The finance minister presented her eighth consecutive Union Budget and laid down measures to reaffirm the government’s commitment to promote the Make-in-India agenda through tax initiatives focused on empowering local manufacturing and tariff liberalisation despite the current geopolitical headwinds. The second Budget under the Modi 3.0 Government aims at rationalising the tariff structure, promoting domestic manufacturing and exports, and facilitating trade. To capture the measures introduced by the government on the customs front, the changes proposed in Union Budget 2025 have been discussed under the following broad themes: Incentives for domestic manufacturing and exports: Continuing its endeavours to promote Make-in-India, the government has now reduced the basic customs duty (BCD) rate on a range of inputs/raw materials, such as wet blue leather, crust leather, plastic sheets, films and chemicals (including laboratory chemicals) to lower costs for domestic manufacturing. On the other hand, BCD rates have been increased on goods such as interactive flat panel displays to set aside the counterproductive results of the inverted duty structure prevailing earlier.
To give impetus to the manufacturing of lithium-ion batteries used in electric vehicles and mobile phones in India, additional specified capital goods have been allowed to be imported duty free.Further, to strengthen India’s exports and integrate the economy with the global supply chain, the government has proposed to set up digital public trade infrastructure — Bharat Trade Net — to support domestic manufacturing and boost India’s global competitiveness. The government has also extended export timelines and added additional duty-free inputs for industries such as handicrafts.Rationalisation of the tariff structure: In line with the government’s vision of a self-reliant India and to reduce classification disputes, the budget has proposed rationalisation of the customs duty tariff structure by reducing the number of slab rates to eight. These rationalisation measures will help in better identification and classification of goods.To reduce the multiple cesses levied at the time of import, it has been clarified that going forward only one cess — either Social Welfare Surcharge (SWS) or Agriculture Infrastructure and Development Cess (AIDC) – will be levied on any imported product.Trade facilitation: With a continuous focus on providing clarity and efficiency through procedural ease, the government has proposed defined timelines to close provisional assessment, except in specified cases. This is a welcome move as it will assist trade in expediting the closure of long-pending provisional assessments — in particular, provisional assessments being assessed by the Special Valuation Branch of the Customs. Additionally, a new provision has been introduced whereby an importer/exporter is now allowed to voluntarily revise an entry post clearance within the specified time period. This will allow the importer/exporter to either avail refund of excess duty paid or make payment of differential duties along with interest in case of excess/short payment of duty, respectively. This new provision may also help in cases where post importation adjustments are required (such as transfer pricing adjustments). This revision is subject to certain exceptions such as cases where investigation/audit/re-assessment has been initiated. With increased reliance on technology in customs clearances, the government has also proposed to facilitate upgrade of infrastructure and warehousing for air cargo, and to streamline cargo screening and customs protocols. This includes introduction of a single-window system for customs clearance, which would integrate various regulatory agencies and authorities.While the above measures would provide a robust framework for growth and attracting foreign direct investment, the industry at large expected the government to provide relief via an amnesty scheme for customs, similar to the schemes under Corporate Tax and Goods and Services Tax. Also, to further enhance domestic value addition and boost manufacturing in India, the industry anticipated introduction of the Phased Manufacturing Programme for PLI sectors. Overall, the Union Budget 2025-26 reflects a strong commitment to advancing growth in India’s economy and to achieving the government’s vision of Viksit Bharat. The government focus would now be on successfully implementing the proposed policies on the ground.— The author, Gautam Khattar, is Principal – Price Waterhouse & Co LLP. The views expressed are personal.
