Budget 2025 wishlist for customs duty: Experts push for fewer slabs, simplified structure and amnesty scheme

As the Union Budget 2025 approaches, think tank Global Trade Research Initiative (GTRI) has put forward a set of recommendations to overhaul India’s customs framework to reduce import costs, foster domestic manufacturing, and improve trade competitiveness.

Reducing slabs

In its report released Monday, GTRI called for a simplified customs duty structure, proposing a reduction in slabs from over 40 to just five. This, it said, would streamline processes and align with national manufacturing and export goals.

The think tank also stressed the need to ensure raw materials are taxed at lower rates than finished goods to support local industries.

“Simplifying the tariff structure by reducing slabs and capping maximum tariffs at 50 per cent would foster economic growth, reduce import reliance, and promote exports,” said the report authored by GTRI founder Ajay Srivastava and trade expert Satish Reddy.

Highlighting the diminishing contribution of customs duties to government revenues, GTRI noted that customs now account for only 6.4% of gross tax revenue, compared to corporate tax (26.8%), income tax (29.7%), and GST (27.8%).

It urged a re-evaluation of tariffs as a strategic tool to support domestic manufacturing and global trade rather than a revenue generator.

Suggesting lowering India's average tariff to about 10%, the think tank said this can be achieved without major revenue loss.

Currently, 85% of tariff revenue comes from just 10% of tariff lines (or product categories), while 60% of tariff lines contribute less than 3% to the revenue.

GTRI also recommended reforms to the Customs Cargo Service Providers (CCSPs) regulatory framework, urging the government to bear the cost of customs officers’ sovereign duties to reduce operational expenses.

It advocated rescinding outdated customs notifications and issuing comprehensive ones to enhance transparency.

"Providing a single, comprehensive duty sheet will make customs processes more transparent and business-friendly," it said.

Deloitte’s call for amnesty scheme

Leading consultancy firm Deloitte, meanwhile, has called for an amnesty scheme to address long-standing customs litigation.

Drawing parallels with the “Sabka Vishwas” scheme for pre-GST taxpayers, Deloitte proposed a mechanism to resolve disputes involving duties worth crores and alleviate the burden on judicial forums.

"The government should end long-drawn litigation to resolve long-standing disputes, alleviate the burdened judicial pipeline and upgrade the law to keep pace with technological advancements and international best practices," it said.

"The industry has been waiting for such a scheme for years to address pending litigation matters under customs. This will help especially help small businesses avoid past disputes and move ahead with a clean slate," the firm added.

Deloitte further suggested an upfront exemption from the 40% basic customs duty on solar module imports for power plants exclusively supplying electricity to green hydrogen projects. It also recommended concessional duty rates for solar power plants and battery energy storage systems under the Project Import Scheme.

GTRI vs Deloitte on MOOWR

While the GTRI suggested ending IGST, cess and Basic Customs duty exemptions under the MOOWR (Manufacture and Other Operations in Warehouse) scheme, Deloitte urged the government to not implement the amendment to Finance Act 2023 that makes IGST and compensation cess payable at the time of import.

"While IGST and compensation cess are creditable, upfront payment of IGST affects the company’s working capital," Mahesh Jaising, partner at Deloitte, said.

The current scheme allows duty-free import of machinery even when the goods made from it are sold domestically.

"This creates an unfair disadvantage for local capital goods manufacturers, who must pay GST on machinery sold in India. Additionally, firms outside the MOOWR scheme pay full import duties and IGST when importing machinery for domestic sales," GTRI argued.

Finance Minister Nirmala Sitharaman is scheduled to present the Union Budget on February 1.