Finance Minister Presents Union Budget with Customs Duty Reforms

In her budget speech, Finance Minister Nirmala Sitharaman introduced pivotal changes in customs duties aimed at boosting domestic manufacturing and export competitiveness. Significant duty exemptions were announced for critical sectors, including medicines and high-tech electronics, alongside reductions to support the renewable energy sector and seafood exports.

Finance Minister Nirmala Sitharaman, during her budget speech in Parliament today, revealed extensive proposals for customs duties designed to enhance domestic manufacturing, increase local value addition, improve export competitiveness, and streamline taxation, while prioritizing public and consumer interests. New customs duty rates will be introduced for a variety of commodities, from life-saving medicines to rare earth minerals.

In a significant relief for cancer patients, the customs duties on three additional medicines—Trastuzumab, Deruxtecan, Osimertinib, and Durvalumab—have been completely waived. Furthermore, basic customs duty (BCD) on x-ray tubes and flat panel detectors for medical x-ray machines has been lowered to align with domestic production capabilities.

Sitharaman highlighted a three-fold increase in domestic mobile phone production over the past six years, along with a near hundred-fold rise in mobile phone exports. In response to consumer interests, she proposed reducing the BCD on mobile phones, mobile PCBAs, and mobile chargers to 15% in the Union Budget 2024-25.

Moreover, customs duties on 25 critical minerals have been completely exempted, with reduced BCD on two of them. These measures will benefit sectors such as space, defense, telecommunications, high-tech electronics, nuclear energy, and renewable energy, which rely heavily on rare earth minerals.

To further support the renewable energy sector, exemptions on capital goods used in manufacturing solar cells and panels have been expanded. Sitharaman proposed ending the customs duty exemption for solar glass and tinned copper interconnects due to sufficient domestic manufacturing capacity.

To enhance seafood export competitiveness, BCD on certain broodstock, polychaete worms, shrimp, and fish feed has been reduced to 5%. Inputs for shrimp and fish feed manufacturing have also been exempted to boost seafood exports.

Similar customs duty reductions and exemptions were announced for leather raw materials to boost export competitiveness in the leather and textile sectors. The export duty structure on raw hides, skins, and leather will be simplified and rationalized. Duties on gold and silver have been reduced from 15% to 6%, while duties on platinum have been cut from 15.4% to 6.4%, to foster domestic value addition in jewelry.

Additionally, BCD on ferro nickel and blister copper has been removed to lower production costs for steel and copper. Sitharaman also announced a comprehensive review over the next six months to further rationalize and simplify the Customs Duty rate structure for ease of trade and to minimize disputes.