Central Board of Indirect taxes and Customs Chairman Sanjay Kumar Agarwal on Thursday said the part shifting of the basic customs duty to Agriculture Infrastructure and Development Cess will only have a marginal impact on transfers to states as the total sum involved would be about Rs 4,000 crore across 30 states.
In the Budget for 2025-26, the government has rationalised basic customs duty rates, slashing the number of levies to just eight, but has kept the effective duty rates on most items the same by adjusting cess to further ease of doing business.
Finance Minister Nirmala Sitharaman removed seven tariff rates in the 2025-26 Budget. This is over and above the seven tariff rates removed in the 2023-24 Budget.
After this, there will be only eight remaining tariff rates, including 'zero' rate to further ease of doing business.
Economic think tank Global Trade Research Initiative has said the Budget has reinforced a fiscal strategy the government has followed since 2021-22, reducing basic customs duty while increasing the Agriculture Infrastructure and Development Cess.
However, the shift allows the central government to retain more revenue because, while BCD is shared with states, AIDC is not.
"Out of the total customs duty collection, the shift from BCD to AIDC is not huge. There is some shifting but it's not huge and on a particular state the impact will not be much. Something like Rs 4,000 crore will get shifted from BCD to AIDC. But this Rs 4,000 crore will be in respect of 30 states. So the impact for each state would be around Rs 20-30 crore," Agarwal told PTI in an interview.
Earlier on Feb. 3, the chairman has informed that India has significantly reduced its average customs duty rate to 10.66% from 11.65% and is now moving towards the same levels as prevalent in the Southeast Asian countries.
Agarwal has added the rate rationalisation exercise was carried out with the objective of making the tariff structure simple, ensuring competitiveness of Indian industry and simplifying the tax regime.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
