Customs duty has come down, rationalisation could help address bad optics: CBIC chairman

Addressing the narrative that tariff rates are very high in India, says CBIC chairman

Average custom rates have come down from 11.65 percent to 10.66 percent, we are moving towards rates in ASEAN countries, said CBIC chairman Sanjay Kumar Agarwal on Monday at a FICCI event.

Addressing the media, Agrawal noted that the recent Budget focused on four key areas: supporting domestic manufacturing and value addition, promoting exports, providing relief to the common people, and facilitating trade.

“In the customs tariff, there are 12,500 tariff lines, of which 8,500 pertain to industrial goods,” he noted. The chairman pointed out that the tariff structure now emphasises narrowband rates of 0 percent, 2.5 percent, 7.5 percent, and 10 percent, with most tariff lines falling under these lower rates.

He added that the recent rationalisation was aimed at improving the perception of India's trade policies. “By carrying out this exercise, we could address the bad optics,” Agrawal noted.

The customs tariff now consists of 12,500 tariff lines, with 8,500 dedicated to industrial goods. The structure focuses on narrowband rates of 0 percent, 2.5 percent, 7.5 percent, and 10 percent, with the majority of tariff lines falling within these lower brackets.

To mitigate any potential disruption to industries due to reduced tariffs, Agrawal explained, “There should not be a major shock to the industry, so we have imposed an equivalent Agriculture Infrastructure and Development Cess (AIDC).” However, he indicated that this cess could be tapered off gradually.

Additionally, the government has streamlined tax levies by ensuring that goods attract either a cess or a surcharge, but not both. “In 82 tariff lines, the surcharge has been exempted,” Agrawal stated.

Customs rates for several items have also been reduced from 2.5 percent to nil, contributing to the overall decline in average rates.