To boost domestic manufacturing and provide a level playing field to the labour intensive MSME sector, the government has decided to hike custom duties applicable on a host of imported consumer products as well as raw materials. This includes imported footwear, furniture, electrical appliances  toys, components such as compressors and motors used to make appliances, kitchenware and  tableware and decorative items.

A health cess of 5 per cent by way of Custom Duty will now be imposed on import of medical equipment. The  National Calamity Contingent Duty, an excise duty has been hike on several tobacco products including cigarettes.

Kamal Nandi, President of Consumer Electronics and Manufacturers Association, said that hike in custom duty on components like compressors and motors and in some cases finished goods is expected to result in “price escalation in the short run on refrigerators, air conditioners, coolers, washing machines, air purifiers and chest freezers.” 

Customs duty on footwear has been increased to 35 per cent from 25 per cent and on parts to 20 per cent from 15 per cent. 

Harkirat Singh, MD, Aero Club, which is known for brand Woodland said, “Not all the parts used to make shoes are currently available in the country and 30-40 per cent of the parts are imported. In addition, specific models of premium shoes are imported. So adjustment will need to be made by the industry in terms of supply chain dynamics for domestic sourcing of parts and there will be some impact on cost structures of companies.”

Anupam Bansal, MD, Liberty Retail said, “This is an important opportunity to develop a stronger ecosystem for local manufacturing of shoes. Premium shoe products could see price hikes in the short term.

Meanwhile, custom duty is also being hiked to 25 per cent from the current 20 per cent on imported furniture goods such as seats, bedding articles, lamps, lighting, illuminated signs and other items of furniture.

Peter Betzel, CEO and CSO, IKEA India said that the company is “disappointed with these customs duty hike. We are further evaluating the impact of the hike on our total business.” He added, “ To maximise local sourcing from India is our very important priority and we would like to continue collaborating with the government to create the right ecosystem.”

Toys will now attract a Customs Duty of 60 per cent from 20 per cent now and is likely to make many international biggies change their India strategy.

Paresh Parekh, Tax Leader, Consumer Products and Retail, EY India said, “Custom duty rate increases and announcement of relook at duty benefits on FTA country imports will have to be analysed by some MNC brands and stores including incremental obligations. This will subtly motivate some of them to start exploring to shift manufacturing base to India.”

Reduction in Custom Duty

 The government announced reduction in basic customs duty on imports of newsprint and light-weight coated paper to 5 per cent from 10 per cent. Custom Duty has been reduced to nil on raw material used for fuels, chemicals and plastics.

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