Government today reduced customs duty on certain products to address the issue of inverted duty structure, under which finished goods are taxed at lower rates than raw material, and boost domestic manufacturing.
"I propose to introduce measures to revive the economy, promote investment in manufacturing sector and rationalise tax provisions so as to reduce litigation as well as to address the problem of inverted duty structure in certain areas," Finance Minister Arun Jaitley said.
The government today lowered the basic customs duty on coal tar pitch, battery waste and battery scrap from 10 per cent to 5 per cent.
The duty on steel grade limestone and steel grade dolomite was cut from 5 per cent to 2.5 per cent, while on crude glycerin from 12.5 per cent to 7.5 per cent and crude glycerin used in the manufacture of soaps from 12.5 per cent to nil.
Also duty on fatty acids, crude palm stearin, RBD and other palm stearin, specified industrial grade crude oils was cut from 7.5 per cent to nil for manufacture of soaps and oleo-chemicals.
Inverted duty structure impacts the domestic industry adversely as manufacturers have to pay higher price for raw material in terms of duty, while the finished product lands at lower duty and costs low.
Manufacturing, which constitutes over 75 per cent of the index, declined 1.2 per cent in March against growth of 4.3 per cent a year earlier.
During the April-March period of 2013-14, the sector's output contracted 0.8 per cent compared with 1.3 per cent growth previously.
