GTRI Recommends Simplifying India’s Tariff Structure to Boost Exports and Reduce Imports

ENA Sectors 2025-01-14 15:26:52 New Delhi, Jan 14 (KNN) India's declining customs duties revenue—now just 6.4 per cent of total tax intake—calls for a strategic rethinking of tariffs to support domestic manufacturing and economic growth, says the Global Trade Research Initiative (GTRI). In a crucial recommendation ahead of the FY26 Budget, GTRI urges the government to lower the average tariff from 17.1 per cent to around 10 per cent, a move that could help India reduce its import dependence, avoid international backlash, and stimulate exports without significant revenue loss. As import taxes lose prominence in the revenue mix, with corporate tax (26.8 per cent), income tax (29.7 per cent), and GST (27.8 per cent) far outpacing customs duties, GTRI suggests this is the right moment to adjust tariff rates to align with Indias long-term economic objectives. The proposed reduction in average tariffs would also alleviate the concerns of developed countries, particularly the U.S., which have often criticized Indias high tariff regime. Currently, Indias tariff revenue is concentrated in a small number of categories—85 per cent of it comes from just 10 per cent of tariff lines. Conversely, more than half of the tariff lines contribute less than 3 per cent of the revenue. GTRI advocates for a streamlined tariff framework, reducing the over-40 slabs to just five and capping the maximum tariff at 50 per cent. This simplification would reduce import reliance, foster exports, and better support Indias manufacturing ambitions. For the overhaul to succeed, GTRI stresses the importance of an inter-ministerial review of the tariff framework—not just a focus on the Department of Revenue. Such a review could align tariff policies with Indias broader economic goals and help create a more holistic and growth-oriented tariff structure. Additionally, GTRI suggests ending certain exemptions under the Manufacturing and Other Operations in Warehouse Regulations (MOOWR). This scheme currently allows duty-free imports of machinery used in domestic manufacturing, which creates an unfair disadvantage for local manufacturers who must pay GST on the same machinery. The think tank also calls for updating Indias outdated customs notifications, which are often unclear and overly complex. A comprehensive duty sheet would streamline procedures, reduce operational costs, and make the customs process more transparent and business-friendly, ultimately lowering trade expenses for firms. (KNN Bureau) 40633 https://knnindia.co.in/news/newsdetails/sectors/gtri-recommends-simplifying-indias-tariff-structure-to-boost-exports-and-reduce-imports 2025-01-14 15:26:52 knnindia.co.in GTRI Recommends Simplifying India’s Tariff Structure to Boost Exports and Reduce Imports