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Self-reliance push: Duties hiked, ‘old exemptions’ to be reviewed

The government has reduced duties on raw materials and inputs used by domestic manufacturers across eight industries, including petrochemicals, textiles, metals and aviation, as a measure to “correct” inverted duty structures.

Written by Prabha Raghavan | New Delhi |
February 2, 2021 3:43:24 am
Self-reliance push: Duties hiked, ‘old exemptions’ to be reviewedThe Union Budget on Monday focused on boosting domestic production in a variety of key sectors by hiking customs duties on final goods, bringing down costs of imported raw materials and reviewing “old exemptions”. (Express photo by Praveen Khanna)

Keeping in line with the government’s push for a more self-reliant India, the Union Budget on Monday focussed on boosting domestic production in a variety of key sectors by hiking customs duties on final goods, bringing down costs of imported raw materials and reviewing “old exemptions”.

The government has reduced duties on raw materials and inputs used by domestic manufacturers across eight industries, including petrochemicals, textiles, metals and aviation, as a measure to “correct” inverted duty structures.

This includes a 10 per cent reduction in duties of gold and silver findings from 20 per cent earlier and a 2.5 per cent reduction in duties on nylon fibre and yarn to 5 per cent. It has also done away with a 2.5 per cent duty on components for manufacture of aircrafts by defence ministry PSUs.

At the same time, not all raw materials have seen a drop in duties, with the government hiking the rates of certain input materials across sectors like agriculture, chemicals, gems and jewellery, capital goods and auto. This is to create a “level playing field” for the benefit of farmers, MSMEs and other domestic manufacturers, according to the government.

The steepest hikes include a 15 per cent jump in products like maize bran and de-oiled rice bran cake (earlier nil) as well as solar inverters (hiked to 20 per cent from 5 per cent). Other products like cotton waste, certain leathers as well as inputs and parts of mobile chargers (other than printed circuit board assembly and moulded plastic) were levied a 10 per cent duty from no duty earlier.

“Our custom duty policy should have the twin objective of promoting domestic manufacturing and helping India get onto (the) global value chain and export better. The thrust now has to be on easy access to raw materials and exports of value added products,” said Finance Minister Nirmala Sitharaman while delivering her Budget speech at the Lok Sabha.

“Towards this, last year, we started overhauling the Customs Duty structure, eliminating 80 outdated exemptions,” said the minister, proposing to review more than 400 old exemptions this year. “We will conduct this through extensive consultations, and from 1st October 2021, we will put in place a revised customs duty structure, free of distortions. I also propose that any new customs duty exemption henceforth will have validity up to the 31st March following two years from the date of its issue,” she added. The decisions follow the government’s announcement of three AtmaNirbhar Bharat packages during the course of the 2020-21 financial year. However, some experts feel the measures, especially those related to bringing down input costs, may not be as effective as the government aims.

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