On Monday, the Global Trade Research Initiative (GTRI) proposed that the government take significant steps in the upcoming budget to simplify the customs duty structure. They recommended reducing the customs duty slab from a high 40% down to just 5%.
This change aims to make it easier for businesses to operate, as lower taxes on raw materials could effectively decrease import bills. The goal is to bolster manufacturing and boost exports, ultimately benefiting the economy.
Review of Duty Policies Is Necessary
The GTRI emphasized the need for an inter-ministerial review of current duty policies to refine India’s customs framework. Their report highlighted that a reduction of about 10% in the average customs duty could be feasible without causing significant revenue loss.
Currently, a staggering 85% of duty revenue is generated from only 10% of import duty categories, while a large portion, 60%, brings in less than 3% to the overall revenue. This indicates a pressing need for a more balanced and efficient duty structure that aligns with national goals.
Focus on Domestic Manufacturing and Trade
The report also pointed out that the share of customs duty in India’s gross tax revenue has dropped to a mere 6.4%, while other taxes like corporate and income tax are much higher. GTRI’s founder noted that it is crucial to reassess tariffs as a strategic tool to support domestic manufacturing.
They suggested lowering customs duties on raw materials and keeping them lower than those on finished goods. By doing so, it could stimulate economic growth, reduce reliance on imports, and promote ‘Make in India’ initiatives, ultimately leading to a stronger trade environment.
