CVD to offset state levies

The government has slashed peak custom duty rates on non-agricultural products from the current 15 per cent to 12.5 per cent.

Though this is lower than the general pre-budget expectation, what will gladden industry is the move to levy a countervailing duty of 4 per cent on all imports to compensate for various state government levies that do not get captured in the current tariff structure. This CVD will be fully adjusted to manufacturers of all exciseable goods. In 2005-06, this CVD was tried in a limited manner.

As a result of the reduced duty, import of commodities like alloy steels, aluminum, copper, ores, important plastics, naphtha and manmade fibre yarn are set to become cheaper.

The import duty on vanaspati has, however, been increased to 80 per cent at par with palm oil, and the 5 per cent duty on steel melting scrap has been restored. Custom duty on anti-cancer and AIDS medicines and lifesaving drugs has been reduced to 5 per cent along with granting them CVD and excise exemptions.

Duty on naphtha and petroleum coke been halved to 5 per cent. Chidambaram has also proposed to extend the concessional project rate of 10 per cent to pipeline projects for transportation of natural gas, crude petroleum and petroleum products. Import of manmade fibers and spun yarns will attract a lower duty of 10 per cent instead of 15 per cent.

To rationalise exemptions in customs, Chidmabaram has withdrawn concessions granted to commodities including spare parts for maintenance of textile machinery, parts of outboard motors imported by specified agencies, food products (except alcoholic preparations) imported by hotels and tourism industry, retail sale of food preparations containing flour, starch for infant use.

Commodities still enjoying exemption from paying the CVD include, crude, PDS kerosene, cooking gas, fertiliser and inputs of fertiliser, newsprint, gold, silver, precious stones, shops for breaking up and non-mega-power transmission and distribution projects.