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Finance ministry weighs phasing out customs duty exemptions in Budget 2025

New Delhi, Dec 24, 2024

Exemptions under review include bulk drugs used in insulin production, raw materials for lab-grown diamonds, plastics used in optical fiber production, and more

The Ministry of Finance is considering removing customs duty exemptions on several imported components in the upcoming Budget 2025, as part of the government’s "Make in India" initiative aimed at boosting domestic manufacturing, The Economic Times reported on Tuesday.

The exemptions being reviewed include:

Bulk drugs used in insulin production

Raw materials for lab-grown diamonds

Plastics for optical fibre production

LED and LCD TV panel parts

Equipment for coal mining and power generation

Key sectors under review include:

Life-saving medicines

Chemicals for telecom-grade optical fibres

Components for renewable energy and transportation

Currently, these components benefit from concessional duty rates of 0-5 per cent. However, these exemptions and conditional rates are set to expire by September 2025. The government is consulting relevant ministries and industry stakeholders to assess domestic capacity and planned investments before deciding whether to continue or discontinue them.

“The review process is underway to decide whether these exemptions should continue or lapse. Inputs from the industry have been sought,” an official was quoted by The Economic Times.

Make in India initiative

This review aligns with the government’s ongoing efforts to reduce dependency on imports and enhance local value addition in global supply chains. In previous budgets, duties on ferro nickel and blister copper were removed to cut steel and copper production costs, while medical device manufacturing benefited from reduced customs duties on X-ray tubes and flat panel detectors.

The geopolitical landscape, particularly trade dynamics with the United States, is also influencing this review.

The Finance Ministry’s move is expected to reshape India’s trade policies, ensuring they promote domestic manufacturing while protecting essential sectors. The review process will likely influence investment plans, technological adoption, and India’s standing in global supply chains.

[The Business Standard]

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