Ahead of the 2025-26 Union Budget, the government is considering significant cuts in customs duties on raw materials to encourage domestic manufacturing. Tax experts predict that sectors such as electronics, healthcare, medical equipment, footwear, and toys could benefit from these changes, aiming to boost local production and support the ‘Make in India’ initiative.
Key Areas Expected for Customs Duty Rationalization
Harpreet Singh, a Partner at Deloitte India, highlighted that sectors like electronics, home appliances, healthcare products, and pharmaceuticals may see customs duty reductions in the upcoming Budget. This aligns with the government’s broader strategy to strengthen domestic manufacturing through strategic tax reforms.
The phased manufacturing plan, which has been successfully implemented in other sectors, may see similar moves in key industries like electronics and medical equipment. Singh noted that such measures could simplify the customs structure and help make India a competitive manufacturing hub.
Simplifying the Customs Duty Structure
The 2024-25 Budget proposed a comprehensive review of the Customs Duty rate structure to ease trade and minimize classification disputes. At present, more than a dozen different duty rates exist, and the government is looking to reduce this to four or five, making the process more straightforward and less prone to legal conflicts.
Experts like Anurag Sehgal from Price Waterhouse & Co. LLP suggest that products could be categorized based on their place in the value chain—ranging from raw materials to finished goods—allowing for more streamlined duty slabs.
Supporting Sustainable Manufacturing Practices
There is also growing demand for simplifying the customs duty framework to support sustainability. Sivakumar Ramjee from Nangia Andersen LLP emphasized the need to rationalize duties on recyclable and reused materials to promote eco-friendly manufacturing practices. This is especially important for aligning with India’s long-term sustainability goals.
Reducing Customs Disputes with an Amnesty Scheme
With over 40,000 pending customs cases, experts are calling for an amnesty scheme to help resolve long-standing disputes. Manoj Mishra from Grant Thornton Bharat stated that about Rs 50,000 crore is locked in litigation, which could be cleared up through a one-time settlement scheme.
This would not only reduce the backlog but also improve the ease of doing business in India.The upcoming Union Budget holds the potential for far-reaching reforms to make the Indian manufacturing sector more competitive. The proposed customs duty rationalization and dispute resolution measures could be key drivers of growth, supporting both domestic businesses and international trade. As the government works towards enhancing the ‘Make in India’ initiative, these changes could create a more favorable environment for local manufacturers and investors.
ALSO READ: TikTok To Be Temporarily Unavailable In The US On Sunday