Customs duty cuts not due to US tariff threats: Sitharaman
While presenting the budget for FY26 on February 1, FM announced rationalisation of customs duties on several items
New Delhi The government’s customs duty rationalisation is an ongoing exercise started since 2023, much before the Donald Trump administration’s call for retaliatory tariff, Union finance minister Nirmala Sitharaman said on Thursday, adding that the exercise would continue in future as it aims to boost domestic manufacturing and ease price burden on citizens.
Rebutting comments of the Opposition members made in Rajya Sabha during a discussion on the Finance Bill 2025 and the Appropriation (No. 3) Bill, 2025 that the government is reducing customs duties and other levies under pressure of President Donald Trump, she said the exercise is consistent “budget after budget” in lines with the government’s focus to boost manufacturing and make exports cost competitive.
“I heard quite a few members saying -- Oh! the tariff war has started. So, in response to the tariff announcements made by President Trump, here are we doing it. No, we have been doing it from 2023. Steadily, every year, newer items are being brought in, keeping in mind Atmnirbhar Bharat [Self-reliant India],” she told house. “So this is an ongoing process. It is nothing to do with today’s global situation,” she said adding that the process “will continue” even in the future.
After discussions the Rajya Sabha return the Finance Bill 2025 and the Appropriation (No. 3) Bill, 2025 to the Lok Sabha, which had passed them on Tuesday. The bills will soon be enacted after the President’s accent.
Explaining the purpose of customs duty rationalisation, she said: “By bringing down the customs duties, or by exempting, or removing it completely, we actually benefiting those small and medium industries who import intermediary goods or raw materials for [manufacturing] their products.”
While presenting the budget for FY26 on February 1, FM announced rationalisation of customs duties on several items such as lifesaving medicines, critical minerals, textile machinery and leather raw materials. The Finance Bill 2025 also proposed to remove seven customs tariff rates for industrial goods, an exercise that was initiated in the July budget.
So, two tranches of rationalization of customs tariff has happened and the number of tariff rates have been reduced from 21 to eight, Sitharaman said. The move will make Indian exports more competitive as the cost of imported inputs have been reduced, she added.
The budget also proposed to add 35 additional capital goods for the production of EV battery and 28 additional capital goods (important for production of mobile phone battery) in the exempted goods list, she said. “Therefore, we will be enabling the production of EV battery… and also more mobile batteries in this country,” she added. “We fully exempted basic custom duty on cobalt powder and scrap of lithium-ion battery, lead, zinc and 12 more critical minerals. All these are in addition to the 25 critical minerals, which were fully exempted from BCD [basic customs duty] in the July 2024 budget, she said.
Earlier, speaking on the bill Congress leader and former finance minister P Chidambaram asked the government to spell out India’s response to President Trump’s threat of tariff war. Initiating a discussion on two bills, he cautioned that a tariff war would lead to depressed exports, lower foreign investments, higher inflation and currency depreciation. He also alleged that the finance minister announced customs duty reduction on items such as automobiles in the budget for FY26 under the US pressure.
