India Inc gears up for further cut in Customs duty

The CII has already said the Government should follow the recommendations of the Kelkar Taskforce and reduce the peak duty below 15 per cent and push for further progress in internal reforms.

Despite the peak rate having been lowered to 15 per cent since March 2005, several product categories continue to attract significantly higher duty rates of 20-150 per cent.

Some of the sectors which are likely to benefit from the slash in the custom duty are auto, textile, oil and infrastructure companies. The reduction in customs duty on raw materials and components to five per cent would give a huge fillip to the country’s auto sector and improve the competitiveness of domestic players.

With a large chunk of Indian textile companies going in for expansion, the industry is likely to see an investment of nearly Rs 70,000 crore in the next five years in machinery alone. Most of these machines are exported and a cut in the custom duty from the existing 15 per cent would increase the competitiveness.

However, local auto ancillary companies are jittery over the proposed customs cut which could flood the Indian market with cheap components.

The IT industry is also expecting that duty on dual use items like rubber parts, cables, copper, steel, plastics is brought down to zero which will lead to indegenous manufacturers becoming more competitive.

However, there are some sectors which would like the existing customs duty structure to remain. The electronics hardware industry is keen that the sectors which manufacture picture tubes, glass parts for tubes, deflection parts, loudspeakers, tuner, transformers etc are provided protection by the government.

“This segment is under threat due to low-cost imports from competing countries and also imports being wrongly classified under the IT category to derive benefit of zero duties. This is leading to unfair disadvantage to domestic manufacturers because components and assemblies are being imported at zero duty in the guise of inputs for IT products and used for the manufacture of consumer equipment,” Electronic Industries Association of India’s president R G Deshpande said.

The steel industry is also seeking a hike in the custom duty from the current 5 per cent to 15 per cent. “With global steel prices under pressure and China being a net exporter of more than 100 mt, the steel industry is entitled to some protection by the government,” Indian Steel Alliance’s president Moosa Raza said.