New Delhi, Jan 22 (NationPress) The Federation of Indian Export Organisations has called on the government to leverage the Union Budget 2026 to address the pressing cost competitiveness issues that exporters are grappling with. This can be achieved through customs duty rationalisation and tax incentives.

FIEO has outlined five key measures, which include customs duty adjustments, support for domestic shipping companies, and increased tax benefits for research and development.

According to the industry body, it is crucial to provide targeted fiscal support and ensure policy stability as India strives for global manufacturing relocation and aims to enhance export-driven growth.

"The Budget needs to urgently resolve the challenge of inverted customs duty structures, where import duties on raw materials, components, or intermediates exceed those on finished products," emphasized S C Ralhan, President of FIEO.

"This inverted duty structure severely undermines the cost competitiveness of Indian exporters and ties up limited working capital due to accumulated input tax credits," he continued.

For instance, the customs duties on synthetic yarns and fibres are higher than those on finished textiles and garments, which negatively affects the textile and apparel value chain, as pointed out by the industry body.

FIEO has urged for the rationalisation and reduction of import duties on essential inputs utilized by export-oriented sectors, ensuring that input costs align with duties on finished products.

Ralhan has also advocated for targeted policy and fiscal support to establish Indian global-scale shipping lines, which includes access to long-term financing, viability gap funding, and enabling regulatory measures.

The industry body estimates that India could save $40–50 billion each year in freight outflows by developing a robust domestic shipping ecosystem.

FIEO has requested the government to reinstate the 200–250 percent weighted tax deduction for in-house R&D expenses under Section 35(2AB) and broaden eligibility to LLPs, partnerships, and proprietorships.

Additionally, it suggested a 200 percent tax deduction for expenditures related to overseas marketing, branding, trade fairs, buyer meetings, and promotional initiatives, which would particularly benefit MSME exporters.

It also called for extending the 15 percent concessional corporate tax rate under Section 115BAB for new domestic manufacturing units for at least another five years, beyond the prior cut-off date of March 31, 2024.