The government is planning to reduce the peak customs duty to 30 per cent in the forthcoming Budget from the present 35 per cent. It is also looking at slashing the number of exceptional rates from 18 to a more manageable level.
According to finance ministry sources, the Centre is considering a report on customs duty rationalisation prepared by a committee headed by Arvind Virmani, senior advisor in the Planning Commission.
The committee has suggested bringing down the peak customs rate by 5 per cent every year to touch 20 per cent by 2004-05.
At present, there are four slabs of customs duty - 5,15, 25 and 35 per cent. The customs duty exemption list includes over 100 items. Finance ministry sources said it is has been proposed to remove several items from the exempted list and bring them under the 5 per cent rate.
The exceptional rates vary between 3 per cent on seven tariff lines including aeroplanes and aircraft and 210 per cent on eight tariff lines for alcoholic beverages.
Interestingly, while the WTO-bound rate on aircraft and aeroplanes is 3 per cent, that on imported whisky, rum, gin, vodka, etc is 150 per cent.
The Confederation of Indian Industry, in a recent meeting with the revenue secretary, had asked for slashing the number of basic rates to three and the number of exceptional rates to a maximum of five.
Finance minister Yashwant Sinha, had in this year's Budget promised to bring down the customs tariff to East Asian levels over the next 3-4 years.
Subsequently, in several industry chamber meetings, he had said the peak customs duty rate would be brought down to 20 per cent by 2004-05.
To counter the demand for protection by the domestic industry, the Virmani committee has mooted measuring the level of effective protection enjoyed by various sectors and calibrating the phase out on that basis.
The anomalies pointed out by the committee include cases of intermediate inputs being charged a higher customs rate than the final goods.
Of the 5,133 tariff lines, 91.62 per cent fall under the four basic customs rates of 5, 15, 25 and 35 per cent.
While 3,522 tariff lines or 68.7 per cent of the total tariff lines attract the peak customs duty of 35 per cent, 958 lines fall under the 25 per cent duty rate.
The tariff lines under the 5 per cent and 15 per cent rates are 76 and 147, respectively at present.
