India’s tax reform momentum is set to shift to customs duties, with finance minister Nirmala Sitharaman signalling the next big policy move after two major changes this year — zero income tax liability up to ₹12 lakh announced in the February budget and GST rate rationalisation resulting in lower taxes on 375 items effective from September 22.

Speaking at a summit here on Saturday, Sitharaman underscored the urgency to simplify customs procedures and make them more transparent, with the proposed reforms similar to the simplification in the Income Tax Act, which will be administered by a new statute starting April. “We need a complete overhaul of customs... we need to have customs simplified for people to feel that it is not cumbersome to comply... need to make it more transparent,” she said.

There is a need to bring the virtues of income tax to the customs side in terms of transparency, she said, adding that the proposed reforms will be comprehensive and entail customs duty rate rationalisation. The announcements to this effect can be made in the upcoming Budget, likely to be presented on February 1.

“We have brought down customs duty over the last two years steadily. But in those few items where our rates are considered to be over the optimal level, we have to bring them down as well. Customs is my next big cleaning-up assignment,” she said.

In this year’s Budget, among other measures announced, the government proposed eliminating seven additional customs tariff rates on industrial goods, following the removal of seven tariffs in 2023-24 (announced in the previous budget speech on July 23, 2024). This reduces the total number of tariff slabs to eight, including a zero rate.

Bullish on growth

India’s economic growth will accelerate to at least 7 per cent this year as fundamentals remain robust despite global uncertainties, Sitharaman said. “Fundamentals of the economy are strong,” Sitharaman said, adding that consumer spending was expected to stay resilient, supported by low inflation and recent cuts in goods and services tax rates.

“We saw the growth numbers for the second quarter. I think that will sustain, and overall, this year’s growth numbers will be 7 or beyond it as well,” she said. India’s economy beat forecasts to grow 8.2 per cent in the three months through September, lifted by robust consumer spending and front-loading of production ahead of local festivals and punitive US tariffs.