Keeping home safe: Peak Customs duty to stay at 10%

NEW DELHI: The government is likely to keep peak Customs duty rate of 10% unchanged in the forthcoming budget to protect the domestic industry as a number of countries look to export their way to growth.

India had committed to lowering its import duty to the Asean level of 4.5%-5 % by 2010 but the financial crisis triggered economic turmoil caused it to pause the reduction.

“The general view is that the rate should be left untouched as domestic industry is still recovering,” said a government official privy to discussions.

Peak customs duty is imposed on more than 90% of imported goods and retaining it at the existing levels would help protect the domestic industry from cheap imports.

India’s domestic demand driven 9% GDP growth is a big contributor to the global demand and a number of countries are looking to step up exports to India.

These include the exports driven economies of Asia that face stagnant demand for their goods in the developed world.

Moreover, India has entered into number of regional and free trade agreements including thatwith Asean. Once in effect these arrangements also lead to reduction duties thereby impacting local industry here.

However, duty on inputs could be cut to boost domestic manufacturing and also help ease inflationary pressures.

The then Finance Minister P Chidambaram had last reduced peak customs duties to 10% from the present level of 12.5% in February 2007 budget.

The duties have remianed at that levels since then.

The industry lobbies have said a reduction in peak duties at this juncture could spell trouble for the domestic industry.

FICCI has said in its pre budget presentation that it would be in fitness of things if the alignment in customs tariff is calibrated with internal reforms.

Domestic manufacturers in sectors such as airconditioners, refrigerators, washing machines , picture tubes, specified plastics and other capital goods would benefit if the peak duty of 10% is retained.

India’s imports have risen 24% to over $221 billion in April-November 2010 from a year ago.