Electronic goods likely to escape higher import duty

The government might not levy higher customs duty on imports of non-essential items like electronic goods. The commerce ministry has told the finance ministry that most electronic goods are covered under information technology (IT) agreements with other countries, and India unilaterally cannot raise the rates.

In case of imports of precious, semi-precious stones and pearls, the curbs might not be possible because a significant portion of these items are processed in India and exported back in finished form or jewellery. That leaves the finance minister mainly with consumer durables like television sets, refrigerators and air conditioners, but officials fear that would not have any significant impact.

Economic Affairs Secretary Arvind Mayaram also indicated the government would not hike duties on more non-essential items to tame the Current Account Deficit (CAD) as curbs on imports of gold, silver and platinum should serve the purpose.

“As far as imports are concerned, we have said we will curb non-essentials and we have taken measures to do so. Now you will have to live with that for a while,” Mayaram said.

Earlier this week, the government had raised import duty on gold, platinum and silver to 10 per cent to curb their demand and rein in CAD at 3.7 per cent of the gross domestic product this financial year. The increase would give the exchequer an additional Rs 4,830 crore.

“Most of the electronics items are zero-rated and covered under IT agreements with various countries. Duty increase on consumer durables would just have a symbolic effect. It would not make much difference to the CAD,” said a finance ministry official.

Another fear is that if India increases duty on certain products, which hurts exports from a particular country, that country might retaliate by increasing duties on exports from India of another product.

At $31 billion, electronic goods comprised 6.3 per cent of the total imports of $490 billion in 2012-13. Pearls, precious and  semi-precious stones were $22 billion or 4.4 per cent of the total imports. Petroleum, gold and machinery comprised 34.4 per cent, 11 per cent and 5.5 per cent of the imports, respectively.

India is a major importer and consumer of gold and silver. The quantity of gold imported during 2012-13 was 845 tonnes, valued at Rs  2,45,862 crore.  Last year, 1,963 tonnes of silver worth Rs 10,691 crore was imported. Due to rise in imports of gold, silver and crude, CAD swelled to 4.8 per cent last year. Imports of gold have increased by 87 per cent to 383 million tonnes in April-July 2013-14, while silver imports in the four-month period showed an increase of 200 per cent, valuing at Rs  12,789 crore.

Last month Finance Minister P Chidambaram had said the government was looking at some compression in non-oil and non-gold imports, especially of non-essential goods. “There is no rocket science in manufacturing basic electronic hardware. It can be manufactured in states like Rajasthan and Kerala,” he had said.

CALL OF DUTY REJECTED

• Most electronic goods are covered under IT agreements with other countries, hence raising duty rates unilaterally not an option
• Curbs unlikely for imports of precious, semi-precious stones and pearls, as significant portion of these items are exported as jewellery
• Commerce ministry fears duty increase on consumer durables might affect exports from a particular country, which might retaliate by increasing duties on exports of a different product