Changes in Import Duty

News: The Finance Minister introduced a host of changes in Customs duty on several items in the Union Budget for 2022-23. This would mean that imports become more expensive or cheaper depending on the change in customs duties.

Background:

  • In 2021, customs duty exemptions were given to the steel scrap industry, which has now been extended for another year. It is likely to provide relief to micro, small and medium-scale secondary steel producers.
  • Over the last five years, import duty hikes have been made on several occasions such as almonds, apples, and others. Other items such as cellphone parts and solar panels have seen the most regular hikes, with an aim to protect and nurture the domestic industry growth. Prior to the large-scale hikes, India’s peak customs duty — the highest of the normal rates — on non-agriculture products had come down steeply from 150% in 1991-92 to 40% in 1997-98 and subsequently, to 20% in 2004-05 and 10% in 2007-08.

What are the Changes in the Import Duty?

  • The customs duty on umbrellas was doubled to 20%, while exemptions provided on import of parts of umbrellas were withdrawn. Similarly, the customs duty on single or multiple loudspeakers, whether or not mounted in their enclosures was hiked to 20% from 15%. Import duty was reduced for cut and polished diamonds, asafoetida, cocoa beans, methyl alcohol and acetic acid.
  • Duty on capital goods and project imports was rationalized by phasing out concessional rates and applying a moderate tariff of 7.5%. Under Project Import Scheme, goods imported by a company are placed under a single tariff in the Customs Tariff Act, 1975 to facilitate faster assessment and clearances of goods.
  • The tariff changes will come into effect from 1stMay 2022, as per the Finance Bill 2022-23.

Why such changes?

  • The hike in import duty for items, such as umbrellas, are in line with the increase in import duty on toys last year. The hike is being done for industries which manufacture items that do not deploy any major technology.
  • Umbrellas, for instance, are manufactured in small units spread across 10-12 districts with Kerala being the major manufacturing state. The government seems to be offering protection to such industries.
  • It also falls in line with the other Budget announcement of popularising one station-one product to popularise local businesses and supply chains as announced in Budget 2022.
  • One station-one product as a concept aims to promote a local product from each stop of the Indian Railways by making the railway station of that area a promotional and sales hub for the product.
  • The concept of ‘One station one product’ has based itself on the successful One District One Product (ODOP) scheme. Based on a district’s strengths, ODOP has been a transformational step towards realising the true potential of a district, fueling economic growth, generating employment and rural entrepreneurship.