Minister of Finance and Corporate Affairs Nirmala Sitharaman said on Saturday that a complete overhaul of the customs system would be her next major assignment as part of broader efforts to reform the economy. Speaking at the HT Leadership Summit organised by a media house, Sitharman emphasised the need to simplify customs rules, adding that we “need to make them more transparent.”
Union Finance Minister said, “There are quite a few things to do but what’s on the card and it’s not a secret that I’m letting out before the budget but is the complete overall of the customs area. We need to have customs a lot more simplified for people to feel that it is not too tiresome, cumbersome for them to comply with the expectations and the rules to make it more transparent.”
“And we are normally in some sort of alignment with the World Customs Organization. So every standard that they peg for us and for the world, we normally comply and keep to that benchmark,” the Minister added. Customs refers to the authority responsible for collecting tariffs and regulating the movement of goods, including animals, vehicles, personal belongings, and hazardous items, into and out of a country.
She added that we have steadily reduced customs duties over the last two years. Sitharaman further added, “We have brought down customs duties over the last two years, steadily. But in those few items where we are still considered to be over the optimal rate, we will have to bring them down as well. So customs is my next big cleaning up assignment.”
Drawing a parallel to past reforms, Sitharaman said that the income-tax system had once suffered from the same problems, where the rates themselves were not the main issue, but the administration was. She recalled how this had even led to the term “tax terrorism,” a label she was determined to erase. Significant reforms, such as faceless assessments, had already made income-tax processes cleaner and less intimidating. She said that the same virtues now need to be brought to customs.
“If I can just go back to the income tax act for a minute. The commentary used to be that income tax rates are not the problem. Yes, we want lower and lower and lower rates, but it is the tax administration which causes the problem. It’s the tax administration which becomes painful, sometimes agonising and therefore the not so nice coinage resulted in tax terrorism,” she added.
But the challenge, she cautioned, was a dual one: streamlining the process while still guarding against illicit and contraband goods.
She wondered aloud whether the system could rely more on comprehensive scanning and minimise direct contact between cargo and customs officials–thereby reducing discretion and increasing trust. Sitharaman also pointed out that customs duties had already been steadily reduced over the past two years, and that even the remaining items where rates were still above optimal levels would have to be reviewed.
