Raw Material, Intermediate Imports Should Have Zero Duty: GTRI

India must undertake a comprehensive, product-by-product overhaul of customs tariffs to support manufacturing and exports. Customs duty today contributes only 6 per cent of India’s gross tax revenue and equals just 3.9 per cent of the value of imports, showing that tariffs have lost their relevance as a revenue instrument.

Around 90 per cent of import value is concentrated in less than 10 per cent of tariff lines, while the bottom 60 per cent of tariff lines generate under 3 per cent of customs revenue.

India should therefore move to zero duty on most industrial raw materials and key intermediates, and adopt a 5 per cent standard duty for most finished industrial products over the next three years. Extreme tariffs such as the 150 per cent duty on alcohol should be rationalised as they encourage evasion while delivering negligible fiscal gain. Tariff policy must also eliminate inverted duty structures that tax inputs more than finished products and quietly destroy domestic manufacturing competitiveness.

Further, all policy decisions must be based on total import duty, not merely basic customs duty. Businesses face the cumulative burden of cesses, antidumping duties, and other levies. Since importers also pay AIDC, Social Welfare Surcharge, and health cesses, the real tariff structure is far more complex. India should therefore consolidate all duties into a small number of transparent slabs based on total import duty, not just BCD.