The Hindu Business Line : Customs duty

The Customs duty slab system, at 10 per cent on imported raw materials, 15 per cent on intermediates, 20 per cent on finished goods, and 60 per cent for all fully assembled two-wheelers, as suggested by the Mr Rahul Bajaj for the forthcoming Budget is, to say the least, antiquated.

Experience has proved that varying slabs of levy, be they Customs, or excise or sales tax, has a built-in scope for interpretation, classification and abuse and, for that reason, could lead to corruption, involving all levels of bureaucracy. In the Indian context, the Chilean example of Customs duty rationalisation merits studying and implementing.

In a bold fiscal initiative a couple of years ago, Chile replaced the corruption-ridden multi-slab rates of levy by a single duty at 11 per cent, as the only rate of duty to be charged for every item imported, with no exemption.

There was a dramatic reduction in corruption, increase in Customs revenue and fresh disputes were limited to cases of under-valuation.

N. Narasimhan

Bangalore

Letters to the editor and contributions can be sent by e-mail to: bleditor@thehindu.co.in

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