Raw Material, Intermediate Imports Should Have Zero Duty: GTRI

India must undertake a comprehensive, product-by-product revision of its tariffs to support manufacturing and exports. Today, customs duty accounts for just 6 percent of India’s gross tax revenue and is equal to just 3.9 percent of the value of imports; This shows that customs duties have lost their validity as a means of revenue.

Approximately 90 percent of the value of imports is concentrated in less than 10 percent of tariff lines, while the bottom 60 percent of tariff lines generate less than 3 percent of customs revenues.

Therefore, India should move to zero duty on most industrial raw materials and essential intermediate products within the next three years and adopt a standard duty of 5 percent on most final industrial products. Excessive tariffs, such as the 150 percent tax on alcohol, should be rationalized as they encourage smuggling while providing negligible financial gain. Tariff policy should also eliminate perverse tax structures that tax inputs more than final products and quietly destroy domestic manufacturing competition.

Additionally, all policy decisions should be based on the total import duty and not just the basic customs duty. Businesses face the cumulative burden of withholdings, anti-dumping duties and other taxes. The actual tariff structure is much more complex, as importers also pay AIDC, Social Welfare Surcharge and health deductibles. Therefore, India should consolidate all taxes into a small number of transparent brackets based on total import duty and not just BCD.