Summary: The Union Budget 2025 proposes a rationalized customs tariff structure by removing seven tariff rates, leaving only eight, with minor reductions on select items. To support domestic manufacturing, several measures are introduced, including exemptions for critical minerals like cobalt and lithium-ion battery waste, and increased support for the textiles industry by exempting more shuttle-less looms and reducing duties on netted fabrics. For electrical goods, duties on interactive flat-panel displays are increased, while open cells for LED TVs see a reduction. Pharmaceuticals receive full exemptions from customs duty for specific drugs and patient assistance programs, with 36 lifesaving drugs added to the exempt list. The shipbuilding sector will continue to benefit from BCD exemptions for raw materials, along with a similar benefit for shipbreaking. Customs and business flexibility will be enhanced, with proposals for fixed timelines on provisional assessments and the introduction of a provision for voluntary declarations by importers and exporters. The budget also focuses on facilitating handicraft exports, duty exemptions for leather inputs, and reductions in duties on seafood products like fish paste and hydrolysate. Additionally, provisions for domestic MROs (maintenance, repair, and overhaul) in the railway sector are extended, with longer export periods for repairs.

Rationalization of Customs Tariff Structure

Removal of seven tariff rates (in addition to the seven removed in Budget 2023-24), leaving only eight remaining rates, including a zero rate.

The effective duty structure will be broadly maintained, with marginal reductions on select items.

Proposal to exempt the social welfare surcharge on 82 tariff lines subject to assessment.

Support to Domestic Manufacturing

Critical Minerals: To further support manufacturing and job creation, cobalt powder, lithium-ion battery waste, scrap, and 12 additional critical minerals will be exempted from BCD, promoting secure raw material availability in India.

Promotion of Textiles Industries

Proposal to add two more types of shuttle-less looms to the list of fully exempted textile machinery.

A reduction in BCD on netted fabrics covered by nine tariff lines from 20% to 15% or ₹15 per kg, whichever is higher.

Electrical and Electronic Goods

Interactive Flat Panel Displays: BCD increased from 10% to 20%.

Open Cells for LED TVs: BCD reduced from 5% to 2.5%.

35 additional capital goods for EV battery manufacturing to the exempted capital goods list and 28 additional capital goods for mobile phone battery manufacturing to the exempted capital goods list to boostdomestic manufacture of lithium-ion battery.

Telecommunication – Reduction of BCD from 20% to 10% on carrier grade Ethernet switches to make it at par with non carrier grade Internet switches

Medicine Sector

Pharmaceuticals: Drugs for manufacturing specific medicines and patient assistance programs (where medicines are supplied free of charge) will be fully exempt from Basic Customs Duty (BCD).

Addition 36 lifesaving drugs and medicines to the list of medicines fully exempted from basic custom and addition 6 life saving medicines to the list attracting concessional custom duty of 5%.

Further, 37 medicines and 13 new patient assistance programmes are added in exempt list.

Shipbuilding & Ship Breaking

Continued exemption of BCD on raw materials, components, consumables, and parts for ship manufacturing for another 10 years, to support the long gestation period of the shipbuilding sector.

The same exemption will apply to shipbreaking, making it more competitive.

Customs and Business Flexibility

Proposal to fix a time limit of two years, extendable by one year, for finalizing provisional assessments under the Customs Act, 1962.

Introduction of a provision allowing importers and exporters to voluntarily declare material facts after goods clearance and pay duties with interest, without penalties (unless an audit or investigation has already been initiated).

Extension of the time limit for the end of imported inputs in relevant rules from six months to one year, with the requirement to file quarterly statements instead of monthly ones.

Handicraft Good

To facilitate handicraft exports, the time period for export eligibility will be extended from 6 months to one year, with a further extension option of three months.

Leather Sector

Proposal to add nine items to the list of duty-free inputs.

Full exemption of BCD on wet blue leather to facilitate imports for domestic value addition and employment.

Exemption of crust leather from 20% export duty to promote exports.

Marine Products & Seafood

Reduction in BCD from 30% to 5% on frozen fish paste for the manufacture and export of analogous products.

Reduction in BCD from 15% to 5% on fish hydrolysate for the manufacture of fish and shrimp feed.

Domestic MROs for Railway Goods

Extension of the export period for foreign-origin goods imported for repairs from six months to one year, further extendable by one year.