Items such as cotton, maize, some automobile parts, capital equipment, leather, plastic, chemical goods, solar lamps and electronics will now attract higher customs duty. The move is in step with the government’s policy to promote domestic production especially by micro, small and medium enterprises (MSMEs) under the Aatmanirbhar programme.
Finance Minister Nirmala Sitharaman also announced reduction in customs duties on some raw materials and inputs used by the domestic industry, to remedy inverted duty structures, in sectors including petrochemicals, textiles, gold and silver, aviation, metals including steel, and animal husbandry, as part of her Budget proposals.
“Our custom duty policy should have the twin objectives of promoting domestic manufacturing and helping India get onto global value chain and export better. The thrust now has to be on easy access to raw materials and exports of value added products,” Sitharaman said.
The increase in customs duties of the identified items, while cheering domestic industry, may not go down well with India’s trading partners such as the US, the EU and China, that recently criticised India’s propensity to increase import tariffs at a World Trade Organisation review. The WTO observed that the simple average applied import tariff in India increased to 14.3 per cent in 2020-21, from 13 per cent in 2014-15.
Agri infra cess
To ensure consumers do not bear “additional burden’’ following the imposition of Agriculture Infrastructure and Development Cess, basic customs duties has been reduced on a number of items including apples (15 per cent), alcoholic beverages (50 per cent), crude edible oil (15 per cent), coal, lignite and peat (1 per cent), urea, MOP, DAP (nil), ammonium nitrate (2.5 per cent), peas, kabuli chana , Bengal gram and lentils (10 per cent).
In continuation of last year’s initiative of eliminating 80 outdated exemptions, Sitharaman proposed a removal of 400 more exemptions this year.
Duty hike
In agriculture, items attracting higher customs duties include cotton and cotton waste, maize bran, de-oiled bran cake, prawn feed, fish feed, raw silk and silk yarn.
In chemicals, higher import duties have been imposed on carbon black, bis-phenol A and epichlorohydrin while in the leather sector, various categories including crust leather and finished leather will attract more duties.
Import duties have also been raised on synthetic, cut and polished stones, auto parts like ignition wiring sets, safety glass, parts of signalling equipment and screws and nuts.
Inverted duty structure
The Budget has attempted further correction of the inverted duty structure, where inputs attract higher customs duties than finished products, with reduced duties on components for manufacture of aircrafts by public sector units, naphtha, nylon chips, nylon fibre and yarn, a number of ferrous and non-ferrous metals (including some steel products), precious metal such as gold, silver, platinum and gold dore and animal feed-additives.