The Federation of Indian Export Organisations (FIEO) on Thursday urged the government to use the Union Budget 2026 to address cost competitiveness challenges faced by exporters through customs duty rationalisation and enhanced tax incentives.
The industry body proposed five key measures, ranging from correcting inverted duty structures to supporting domestic shipping lines and strengthening incentives for research and development, stressing that targeted fiscal support and policy certainty are critical as India competes for global manufacturing relocation and seeks to deepen export-led growth.
Highlighting a long-standing concern, FIEO President S C Ralhan said the Budget must urgently address inverted customs duty structures, where import duties on raw materials, components and intermediates are higher than those on finished goods.
“An inverted duty structure significantly erodes the cost competitiveness of Indian exporters and locks up scarce working capital through accumulated input tax credits,” Ralhan said.
As an example, FIEO pointed out that synthetic yarns and fibres attract higher customs duties than finished fabrics and garments, adversely impacting the textile and apparel value chain. The organisation recommended rationalisation and reduction of import duties on key inputs used by export-oriented industries so that input costs are better aligned with finished product duties.
FIEO also called for targeted policy and fiscal support to develop Indian global-scale shipping lines. Ralhan suggested measures such as access to long-term finance, viability gap funding and a supportive regulatory framework, noting that a strong domestic shipping ecosystem could help India save an estimated $40–50 billion annually in freight outflows.
On the tax front, the industry body urged the government to restore the 200–250 per cent weighted tax deduction for in-house R&D expenditure under Section 35(2AB) of the Income-tax Act and to extend eligibility to LLPs, partnerships and proprietorships.
In addition, FIEO proposed a 200 per cent tax deduction for expenditure incurred on overseas marketing, branding, trade fairs, buyer meets and promotional activities, a move that would particularly benefit MSME exporters.
The organisation also recommended extending the 15 per cent concessional corporate tax rate under Section 115BAB for new domestic manufacturing units for at least another five years beyond the earlier cut-off date of 31 March 2024, to sustain investment momentum in manufacturing.
