The Modi government bowed to the majesty of President Donald Trump even before he shot his tariff arrow at India.

The budget has discreetly cut the tariff on high-powered motorbikes like Harley Davidson from 50 per cent to 30 per cent – sending out a clear signal that is ready to anticipate and accommodate the capricious demands of the tariff tyrant who has rocked the foundations of the world trade system.

In the customs duty changes, there is an entry for motorcycles with an engine capacity of 1600 cc and above which are imported as a completely built unit (CBU). In this category, the tariff on motorbikes imported in a semi-knocked down unit (SKU) has been trimmed from 25 per cent to 20 per cent.

The Harley Davidson issue had first flared during Trump’s first term as President in February 2018. At that time, he had rattled the government by demanding a cut in the customs duty on Harley Davidson bikes which then ruled at 75 per cent.

He had threatened to slap duties against Indian imports for failing to provide reciprocity in tariffs. The Modi government had then cut the rate to 50 per cent – but Trump remained peeved, arguing that the US did not levy any duty on Indian motorcycles.

At the start of his second term, Trump has threatened trading partners like Mexico, China and Canada with ruinous tariffs of up to 25 per cent and his fulminations could soon engulf India as well, which is probably why the government has bent over backward even before Trump has cried boo.

Tariff fall

The budget has announced a slew of customs duty cuts with the aim to rationalise tariff structure and duty inversion, leaving only eight tariff rates including zero.

The tinkering in indirect tax will cost the exchequer ₹2,600 crore.

As part of rationalisation, the budget proposed to remove seven tariff rates, over and above seven rates removed in 2023-24 budget.

The budget also announced that there will be not more than one cess or surcharge on 82 tariff lines that are subject to cess.

The indirect tax tweaks are also meant to boost export promotion and as part of the measures taken, the budget proposed slew of changes in sectors impacting handicraft goods, leather, marine products and domestic MROs for railway goods.

Sanjay Budhia, managing director of Calcutta-based engineering outfit Patton Group, said the reduction of basic customs duty on several inputs for production and rationalisation of customs tariff structure for industrial goods would boost the export potential of the country.