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Sarkaritel.com News and Features
Customs Duty Needs
Rationalisation: CII
New Delhi, December 04, 2006
The pre-budget memorandum of CII brings out the fact that
despite the peak rate having been lowered to 12.5% since 1st
March 2006, several product categories continue to attract
significantly high duty rates, ranging from 15% to 150% and
comprising of 15 rates. There are many commodities whose duty
has not been reduced during last five years. Therefore, CII
has suggested that all duty rates above the peak rate be
reviewed and rationalized.
On the most commonly used rate (the so called peak rate) of
customs duty, while CII has urged the government to follow the
recommendations of the Kelkar Task Force on Indirect taxes and
further reduce the peak duty rate from 12.5% to 10% the
Confederation has said that this must be accompanied by
internal reforms. In this context, CII has suggested two
internal reforms - First, reduction of transaction cost due to
high infrastructure costs, power cost, cargo dwell time in
ports/ airports, etc. Second, reduction of CST from 4% to 2%
with effect from 1st April 2007.
While reducing the peak rate of customs duty, CII has
recommended that there should be corresponding reduction of
duty rates on intermediates and raw materials to maintain
two/three tier duty structure. For instance, reduction of
customs duty on fuel oils like furnace oil, LSHS from 10% to
5%, on non-ferrous metals and scrap of non-ferrous metals from
7.5% to 5% & 2% respectively, on melting scrap of iron and
steel from 5% to 2%, etc. After reduction of peak rate to 10%,
the three most common slabs of customs duty structure would be
10%, 7.5% and 5% and any further reduction below 5% should be
allowed only in exceptional cases, said the CII Press Release
issued here today.
CII has in its recommendation emphasised removal of 0%
Customs duty except for life saving drugs and security related
items, and those agreed through multilateral and bilateral
agreements.
CII has also urged the government to remove anomalies in
the customs duty structure where the inputs to a product
attract higher duty than the product itself. Customs duty, for
instance, on set-top box used in cable transmission system is
Nil whereas its imported inputs attract a duty of 5% or 12.5%,
on synthetic fibers and yarns duty is 10% in contrast to 12.5%
for its major input – like methyl acrylate, dimethyl formamide,
etc. More such anomalies have been cited in cutting tools,
footwear and tyres in the CII Pre-Budget Memorandum.
The other anomalies pointed out by CII have arisen due to
the bilateral Free Trade Agreements signed by India wherein
import of specified products have been allowed at NIL duty.
Consequently, the import of full product is turning to be
cheaper than import of inputs at the prevalent customs duty
rates and manufacture of the said product. The India-Thailand
FTA has boosted import of certain products from Thailand.
Hence, CII has urged for reduction of customs duty to 5% on
the major inputs required for manufacture of those products,
which are affected by NIL duty due to India – Thailand FTA.
In the Budget 2006, the levy of 4% of special CVD was
extended to all imports with certain exceptions, which
includes various types of projects and others wherein
machinery and equipment are used. This has adversely affected
the indigenous manufacturers of such goods. Hence, CII has
recommended the removal of exemption of special CVD of 4% on
all type of projects and others to counter balance internal
taxes such as CST/VAT.
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