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.

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Highlights of Economic Survey 2008-2009

New Delhi (PTI): Following are the highlights of the pre-Budget Economic Survey 2008-09.

# Unleash reforms - phase out cesses, surcharges and transaction taxes (such as commodities transaction tax, securities transaction tax and Fringe Benefit Tax)

# Introduce new Income Tax Code that results in neutral corporate tax regime

# 7-7.5% growth possible in 2009-10

# Allow 49% FDI in defence and insurance; permit FDI in multi-format retail starting with food

# Proposes another round of fiscal stimulus including tax cuts and increase in expenditure

# Decontrol petrol and diesel prices; end Govt monopoly in railways, coal and nuclear energy

# Lift all bans on future contracts to restore price discovery; decontrol sugar and fertiliser

# Revitalise disinvestment programme to generate Rs 25,000 crore annually, list all PSUs and auction those beyond revival

# Economic growth decelerated in 2008-09 to 6.7 per cent from nine per cent in 2007-08

# Fiscal deficit in 2008-09 shot up to over 6 per cent from 2.7 per cent in 2007-08

# Survey indicates FRBM-II to get back to path of fiscal consolidation

# Complete the process of selling 5-10 per cent equity in identified profit-making non-'Navratna' PSUs

# List all unlisted PSUs and sell a minimum 10 per cent equity to public.

# Auction all loss-making PSUs that cannot be revived

# In PSUs with zero networth, allow negative bidding in the form of debt write-off

# Auction 3G spectrum

# The auctioned spectrum must be freely tradable, with capital gains on spectrum to be taxed under the Income Tax Act

# Rationalise Dividend Distribution Tax to ensure full single taxation of returns to capital in the hands of the receiver

# Reform petroleum (LPG, Kerosene), fertiliser and food subsidies to reduce leakages and ensure targeting

# Limit LPG subsidy to a maximum of 6-8 cylinders per annum per household

# Phase out kerosene supply-subsidy by ensuring that every rural household has a solar cooker and solar lantern

# Review customs duty exemptions and move to a uniform duty structure to eliminate inverted duties

# Implemnet GST from April 1, 2010

# Rapid operationalisation of UID Authority within 3 months

# Agriculture growth fell sharply to 1.6 per cent in 2008-09 from 4.9 per cent

# Exports grew at 3.4 per cent to 168 billion dollar in 2008-09 from 163 billion dollar in previous fiscal

# Imports grew at 14.3 per cent to $287.75 bn from $251.65 bn

# Trade balance deteriorated to $119.05 bn from $88.52 bn.

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Economic Survey: Cut customs duties, streamline export promotion

New Delhi (PTI): The government should cut customs duties and streamline export promotion schemes and pay special attention to infrastructure to overcome the contracting exports on account of recession in India's major trading partners, the Economic Survey said on Thursday.

The Economic Survey cautioned that the global meltdown, particularly in the US and EU, is expected to impact the country's export growth in 2009-10.

"With import demand falling from our major trading partners, India's exports of goods and services (are) expected to be impacted," the pre-Budget Economic Survey tabled in Parliament on Thursday said.

India's exports, after registering a healthy growth rate of over 30 per cent in the first half of 2008-09, turned negative in October 2008. Overseas shipments declined by 29.2 per cent in May — contracting for the eighth month in a row — over the same month last year.

In the last fiscal, exports grew by a meagre 3.4 per cent to $168.7 billion dollars.

The survey said that besides short-term relief measures and stimulus packages, some fundamental policy changes are needed for the merchandise trade sector.

The measures include continuing to reduce customs and excise duty to make our exports and industry competitive, streamlining existing export promotion schemes, and giving special attention to export infrastructure.

The survey talked of "weeding out unnecessary customs duty exemptions", and rationalising the tax structure including specific duties in a calibrated manner taking into account the specific duty levels in our trading partner countries.

There is also a need to check the proliferation of special economic zones, evolve clear-cut policy for beneficial Comprehensive Economic Cooperation Agreements even with some developed countries "... which should be well integrated with our economic and trade policy reforms and the blueprint for possible changes due to WTO negotiations."

However, the Economic Survey said the steep fall in petroleum prices and cooling of the prices of commodities could have a positive effect on imports.

Imports dipped for the fifth straight month by 39.2 per cent to $16.21 billion in May over the year-ago month.

It also said in 2010 recovery is expected with IMF projections at 1.9 per cent increase for world output and 0.6 per cent for world trade volume of goods and services.

The survey emphasised the need to desist from any protectionist tendencies and proceed on the reform path.

"While efforts to promote exports are needed, there is a need to guard against protectionist measures originating from our trading partners," it said.

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