Overview of India’s Import and Export Tariff Policy

1. Definition and Classification of Import and Export Duties

Import and export duties are taxes imposed by the government on goods crossing the national border, with the purpose of regulating international trade, protecting domestic industries, and increasing fiscal revenue. These duties can be categorized based on different calculation methods:

• Basic Customs Duty (BCD): The statutory rate levied by customs authorities on imports and exports.

• Ad Valorem Duty: Calculated as a percentage of the product’s value.

• Specific Duty: Levied based on physical quantity such as weight, volume, or number of items.

• Compound Duty: A combination of ad valorem and specific duties.

2. Evolution of India's Trade Tariff Policy

Historical Development:

• From Independence to 1960s: India implemented a licensing system and export duties, while imports were generally liberal. However, restrictions were introduced when trade deficits worsened.

• 1960s–1970s: India introduced export subsidies, tax incentives, and established special processing zones (e.g., Kandla) to support exports. Economic liberalization began, the rupee was devalued, and small and medium enterprises were encouraged to expand export capacity.

• Recent Years: Adjustments have been made to align with initiatives like Make in India and Digital India. For example:

  • Tariffs on smartphone components were reduced to boost manufacturing.

  • Import duties on gold and silver jewelry were increased to close loopholes in bullion imports.

  • High export duties were imposed on sugar byproducts like molasses.

  • Anti-dumping duties were introduced to protect local industries from foreign competition.

3. Formulation and Administration of Tariff Policy

India’s trade tariff policies are formulated and implemented by several key government bodies:

• Ministry of Finance

• Ministry of Commerce and Industry

• Central Board of Indirect Taxes and Customs (CBIC)

Policy decisions consider a wide range of factors, including domestic industry interests, consumer welfare, global trade dynamics, and macroeconomic conditions.

India’s Import Tariff Policy

1. Structure and Rates

India’s import tariff system is relatively complex and includes multiple layers of duty:

• Basic Customs Duty: Varies by product category, origin, and usage. Higher for luxury and non-essential goods, lower for essentials and raw materials.

• Special Rates: Reduced for capital goods, industrial inputs, and parts; raised for goods that compete with domestic industries.

• Adjustability: Import duties are frequently revised in response to changing economic conditions. E.g., duties on smartphone parts were reduced to support domestic assembly, while duties on jewelry were increased to prevent under-invoicing.

2. Duty Exemptions and Concessions

India grants tariff concessions under the following mechanisms:

• Free Trade Agreements (FTAs): India offers preferential rates under FTAs with countries like the UAE, where, for instance, gold imports enjoy reduced tariffs.

• Generalized System of Preferences (GSP): Offers lower duties for imports from least-developed countries (LDCs) to support their economies.

3. Mechanisms for Adjustment

Import duty changes are typically executed through:

• Annual Union Budget: New rates are announced each fiscal year reflecting government priorities.

• Ad-hoc Adjustments: Temporary revisions are made in response to urgent market needs—e.g., lowering import duties to stabilize supply or prices.

India’s Export Tariff Policy

1. Structure and Rates

Most Indian exports are duty-free, but certain strategic commodities are subject to export duties, which may vary based on market conditions.
Example: In May 2024, export duties on iron ore were raised to 45–50% depending on grade, in an effort to control inflation and support domestic industries.

2. Export Incentives

To promote exports, India offers:

• Duty Concessions: On specific products to reduce costs and enhance competitiveness.

• Tax Refunds (Duty Drawback): Refunds for duties paid during manufacturing and logistics stages.

• Financial Support: Including subsidized loans, infrastructure support, and quality enhancement programs.

3. Export Controls and Restrictions

India enforces export controls for the following reasons:

• National Security: Restrictions on sensitive technologies and materials.

• Environmental Protection: Limits on products that may harm ecological balance.

• Strategic Resources: Export restrictions on items deemed vital to national interest.

India uses a mix of tariffs, incentives, and regulatory controls to balance trade objectives with industrial development, employment, and sustainability goals.