Reduce Customs Slabs To 5; Simplify Tax Structure To Boost Mfg, Exports

New Delhi: The government should simplify the customs duty structure by reducing slabs from over 40 to 5, and ensure that raw materials are taxed lower than finished goods in the forthcoming Budget to cut import bills, boost manufacturing and exports, think tank GTRI said on Monday.

It asked for an inter-ministerial review of tariff policies to refine India’s tariff framework, avoid international scrutiny, and align tariffs with national goals. Suggesting lowering India’s average tariff to about 10 per cent, the Global Trade Research Initiative (GTRI) said this can be achieved without major revenue loss. Currently, 85 per cent of tariff revenue comes from just 10 per cent of tariff lines (or product categories), while 60 per cent of tariff lines contribute less than 3 per cent to the revenue.

It added that India’s customs duties, once a significant contributor to government revenue, now account for just 6.4 per cent of the gross tax revenue, compared to corporate tax (26.8 per cent), income tax (29.7 per cent), and GST (27.8 per cent). Given the declining share of customs duties, they are no longer a key revenue pillar and it is time to re-evaluate tariffs as a strategic tool to support domestic manufacturing and global trade, the GTRI said. “Simplifying the tariff structure by reducing slabs from over 40 to 5, capping maximum tariffs at 50 per cent, and ensuring raw materials are taxed lower than finished goods would foster economic growth, reduce import reliance, and promote exports,” said the report, prepared by the think tank’s founder, Ajay Srivastava and trade expert Satish Reddy. The report also suggested ending IGST, cess and Basic Customs duty exemptions under the MOOWR (Manufacture and Other Operations in Warehouse) scheme to support local capital goods manufacturers and Make in India.