India needs a comprehensive overhaul of its import tariff framework and customs administration to reduce trade costs, strengthen manufacturing competitiveness, and revive export growth, according to a new report by the Global Trade Research Initiative (GTRI).
The study, titled ‘A Blueprint for Modernizing India’s Import Tariffs and Customs Regime,’ stated that the country’s existing tariff and customs system has become overly complex, inefficient, and misaligned with India’s broader manufacturing and supply-chain ambitions.
Instead of facilitating trade, customs operations continue to function largely as a control-driven mechanism, creating friction for businesses.
The report comes as India’s merchandise trade has crossed $1.16 trillion, with nearly 29% of gross domestic product now passing through customs clearances. In such a high-volume environment, even minor procedural delays or compliance burdens translate into high economy-wide costs, raising input prices, slowing shipments, and weakening export competitiveness.
The Union Minister for Finance and Corporate Affairs (India)
GTRI noted that global companies are reassessing sourcing locations amid rising geopolitical tensions, making trade efficiency a critical determinant of India’s ability to attract manufacturing investment.
It also highlighted the policy window created by Finance Minister Nirmala Sitharaman’s commitment in December to reform customs procedures, while cautioning that incremental changes would not be sufficient to deliver meaningful gains.
A central recommendation of the report is a fundamental rethink of India’s import tariff policy. While customs duties were once a major revenue source, they now contribute only about 6% of gross tax revenues and average around 3.9% of import value. Despite their reduced fiscal importance, tariffs continue to distort production decisions and supply chains.
The report said tariff revenues are highly concentrated, with nearly 90% of import value covered by less than 10% of tariff lines, while the bottom 60% of tariff lines generate less than 3% of total customs revenue. Maintaining a complex tariff structure for such limited returns imposes high administrative and compliance costs on both businesses and the government.
To address this, GTRI recommended moving toward zero-duty imports for most industrial raw materials and key intermediates, along with a low, uniform duty of about 5% on finished industrial goods over the next three years. It also called for eliminating inverted duty structures, where inputs attract higher taxes than finished products, which undermines domestic manufacturing competitiveness.
The think-tank also flagged extremely high tariffs, such as the 150% duty on alcohol, arguing that such rates encourage evasion while generating minimal additional revenue.
Beyond tariffs, the report criticized the complexity of customs notifications, which often amend decades-old rules and lack clarity. GTRI urged the government to issue self-contained notifications and publish all applicable import duties in a single, unified online schedule to improve transparency, reduce compliance burdens, and enhance ease of doing business.
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