Customs Duty Tweak Sharpens India’s Edge in Global Trade
Customs Duty Tweak Sharpens India’s Edge in Global Trade

Need To Rationalise Customs Duties In Certain Sectors: Official

"But if the industry is 40-50 years old and has developed, has good competition, good investments and if they are globally known, then they should also be competing with the global firms," the official argued

There is a need to rationalise customs duties particularly in those sectors which are growing at a healthy pace for the last several decades, an official said on Thursday.

The official, however, said that providing a protection of high duty is required for the infant domestic industry.

"But if the industry is 40-50 years old and has developed, has good competition, good investments and if they are globally known, then they should also be competing with the global firms," the official argued.

Normally, customs duties or tariffs are used as a policy tool to ensure a higher level of protection for certain sectors to boost domestic manufacturing.

These remarks assume significance as there is demand from countries which are negotiating free-trade agreements with India to cut down import duties in sectors such as auto and alcoholic beverages.

Overall duties in certain segments are up to 150 per cent like alcoholic beverages.

"There is a need for balancing in the duty structure. One country has less duty and other will have high taxes, this can not happen," the official added.

Given certain disability factors in India like high interest rates, problems in getting land and some hidden cost, there is a requirement to provide protection to domestic industries to provide a level-playing field with firms of the developed nations.

But for that disability factor, one can provide a certain level of protection to domestic industry but not at the level of 100 or 150 per cent, the official argued adding "our argument is that duties should be rationalised".

Industry body India Cellular and Electronics Association (ICEA) has recently stated that import duty cuts on mobile phone components can increase domestic production of handsets by 28 per cent to USD 82 billion and boost exports, crucial to support indigenous manufacturing.

ICEA Chairman Pankaj Mohindroo has said that the next phase of mobile manufacturing growth has to come from exports as the production for the local market is close to saturation.

He has said India will need to enhance competitiveness in mobile manufacturing at the global level by matching the tariffs or reducing the cost of production with respect to countries like China and Vietnam, where import duty on most of the mobile components is nil or in a lower tax bracket.

ICEA, whose members include Apple, Foxconn, Dixon, Vivo, Oppo, Xiaomi, and Lava etc, has projected that lowering duties on mobile inputs, as recommended by the industry, will enhance local production of mobile phones to USD 82 billion by 2026-27 compared and USD 64 billion with business as usual.

According to think tank GTRI, the countries with which India is negotiating trade agreements already have low import duties.

"For example, the UK's duties are 4.1 per cent, Canada's 3.3 per cent, and the USA's 2.3 per cent. In contrast, India's import duties are higher at 12.6 per cent," GTRI Co-Founder Ajay Srivastava has said in his report.

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