs duty rate (compared to standard BCD) for approved machinery imports	Example: Your MSME manufacturing unit plans to import a machine costing US$ 1 million. Under scheme you receive sanction for concession; instead of paying full duty (say 10% of CIF) you may pay a lower rate (say 5%) – thus saving duties of approx ₹ X lakh on that machine.
Lowered capital cost & improved viability	By reducing duty, your upfront investment is lower and ROI may improve	Example: Lower duty means your total project cost reduces; this may reduce your capital-cost repayment burden and improve viability for bank/finance.
Support for expansion/new project	Duty concession supports the capex for new or large expansion projects, thereby encouraging growth	Example: If your MSME intends to expand production capacity by installing new imported equipment, the concessional duty makes the expansion more affordable and easier to be cleared by customs.

Eligibility Criteria

Who can apply:

The manufacturing enterprise must be in a sector eligible under the scheme (e.g., automotive sector when applying under Auto Division of MHI).
The project must be a new unit set-up or a substantial expansion of an existing unit (not a routine replacement).
The application for duty concession must be made before import to the nodal authority in the Ministry of Heavy Industries / relevant division.
The imported machinery/equipment must be part of the approved list in the sanction letter and imported under the “Project Import” scheme.
The manufacturing enterprise must undertake import of machinery/equipment as per project plan and abide by conditions of sanction (timelines, list of items, end-use etc.).

Who cannot apply:

If the enterprise is only importing for non-manufacturing use, or the projects is routine or the machinery list is not sanctioned, then the concession may not apply.

Documents Required

Project proposal / DPR for new unit or expansion.
List of imported machinery/equipment (tariff headings, cost, specification).
Manufacturing unit registration/incorporation certificate.
Past production details (in case of expansion).
Import commitment/ CIF cost estimate.
Undertaking to abide by project import terms, manufacturing capacity, utilisation.
Any sector-specific documents (for automotive etc) as required by nodal division.

Application Process for the Scheme

Option 1: Apply with Bullit (Recommended)

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Option 2 : Apply via online/hybrid route:

Prepare project proposal including sector, cost, imported machinery list (with tariff lines), expansion/new unit details, manufacturing capacity, timeline.
Submit application to Joint Secretary (Auto Division) / relevant division of MHI, quoting that you seek customs duty concession under Project Import route. Include details of project, machinery list, cost breakup, manufacturing plan.
Ministry reviews the application; if approved, issues sanction letter specifying machinery list, approved duty concession rate, and terms.
Once sanction letter is issued, you import machinery under Project Import route, produce sanction letter at customs, and get concessional duty at time of clearance.
After import and commissioning, you comply with post-import conditions (e.g., utilisation, manufacturing declarations) as specified in sanction letter.
Maintain records of import, project implementation, commissioning, production as required in sanction letter for audit/monitoring.