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Budget 2025-26 saw a massive announcement of customs tariff rationalisation. This announcement is significant as it marks India’s evolution from a protectionist economy to a globally inclusive economy. This measure will make way for more imports coming into India in terms of Foreign Direct Investments (FDI) and it will make exports lucrative too. However, to reap the benefits of this announcement requires intervention of smart technologies such as Port Community Systems.
Trade policy of India has evolved constantly since its independence in 1947. What started as a protectionist trade policy gradually shaped up as a catalyst to promote cross-border trade and evolve as an integrated global economy. Several Foreign Direct Investments (FDI) failed to materialize due to excessive import tariffs and manufacturing grew at a slower pace.
While the quantitative restrictions on imports were reduced post liberalization in 1991, the economy grew on an upward swing. The current tariff structures include Basic Customs Duty (BCD), Integrated Goods & Service Taxes and Surcharges charged by state governments.
In certain cases, the customs tariff goes beyond the actual product cost and importing a product might get more expensive for the exporting nation. Such scenarios often lead to trade wars as well as geopolitical tensions. Moreover, for the common man too consumption of a commodity/product becomes even more expensive.
A major announcement in budget 2025-26 was that on reduction of customs tariff rates from 15 to 8 (including zero rates). 36 life saving drugs, EV batteries, frozen sea food, wet blue leather to name a few will have a significantly reduced BCD and surcharges. In addition to that promoting ease of doing business in terms of clearance of goods, voluntary declaring of material facts etc. and others were the highlights of the budget.
A two-year time limit for finalising provisional customs assessments, extendable by one additional year is proposed. This will provide clarity and predictability in customs procedures, thereby minimising operational delays and associated costs for importers and exporters.
The budget features a voluntary compliance scheme as part of its customs tariff rationalization efforts. This initiative allows importers and exporters to voluntarily disclose any material facts post-clearance of goods, enabling them to pay the due duty along with interest, but without incurring penalties.
By rationalising the tariff structure, the tax system can be made straightforward and facilitate ease of doing business for all stakeholders. Also, by reducing unnecessary cess and surcharges, importing some of the niche products would improve and more investments would flow into India.
India’s customs tariff policy is gradually evolving from a protectionism to a globally inclusive policy. In turn, this will create new opportunities for multiple industries and make India as an export hub in the Asia Pacific region.
Lack of harmonisation in data management is a major challenge in the maritime industry and streamlining them in a single dashboard would create better coordination between stakeholders. Port Community Systems come as a facilitator by streamlining process for submitting export and import information to customs and exchange information amongst themselves. Policy changes as this would be well documented from time to time in a smart platform like Port Community Systems and adhering to them becomes seamless for all stakeholders.
The budget is a welcome measure as it captures the pulse of the logistics industry and is wanting to facilitate ease of doing business for the stakeholders. However, to seamlessly facilitate the same requires technology intervention and the use of smart platforms like Port Community Systems. Going forward, tax systems might get even more simplified and with technology intervention ease of doing business can be well facilitated.
