MoF unlikely to cut customs duty

According to senior officials participating in the pre-budget inter-ministerial consultations, finance ministry officials have been quizzing officials from other ministries on why customs duties should be reduced when collections have been well short of budget estimates and the finance ministry has to find ways and means to reduce the revenue deficit.

The union commerce ministry has suggested re-structuring of tariff rates in the case of such items as are affected by the elimination of QRs in April 2001. Most of these changes are expected to have a positive impact on revenues. Where the impact is likely to be negative, involving a reduction in duty rates, the finance ministry is unlikely to agree on the grounds of an adverse impact on revenues.

As already reported in these columns, the finance minister is expected to retain the 10 per cent surcharge on imports and the special additional duty (SAD) on imports introduced in 1998-99. However, it is likely that the finance minister may undertake a review of tariff rates with a view to eliminating structural imbalances, such as there being a higher duty on raw materials and intermediates compared to finished goods in some industries. Even this review, it is learnt, will be constrained by revenue considerations. The bottomline on customs duty changes, according to finance ministry officials, is that revenues receipts should not dip any further.