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| "It's time to correct one of the last remaining inverted duty structures in our economy. The import duty on natural rubber stands at 20 per cent, while a finished tyre draws a 10 per cent duty. This leads to a situation where it is cheaper to import a finished product into India, than manufacturing it here, putting domestic industry at a significant disadvantage. Import duty on natural rubber needs to at least be on par with the finished good, at 10 per cent " |
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| Chamber-Speak |
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CII
There should be no change in the Customs duty of 10 per cent. In addition, anomalies in Customs duty structure like higher Customs duty on input than on final product should be removed. |
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| Custom duty on fuel oils like furnace oil and low sulphur heavy stock should be reduced from 10 per cent to 5 per cent and on non-coking coal, petroleum coke, low ash metallurgical coke, naptha and liquefied propane, from 5 per cent to 2 per cent |
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FICCI
The government must retain the peak Customs tariff at 10 per cent. Any further reduction will adversely affect the competitiveness of domestic industry. Internal reforms should be calibrated while reducing the peak Customs tariff in future. |
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| The government should be cautious while signing any further free trade agreements and the recommendations of the Hoda Committee should be looked into before further tariff reduction |
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| STATE OF PLAY |
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| S Madhavan, Leader Indirect Tax Practice, PricewaterhouseCoopers |
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| The appreciation of the Indian rupee could impact Customs revenues. It is possible ,therefore, that the government may not effect any cuts in the Customs duty rates. This could result in sharper duty cuts in the following year if the government intends to maintain its goal of bringing the average rates down to around 5 per cent by 2010. Alternatively, the government could reduce the median Customs duty rate by 2.5 per cent and at the same time, protect revenues by broadbasing the duty by pruning several end- use and product-specific exemptions so that the Budget takes forward the twin agenda of moderation of duty rates and broadbasing the coverage. The problem of the inverted duty structure has been addressed in the earlier years with regard to several sectors. The issue of finished products being imported from countries with which India has entered into bilateral and regional trade agreements at rates lower than the rates at which raw materials/ intermediates are imported from other countries is a real one. The only real policy response is a general rate cut for all product categories thereby keeping the duty differential arising from trade agreements within manageable limits. One more area that requires attention is with regard to the 4 per cent additional Customs duty. This should be available as a full offset against state VAT. This is currently not possible as Customs duty is a federal levy whereas state VAT is not. Recent amendments have enabled this additional duty to be available as a refund to importers/traders if state VAT or CST is discharged on such goods on subsequent sales. However, lack of clarity in operationalising of such refund has resulted in a situation where this refund has not been granted to any business in India. There is an urgent need for the Budget to address this issue and to ensure that imports of traded goods are not taxed twice as they are currently |
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