Budget 2025: CBIC chief defends India's new tariff policy, rejects protectionism claims

Sanjay Kumar Agarwal, Chairman of the Central Board of Indirect Taxes and Customs (CBIC), addressed growing concerns over India's import tariff policy, dismissing allegations from the United States that India is becoming increasingly protectionist. "India is being unfairly targeted because many countries have measures to support domestic interests," Agarwal stated during an interaction with Siddharth Zarabi, Editor of Business Today.

Agarwal elaborated on the comprehensive customs duty rationalization exercise announced in the previous Budget. "The Finance Minister had announced a customs duty rate rationalization exercise, and this has been conducted on a massive scale. We have gone through all tariff items and reviewed the rate structure," he said.

The exercise was driven by four key objectives: providing adequate protection for certain sectors, simplifying the rate structure, maintaining industry competitiveness, and enhancing ease of doing business. To achieve these goals, seven high tariff rates—25%, 30%, 35%, 40%, 100%, 125%, and 150%—on industrial goods have been eliminated. However, agricultural goods and textiles were excluded from this exercise.

Agarwal explained that the revised rates are applied progressively based on value addition. "Raw materials and minerals are taxed at 0% or 2.5%. Intermediates are taxed at 5% or 7%, capital goods at 7.5%, and finished goods at 10%. Higher rates, such as 15% and 20%, have been retained only for products under the Production Linked Incentive (PLI) or Phased Manufacturing Programme (PMP) schemes or where a surge in imports was observed," he noted.

In a bid to protect domestic industries temporarily, tariffs above 20% have been reduced to 20%, and those exceeding 70% brought down to 70%. Additionally, the Agriculture Infrastructure and Development Cess (AIDC) has been adjusted, with lower rates applied to specific items to balance protection with reduced overall rates.

Addressing criticism linked to the U.S. and specific references to Harley-Davidson motorcycles, Agarwal clarified, "The average customs duty rate has dropped from 11.65% to 10.66%, a reduction of almost 10%, bringing it closer to ASEAN countries' rates." He added that for completely built motorcycles, the rate has been reduced from 50% to 40%, while motorcycles imported under Completely Knocked Down (CKD) conditions remain at 15%.

On the broader criticism from the U.S., Agarwal pointed out that India’s import tariffs are comparable, if not more liberal, than those of other major economies. "We analyzed the top 30 imports from the U.S., including crude petroleum and natural diamonds. The rates are either zero or between 0-10%. None of the cases have rates above 10%," he said.