FIEO Calls For Inverted Duty Correction, Tax Relief & Manufacturing Support In Budget 2026–27

New Delhi, Jan 22 (KNN) Ahead of the Budget 2026-27, industry body Federation of Indian Export Organisations (FIEO) has called for targeted fiscal and policy measures to address cost pressures, enhance export competitiveness, and strengthen India’s manufacturing and logistics ecosystem.

FIEO President SC Ralhan emphasised that the Budget must urgently address persistent structural issues that weaken exporters, particularly MSMEs, amid heightened global competition.

Correct Inverted Duty Structures

FIEO flagged inverted customs duty structures as a major concern, where duties on raw materials and components are higher than those on finished products. It recommended rationalising import duties on key inputs used by export-oriented industries to align them with finished goods tariffs.

According to the exports promotion body, such anomalies erode cost competitiveness and lock up working capital through accumulated tax credits. Sectors such as textiles, electronics, chemicals, plastics, leather and footwear continue to face this issue, discouraging domestic value addition and weakening export performance.

Support for Indian Shipping Lines

The exporters’ body also called for policy and fiscal support to develop Indian global-scale shipping lines, including access to long-term finance, viability gap funding and regulatory facilitation.

FIEO said India’s dependence on foreign shipping lines exposes exporters to high freight costs and supply disruptions. A strong domestic shipping ecosystem could improve reliability, enhance trade resilience and potentially save USD 40–50 billion annually in freight outflows.

Restore R&D Tax Incentives

On innovation, FIEO recommended restoring the 200–250 per cent weighted tax deduction for in-house research and development under Section 35(2AB) of the Income Tax Act, and extending it beyond companies to include LLPs, partnership firms and proprietorships.

The organisation noted that the dilution of R&D incentives has weakened India’s innovation ecosystem, especially for MSMEs, even as most OECD countries continue to offer strong tax support for research activities.

Tax Relief for Overseas Marketing

To help exporters expand global reach, FIEO proposed a 200 per cent tax deduction for overseas marketing and branding expenses, including participation in trade fairs, buyer meets and promotional activities.

High international marketing costs, it said, discourage MSMEs from entering new markets. Enhanced deductions would improve brand visibility, encourage market diversification and support sustainable export growth, FIEO suggested.

Extend Concessional Corporate Tax for Manufacturing

FIEO also urged the government to extend the 15 per cent concessional corporate tax rate for new manufacturing units under Section 115BAB for another five years beyond the earlier March 31, 2024 cut-off.

According to the industry body, extending the scheme would improve policy certainty, attract fresh investments, support supply-chain relocation and reinforce the government’s Make in India and export-led growth objectives, while complementing existing PLI schemes.

(KNN Bureau)