Customs Duty Overhaul: Minimal Impact on State Transfers

CBIC Chairman Sanjay Kumar Agarwal announced that changes in customs duty rates and shifts to AIDC will have minimal financial impact on states, affecting approximately Rs 4,000 crore across 30 states. The Budget 2025-26 aims to simplify duties, promoting ease of business while maintaining overall tax rates.

On Thursday, CBIC Chairman Sanjay Kumar Agarwal conveyed that the partial reallocation of basic customs duty to the Agriculture Infrastructure and Development Cess (AIDC) would have a marginal effect on state finances, impacting a total of around Rs 4,000 crore across 30 states.

The 2025-26 Budget reflects governmental efforts to adjust basic customs duty rates, reducing various levies to eight. Despite these changes, effective duty rates remain largely unchanged, aiming to facilitate ease of business through compensatory cess adjustments.

Finance Minister Nirmala Sitharaman's budgetary strategy includes the removal of seven tariff rates in successive budgets, aligning India's rates more closely with those in Southeast Asia to simplify the tariff framework and support industry competitiveness.