India Needs Tariff and Customs Overhaul
India needs a sweeping overhaul of its import tariff structure and customs administration to cut trade costs, strengthen manufacturing competitiveness, and revive export growth, suggests trade-focused think-tank Global Trade Research Initiative (GTRI).
The report, titled “A Blueprint for Modernizing India’s Import Tariffs and Customs Regime”, outlines the need for reforms spanning tariff policy, customs procedures, export incentives, and manpower deployment. Taken together, these measures would transform customs from a control-oriented system into what the authors describe as a growth-enabling institution aligned with India’s broader manufacturing and supply-chain ambitions.
The study comes as India’s merchandise trade crosses USD 1.16 trillion, with nearly 29% of GDP flowing through customs clearances. Even modest inefficiencies now impose economy-wide costs, raising input prices, delaying shipments, and weakening export competitiveness, particularly at a time when global companies are reassessing sourcing locations amid geopolitical fragmentation.
Rationalizing Tariffs For Growth
Finance Minister Nirmala Sitharaman’s commitment in December to overhaul customs procedures has created a rare policy opening, the GTRI report noted, but warned that piecemeal changes will not be enough.
At the core of the recommendations is a call to rationalize India’s import tariffs, which the report argues have lost relevance as a revenue instrument while continuing to distort production decisions. Customs duties now account for just 6% of gross tax revenue and average only 3.9% of import value, according to GTRI.
The distribution of tariff revenue is highly skewed: nearly 90% of import value is concentrated in fewer than 10% of tariff lines, while the bottom 60% of tariff lines generate under 3% of customs revenue. Maintaining a complex tariff schedule for such limited fiscal return imposes high administrative and compliance costs.
GTRI recommends zero duty on most industrial raw materials and key intermediates, while adopting a low, standard duty of around 5% on finished industrial goods over the next three years. The report also calls for eliminating inverted duty structures, where inputs are taxed more heavily than finished products, quietly eroding domestic manufacturing competitiveness. Extreme tariffs, such as the 150% duty on alcohol, should be rationalized, as such rates encourage evasion while delivering negligible fiscal gain.
Simplifying Customs Procedures
Equally important, tariff reform should be based on total import duty, not just the headline basic customs duty. Importers face a cumulative burden of cesses, surcharges, and trade remedies, making the effective tariff far more complex than official rate schedules suggest.
Beyond tariffs, the report targets what it describes as a labyrinthine system of customs notifications, many of which amend decades-old rules and are not self-contained. Traders must navigate hundreds of overlapping notifications to determine applicable duties, often without clear HS-code references.
GTRI urges the government to issue self-contained notifications that clearly state their full impact and to publish all applicable import duties in a single, unified online schedule.
(This article has been syndicated from ANI)
Aishwarya is a journalism graduate with over three years of experience thriving in the buzzing corporate media world. She’s got a knack for decoding business news, tracking the twists and turns of the stock market, covering the masala of the entertainment world, and sometimes her stories come with just the right sprinkle of political commentary. She has worked with several organizations, interned at ZEE and gained professional skills at TV9 and News24, And now is learning and writing at NewsX, she’s no stranger to the newsroom hustle. Her storytelling style is fast-paced, creative, and perfectly tailored to connect with both the platform and its audience. Moto: Approaching every story from the reader’s point of view, backing up her insights with solid facts.
Always bold with her opinions, she also never misses the chance to weave in expert voices, keeping things balanced and insightful. In short, Aishwarya brings a fresh, sharp, and fact-driven voice to every story she touches.
