GTRI urges overhaul of India’s import tariffs, customs regime to cut trade costs and boost exports 

INDIA – The Global Trade Research Initiative (GTRI) has called for a sweeping overhaul of India’s import tariff structure and customs administration, arguing that comprehensive reform is essential to reduce trade costs, improve manufacturing competitiveness and stimulate export growth. 

In a report titled “A Blueprint for Modernizing India’s Import Tariffs and Customs Regime,” the think tank recommends a gradual shift toward zero duty on most industrial raw materials and key intermediates, alongside the introduction of a low, standard import duty of around 5% on finished industrial goods over the next three years. 

GTRI said the proposed structure would help dismantle inverted duty regimes that currently impose higher tariffs on inputs than on finished products, a system it says penalises domestic manufacturers. The report notes that such distortions undermine the competitiveness of local industry and weaken India’s position in global value chains. 

The study also highlights the need to rationalise extreme tariff rates, including the 150% import duty on alcohol. GTRI said such levies encourage tax evasion while delivering limited fiscal benefits. It added that tariff reform should focus not only on basic customs duty but also on the total import duty burden, including cesses, surcharges and trade remedies, which often push effective tariffs well above headline rates. 

According to the report, India’s merchandise trade has crossed US$1.16 trillion, with customs clearances accounting for nearly 29% of gross domestic product. GTRI said this scale underscores the importance of efficient customs operations, particularly as global firms reassess sourcing strategies amid geopolitical uncertainty. 

Despite the volume of trade, customs duties contribute only about 6% to India’s gross tax revenue, averaging 3.9% of import value. GTRI said this indicates that tariffs are becoming less effective as a revenue tool.  

The report also shows that nearly 90% of import value is concentrated in fewer than 10% of tariff lines, while the bottom 60% generate less than 3% of customs revenue. 

GTRI founder Ajay Srivastava said the current structure “imposes high administrative and compliance costs” with little fiscal return. He also criticised the complexity created by overlapping and outdated notifications that traders must navigate. 

To address these issues, GTRI urged the government to issue self-contained customs notifications and publish all applicable import duties in a single, unified online schedule. The report also recommended aligning the duty drawback system with eight-digit HS codes to reduce errors and refund delays. 

Further proposals include liberalising approvals for inland container depots and freight stations, redeploying customs officers toward audits and origin verification, and posting officers overseas to support exporters facing non-tariff barriers. 

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