Budget 2025-26: Customs duties on several items, exemptions under review

In what could help boost domestic manufacturing, the government is undertaking a review of customs duty rates on various items and is also looking to prune exemptions on several goods.
 
The move, which could include a lowering of tariffs on several items as well as removing exemptions on others is expected to be announced in the Union Budget 2025-26. Duties and exemptions on over 200 items are understood to be under review but the final decision will be taken in the next few weeks ahead of the presentation of the Budget on February 1. Some corrections in the inverted duty structure would also be carried out.
 
Finance minister Nirmala Sitharaman had in the Union Budget 2024-25 announced that the government would undertake a comprehensive review of the rate structure over the next six months to rationalise and simplify it for ease of trade, removal of duty inversion and reduction of disputes. It was expected that the review would be completed before the presentation of the next Budget.
 
According to sources, the move is also influenced in part by concerns over the US government’s moves on tariff under President elect Donald Trump. In the past, Trump has called India as tariff king for levying high customs duties on imports.
 
“A review of customs duty now will send out a positive signal although it is not just for that sake that the exercise is being undertaken,” noted a source, adding that the top focus of the exercise is to boost and incentivise domestic manufacturing and correct any anomalies in the current structure.
 
Sources pointed out that in the past as well the government has announced several cuts in customs duty rates to promote domestic manufacturing of items such as mobile phones.
 
Anurag Sehgal, Managing Director, Indirect Tax, Price Waterhouse & Co. LLP noted that the customs duty regime could see some changes in the Union Budget 2025-26. “While the inverted duty structure has been corrected in the last few years, rate rationalization may be carried out to incentivize domestic manufacturing. This can be done through making slabs for different goods based on whether they are primary raw materials or inputs,” he said, adding that more exemptions for customs duty may also be reviewed.