GTRI Urges Comprehensive Reset Of India’s Tariff And Customs Ahead Of Budget 2026
A new GTRI report outlines 23 reforms to cut trade costs, simplify tariffs and reposition customs as a facilitator of growth ahead of the Union Budget that will be presented by Finance Minister Nirmala Sitharaman on February 1.
The Gist
Ahead of the 2026 Union Budget, the Global Trade Research Initiative (GTRI) urges a complete overhaul of India's import tariff and customs system.
- GTRI's report outlines 23 reforms aimed at reducing trade costs and enhancing export performance.
- It highlights the need for tariff rationalisation and streamlined customs procedures to bolster manufacturing competitiveness.
- The recommendations come amid global trade disruptions and India's goal to become a key manufacturing hub.
Ahead of the Union Budget on February 1, the Global Trade Research Initiative (GTRI) has called for a comprehensive overhaul of India’s import tariff regime and customs administration, saying the existing framework has lost relevance as a revenue tool while continuing to raise trade costs.
In a report titled ‘A Blueprint for Modernizing India’s Import Tariffs and Customs Regime’, GTRI outlined 23 reforms covering tariff policy, customs procedures, export incentives and manpower deployment. The report said rationalising import tariffs and simplifying customs processes are needed to reduce costs, support manufacturing competitiveness and improve export performance.
The report is set against a period of disruption in global trade and supply chains. Geopolitical developments, including the US–China trade conflict, the war in Ukraine and instability in the Middle East, have prompted multinational companies to reassess sourcing strategies. As production becomes more diversified, governments are competing on tariff predictability, clearance speed and logistics efficiency.
Structural Issues With Tariff
India has sought to position itself as an alternative manufacturing and export base amid this shift, promoting trade agreements, production-linked incentives and deeper participation in global value chains. At the same time, global trade rules have become more fragmented, with increased use of tariffs, trade remedies and non-tariff barriers, placing greater emphasis on efficient customs administration.
The study comes as India’s merchandise trade exceeds $1.16 trillion, with nearly 29% of gross domestic product moving through customs clearances. GTRI said inefficiencies in tariffs and border procedures raise input costs, delay shipments and weaken export competitiveness.
The report also follows Finance Minister Nirmala Sitharaman’s December commitment to overhaul customs procedures. GTRI said the announcement has created a policy opening but warned that incremental changes would not be sufficient to address structural issues in the tariff and customs framework.
Rethinking The Tariff Structure
The report calls for rationalisation of import tariffs, noting that customs duties contribute about 6% of gross tax revenue and average 3.9% of import value. GTRI said this reduces their effectiveness as a revenue source.
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. The report said maintaining a complex tariff structure under these conditions increases administrative and compliance costs.
GTRI recommended moving toward zero duty on most industrial raw materials and key intermediates, while adopting a standard duty of around 5% on finished industrial goods over three years. It also called for eliminating inverted duty structures and rationalising high tariff rates, including the 150% duty on alcohol. Tariff reform, the report said, should be based on total import duties, including cesses, surcharges and trade remedies.
Customs Rules And Processes
Beyond tariffs, the report pointed to the large number of customs notifications and recommended issuing self-contained rules and creating a unified online duty schedule. It also recommended aligning duty drawback codes with standard HS classifications to reduce disputes.
Operational recommendations included strengthening risk-based clearance, making Direct Port Delivery the default option, extending risk management to all border agencies, easing approval norms for logistics facilities and addressing export incentive bottlenecks. GTRI also recommended redeploying customs manpower toward audits and origin verification, and posting customs officers overseas to help address non-tariff barriers.
The report said the reforms would need to be implemented together to reduce trade costs and improve the functioning of customs administration.
