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Friday, February 21, 2020

Budget 2020: Govt maintains protectionist stance; hikes import duties on over 100 categories of products

It has also decided to amend customs rules to allow safeguards to limit quantities of imported products that it feels will “threaten” the domestic industry.

Written by Prabha Raghavan , Aanchal Magazine | New Delhi | Updated: February 2, 2020 1:14:48 pm
Budget 2020, Budget import duty hike, Nirmala Sitharaman Budget 2020, Indian Economy Budget 2020, Economic slowdown budget, India gdp grwoth budget, Budget news, Indian Express Finance Minister Nirmala Sitharaman.

The government Saturday hiked import duties on over 100 categories of products across sectors, including certain food items, furniture, footwear, household appliances, parts of mobile phones, and toys, continuing a progressively protectionist stance sparked over the last few years. It has also decided to amend customs rules to allow safeguards to limit quantities of imported products that it feels will “threaten” the domestic industry. For instance, the duty on shelled walnuts has been hiked to 100 per cent from 30 per cent. Duties on tricycles, dolls and puzzles are now 60 per cent as opposed to 20 per cent earlier, while completely built units of commercial electrical vehicles like buses and trucks will carry a 40 per cent customs duty, up from 25 per cent, starting April 1.

Exemptions on duties for products like certain milk products and alcoholic beverages, peanut butter, preserved potatoes, tin plates, sheets and strips, goods used in the construction of roads and parts used to manufacture printers have also been withdrawn.

The government is also taxing certain imported medical devices as part of a new health cess to set up hospitals in aspirational districts lacking healthcare facilities to support the NDA government’s flagship health insurance scheme for the poor. The 5 per cent cess is also expected to encourage the use of domestically manufactured medical devices in the country, said Finance Minister Nirmala Sitharaman during her budget speech.

At the same time, the government has reduced duties on at least 15 categories of products, including newsprint, parts used to manufacture microphones, calendered plastic sheets used to make smart cards and certain sports goods. For instance, pure bred breeding horses will now carry no duty, while they used to carry 30 per cent earlier. Solar cells, assembled in modules or made up in panels, will carry zero per cent duty, starting February 2.

Read | Govt invokes clause in FRBM Act to raise fiscal deficit target to 3.8% from 3.3%

According to the latest Budget documents, the country’s Customs Tariff Act, 1975, is also being amended to allow it to impose a safeguard duty, apply a tariff-rate quota or any “appropriate” measure that would help the government curb imports that could cause “serious” injury to the domestic industry.

The government has also incorporated “suitable” provisions in its Customs Act to prevent “undue” claims of Free Trade Agreement (FTA) benefits that pose a threat to India’s domestic industry. “It has been observed that imports under Free Trade Agreements (FTAs) are on the rise…In the coming months we shall review Rules of Origin requirements, particularly for certain sensitive items, so as ensure that FTAs are aligned to the conscious direction of our policy,” said Sitharaman.

Now, merely presenting a certificate of origin “shall not absolve the importer of the responsibility to exercise reasonable care” when seeking preferential rate of duty under an FTA, according to the amendments. The importer would have to establish, among other things, that the goods qualify for the preferential rates and should also possess “sufficient” information on the regional value content of the product. The NDA government, in its previous tenure, had also engaged in a tariff hiking spree covering over 400 items ranging from apples and almonds to cell phone parts.

Also Read | Finance Commission recommends 41% share of taxes for states; 1% for J&K, Ladakh in FY21

Last year, Prime Minister Narendra Modi had also walked out of the proposed RCEP deal over “significant” outstanding issues. Around this time, commerce minister Piyush Goyal had become positive about resolving talks with the US and reopening discussions with regions like the EU. However, the minister has also been vocal about India’s willingness to retaliate in cases where existing agreements have not worked in the country’s favour. In December, he had asked the industry for details of non-tariff trade barriers imposed by other countries on Indian exports, adding that the government was “willing to look at retaliatory action” and impose similar trade remedial measures.

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