The slew of customs duty cuts and exemptions spanning sectors like nuclear energy, critical minerals, and defence announced in the Union Budget should not be viewed purely from a revenue implication perspective, but as measures to help India’s manufacturing industry, Vivek Chaturvedi, Chairman of the Central Board of Indirect Taxes and Customs (CBIC), told The Indian Express in an interview.
Moreover, the CBIC Chairman said the customs duty cuts were driven by a sector-specific strategy aimed at making the Indian industry more competitive ahead of multiple free trade agreements (FTA) expected to come into effect over the next year. “If you look at the entire custom duty exemptions as a part of this Budget, there’s a very specific thought process — very calibrated, a very nuanced approach,” he said.
On energy security, he pointed to duty exemptions for setting up nuclear power plants without any capacity limit, capital goods for lithium-ion battery manufacturing, monazite — a critical component for magnets used in electric vehicles — and sodium antimonate, which accounts for around 26% of the cost of solar glass panels. For MSMEs, he highlighted the protection provided to domestic umbrella manufacturers — facing stiff import competition — with a composite duty of Rs 60 per piece or 20%, whichever is higher. Leather exporters received duty exemptions on inputs used for manufacturing shoe uppers, while the seafood processing industry saw the duty-free input limit raised from 1% to 3% of the previous year’s freight on-board (FOB) value.
Asked whether the global trade upheavals, particularly triggered by the US, weighed heavily on the government’s mind while deciding on the import duty cuts, Chaturvedi responded by saying that the measures were designed to address the needs of industries ranging from energy and defence to MSMEs and leather exports, rather than responding to any single external pressure.
Asserting that such interventions should not be viewed from a revenue lens, the CBIC Chairman said, “This is something which I as a country need for my industry to stand up on its feet.” With multiple FTAs on the horizon, he framed the concessions as essential to making domestic manufacturers competitive — not just in the domestic market, but also in capturing opportunities abroad.
“Can I make my industry so resilient and so competitive that they can also look at capturing those markets? That has been largely the thought process (behind the duty cuts),” he added.
In the span of about six months, India inked a host of long-overdue trade deals, like with the UK, Oman, and New Zealand. The deal with the European Union has been concluded and is expected to be signed soon, while an agreement with the US is also in advanced stages. The trade deals with Western countries could open new markets for labour-intensive sectors, but could also raise import pressure.
With prior US tariffs creating stress for export-oriented special economic zones (SEZs) — over 460 have shut down in the past five years according to government data presented in Parliament — the Budget announced a one-time measure for SEZs to sell to the domestic market at concessional duties.
“Idling capacity is not good for the economy,” Chaturvedi said. “Once you start using that capacity, you also need a market, and (in case) those markets, your primary markets of exports, (are) not available, then what is the alternative? The alternative is only to have a DTA (Domestic Tariff Area).”
However, the CBIC Chairman emphasised that adequate safeguards would ensure existing DTA manufacturers do not face disadvantage or arbitrage. The modalities, likely through a concessional duty notification, are expected “very soon” following consultations between the Department of Revenue (DoR), Department of Commerce, and other stakeholders, he said.
Chaturvedi also defended recent increase in duties on cigarettes — the first since 2017 — by pointing to global health guidelines and India’s lag in tobacco taxation. He noted that the World Health Organisation (WHO) recommends an excise incidence of around 75% on cigarettes.
“Most of the countries that you see — Australia, UK — they have around 80 to 85% (duty on cigarettes),” he said, adding that many also have automatic annual escalation mechanisms tied to inflation. The core logic, he explained, rests on what the WHO and World Bank call the “affordability index” — which compares income growth with cigarette price inflation.
“As incomes rise, if the tax incidence on cigarettes doesn’t rise, the affordability becomes more, and that’s not a very happy situation from a health perspective,” Chaturvedi said. “It is what the world does. It’s what we haven’t really done since 2017.”
In January, the government notified the new duty rates for tobacco products including cigarettes, jarda, gutkha (paan masala with tobacco), and cess rate for paan masala (without tobacco). The imposition of additional duties over and above the 40% slab under GST 2.0 marked the transition from the earlier compensation cess levy under the original GST regime.
On the government raising the limit for passengers bringing duty-free imported goods into India by Rs 25,0000 to Rs 75,000, Chaturvedi said the overhaul of baggage rules was “long overdue”. The rules, which will come into effect from Monday, allow a passenger duty-free clearance of goods worth up to Rs 75,000 “carried on the person or in his bona fide baggage”.
However, this does not apply to firearms, cartridges of firearms exceeding 50, cigarettes exceeding 100 sticks, cigars exceeding 25, tobacco exceeding 125 grams, alcohol in excess of 2 litres, gold or silver in any form other than ornaments, and televisions. For foreign tourists, the limit has been raised to Rs 25,000 from Rs 15,000 when they enter India by ways other than by land.
But beyond the revised limits, Chaturvedi said the bigger focus was on removing long standing “irritants”. Chief among them was the valuation of jewellery, which often led to disputes between passengers and customs officers. The solution was to scrap value limits entirely and shift to a weight-based system — 40 grams for women and 20 grams for others.
Another change addresses professionals entering India with high-end equipment, such as wildlife photographers carrying expensive cameras. “The customs officer is going to look at you with great suspicion, if you carry a camera with a very big lens, for instance,” Chaturvedi said. Now, such passengers can make an electronic declaration on arrival, receive a certificate, and exit with the same goods without paying duty. The rules also now extend transfer-of-residence benefits to foreigners with long-term Indian visas — mirroring what returning Indians receive. “It’s been made uniform… largely (on account of) ease of living, convenience,” he said. “It was long overdue.”
