New Delhi, Jan 17: India requires a comprehensive overhaul of its import tariff structure and customs administration to reduce trade costs, enhance manufacturing competitiveness, and revive export growth, according to the Global Trade Research Initiative (GTRI).
In its report, “A Blueprint for Modernizing India’s Import Tariffs and Customs Regime,” GTRI outlined reforms spanning tariff policy, customs procedures, export incentives, and manpower deployment. The think tank emphasized transforming customs from a control oriented system into a growth enabling institution aligned with India’s manufacturing and supply-chain ambitions.
India’s merchandise trade now exceeds USD 1.16 trillion, with nearly 29% of GDP passing through customs clearances. Even minor inefficiencies impose economy wide costs, increasing input prices, delaying shipments, and weakening export competitiveness especially as global companies reassess sourcing amid geopolitical fragmentation.
Finance Minister Nirmala Sitharaman’s commitment to revamp customs procedures has created a policy window, GTRI noted, but warned that piecemeal changes will not suffice.
Key Recommendations:
Rationalise Import Tariffs: The report calls for zero duty on most industrial raw materials and intermediates and a uniform low duty (around 5%) on finished industrial goods over the next three years. Inverted duty structures, where inputs are taxed higher than finished products, should be eliminated. Extreme tariffs, such as the 150% duty on alcohol, should be rationalised to curb evasion and improve efficiency.
Simplify Customs Procedures: The think-tank criticized the labyrinth of overlapping notifications, amendments, and unclear references that complicate compliance. GTRI urges self-contained notifications and a unified online schedule of duties to enhance transparency.
Focus on Effective Tariffs: Reform should consider total import duty, including cesses, surcharges, and trade remedies, rather than just the basic customs duty, as the cumulative burden often exceeds the headline rates.
Support Manufacturing and Exports: Streamlining tariffs and customs processes would reduce input costs, improve supply chain efficiency, and strengthen India’s position as a global manufacturing hub.
According to GTRI, customs duties now generate just 6% of gross tax revenue, concentrated in fewer than 10% of tariff lines, while 60% of lines contribute under 3% of revenue. Maintaining complex schedules for limited fiscal returns imposes high administrative and compliance costs.
The report concludes that comprehensive reforms in tariffs and customs procedures are crucial to making India a more competitive and investor friendly trading nation.