Customs Duty Structure Review: India Aims for Fewer Rates

New Delhi, Jul 24 (PTI) The government is looking at bringing down the number of customs duty levies to five from about a dozen presently, as part of the duty rationalisation exercise, Revenue Secretary Sanjay Malhotra said on Wednesday.

The reduction in the number of customs rates will help reduce classification disputes, he said when asked about the Budget proposal for a comprehensive review of the rate structure in six months.

On Tuesday, Finance Minister Nirmala Sitharaman in her Budget speech said the government will undertake a comprehensive review of the customs rate structure over the next six months to rationalise and simplify it for ease of trade, removal of duty inversion and reduction of disputes.

In an interview to PTI, Malhotra said the rationalisation is intended to reduce the number of tax rates levied on import and export of goods.

"Right now, the number of tax rates is more than 10, in double digits... Other than exceptions, we want to reduce this to may be 4 or 5 at the most. The purpose basically is to simplify so that classification disputes do not arise...More the rates, more are the classification disputes. The effort is to merge these rates into fewer number of rates so that classification disputes are reduced," Malhotra said.

Talking about the proposal, Central Board of Indirect Taxes & Customs (CBIC) Chairman Sanjay Kumar Agarwal said the exercise would be completed in the next six months so that the proposal could be taken up in the next budget in February 2025.

"Customs duty is levied at various rates. In 6 months time we will definitely look into the various rates and try to bring certain rationalisation in that. In next year's Budget that exercise will be completed and would be presented in next rationalisation. We will look at the number of rates. We will try to keep not too many rates. If there is any inversion that will be corrected," Agarwal said.

The FY25 Budget has lowered customs duty on mobile phone, mobile PCBA and mobile charger, 25 critical minerals, gold, ferro nickel and blister copper, oxygen free copper for manufacture of resistors and certain parts for manufacture of connectors.

The customs duty was increased on printed circuit board assembly (PCBA) of specified telecom equipment, ammonium nitrate, and exemption on solar glass and tinned copper interconnect was withdrawn.

Agarwal said the rationalisation was intended to give impetus to domestic manufacturing, strengthening and diversification of the supply chains and giving boost to factors in exports.

In addition, corrective steps have been taken by hiking customs duties in case where items were being imported into the country at unusually cheap rates which were impacting domestic industries.

Likewise, duty inversion on certain items has been corrected.

"The underlying philosophy behind the customs duty rationalisation made in FY25 budget is to boost domestic manufacturing, make the inputs available to domestic industry where there is no availability of such inputs within the country," Agarwal said.