India needs a comprehensive overhaul of its import tariff structure and customs administration to reduce trade costs, improve manufacturing competitiveness and revive export growth, according to a report by the Global Trade Research Initiative (GTRI).
The think tank has recommended a phased move towards zero duty on most industrial raw materials and key intermediates, alongside the adoption of a low, uniform standard duty of around 5% on finished industrial goods over the next three years. It has also urged the government to eliminate inverted duty structures, where inputs attract higher taxes than finished products, a system that it said quietly undermines domestic manufacturing competitiveness.
It stressed that tariff reform should be assessed on the basis of the total import duty burden rather than headline basic customs duty alone, noting that importers face a cumulative load of cesses, surcharges and trade remedies that significantly raise effective tariffs beyond published schedules.
The report noted that India’s merchandise trade has crossed US $ 1.16 trillion, with nearly 29% of gross domestic product passing through customs clearances. In this context, it said that even modest inefficiencies now impose economy-wide costs by raising input prices, delaying shipments and weakening export competitiveness at a time when global firms are reassessing supply chains amid geopolitical fragmentation.
GTRI observed that customs duties are no longer a major revenue instrument, accounting for just 6% of gross tax revenue and averaging only 3.9% of the value of imports. Tariff revenue, it said, is highly concentrated, with nearly 90% of import value falling within fewer than 10% of tariff lines, while the bottom 60% generate less than 3% of customs receipts. Maintaining a complex tariff schedule for such limited fiscal returns imposes high administrative and compliance costs, the report argued, citing comments by GTRI founder Ajay Srivastava.
On customs administration, the think tank recommended simplifying rules and procedures to ease compliance. It highlighted the complexity of the existing system of customs notifications, many of which amend decades-old rules and are not self-contained, forcing traders to navigate hundreds of overlapping notifications often without clear harmonised system (HS) code references.
GTRI has urged the government to issue self-contained notifications that clearly spell out their full impact and to publish all applicable import duties in a single, unified online schedule. It also called for greater transparency in the renewal of time-bound duty exemptions, including brief public explanations for their continued necessity.
To reduce disputes, the report recommended aligning India’s duty drawback system with the standard eight-digit HS codes used for imports and exports, noting that the current use of a separate coding system for refunds increases errors and delays. It also suggested liberalising approval norms for inland container depots and freight stations to support modern, niche supply chains rather than imposing uniform logistics infrastructure requirements.
Finally, GTRI proposed redeploying customs officers towards audits, origin verification and inland clearance points. It also suggested posting customs officers at Indian embassies and major global ports to help exporters address non-tariff barriers and to learn from international best practices, reflecting Srivastava’s views as outlined in the report.
