India should simplify its customs duty framework by reducing the actual number of duty slabs rather than merely tweaking Basic Customs Duty (BCD) rates, the Global Trade Research Initiative (GTRI) said on Tuesday.
The move, it argued, is essential to improve ease of doing business and support the country’s manufacturing and export ambitions.
Current Challenges in Customs Tariffs
In its pre-Budget recommendations, GTRI noted that the last Budget reduced ad valorem BCD rates to eight slabs. However, this reform excluded numerous specific duties, mixed duties, and conditional rates, which continue to create hundreds of effective tariff slabs in practice, reported PTI.
Additionally, part of the BCD was shifted to the Agriculture Infrastructure and Development Cess (AIDC), keeping total import duties unchanged while lowering the apparent number of slabs on paper.
GTRI highlighted that importers also pay AIDC, Social Welfare Surcharge, and health cesses, making the real tariff structure highly complex and opaque.
Need for Consolidation and Transparency
“India should consolidate all duties into a small number of transparent slabs based on total import duty, not just BCD,” said founder, GTRI.
He stressed that as India pursues deeper manufacturing, export diversification, and supply-chain integration amid rising global protectionism, an outdated tariff structure and process-heavy customs system risk undermining these objectives.
Economic Impact
Srivastava noted that nearly 29 per cent of India’s GDP flows through Customs, with merchandise trade exceeding USD 1.16 trillion. Even minor inefficiencies in customs procedures now impose high economy-wide costs, raising input prices, delaying shipments, weakening export competitiveness, and deterring investment.
Recommended Reforms
GTRI recommended modernising India’s customs system by reducing the number of duty slabs across all import duty components, consolidating duties into a single clear schedule, and using simple, transparent language in customs notifications.
It also suggested creating a searchable online database of customs tribunal decisions and conducting a zero-base audit of all customs rules, procedures, and notifications.
Srivastava emphasised that customs duties today contribute only 6 percent of India’s gross tax revenue and 3.9 percent of import value, indicating that tariffs have largely lost relevance as a revenue instrument.
A comprehensive, product-by-product overhaul of tariffs, he argued, is needed to align trade policy with manufacturing growth and export competitiveness.
