India needs tariff overhaul to boost manufacturing, exports: GTRI
What's the story
India needs a major overhaul of its import tariff structure and customs administration to cut the trade costs, boost manufacturing competitiveness, and also revive export growth. This is the key recommendation of a report by the Global Trade Research Initiative (GTRI). The think tank has also suggested moving toward zero duty on most industrial raw materials and key intermediates over the next three years.
Tariff strategy
GTRI proposes low standard duty on finished industrial goods
Along with the zero-duty suggestion, the GTRI report also recommends a low standard duty of around 5% on finished industrial goods in the next three years. The think tank has called for eliminating inverted duty structures, where inputs are taxed more heavily than finished products. This practice has been silently eroding domestic manufacturing competitiveness.
Tariff reform
GTRI urges rationalization of extreme tariffs
The GTRI report calls for the rationalization of extreme tariffs, like the 150% duty on alcohol. The think tank argues that such high rates only encourage evasion and provide little fiscal gain. It further emphasizes that tariff reform should consider total import duty, not just headline basic customs duty. This is because importers face a cumulative burden of cesses, surcharges, and trade remedies which makes effective tariff more complex than official rate schedules suggest.
Revenue imbalance
Skewed distribution of tariff revenue
The GTRI report highlights that customs duties now account for just 6% of gross tax revenue, and average only 3.9% of the value of imports. It points out a highly skewed distribution where almost 90% of the import value is concentrated in fewer than 10% of tariff lines or product categories. The bottom 60% generate less than 3% of customs revenue, making maintaining a complex tariff schedule for such limited fiscal return costly in terms of administrative and compliance costs.
Transparency push
Calls for greater transparency and alignment in customs
GTRI has called for more transparency around the renewal of time-bound duty exemptions, including brief public explanations of why they remain necessary. To reduce disputes, it recommends aligning the country's duty drawback system with the standard eight-digit HS codes already used for imports and exports. Currently, exporters use a separate coding system for refunds which increases errors and delays.