New levies hit 2 per cent of trade basket
Union budget 2023-24 had announced a slew of import duty changes to boost domestic manufacturing.
However, the change will have an impact of around $14 billion or on 2 per cent of the value of the country’s current merchandise import basket. This includes products on which the duty had been increased or reduced.
“The combined import value for products on which duty was raised is $12 billion, or 1.6 per cent, of India’s total merchandise imports in 2022. Combined import value for products on which the duty was reduced is $2 billion or 0.27 per cent of India’s total merchandise imports in CY2022,” Ajay Srivastava, co-founder of the think tank Global Trade Research Initiative (GTRI), said.
The budget also rectified the inverted duty structure for electric kitchen chimneys by bringing duties on inputs and outputs at the same level.
Effective duty on electric kitchen chimney — increased from 7.5 per cent to 15 per cent and effective duty on heat coils used in the manufacture of electric kitchen chimneys decreased from 20 per cent to 15 per cent.
The budget has reduced the number of duty slabs without impacting the final duty to be paid.
The basic customs duty slabs on goods other than textiles and agriculture have been reduced from 21 to 13.
Srivastava said: “This was the most crucial exercise undertaken in this budget. Reducing the number of duty slabs without changing the final duty required rearranging effective duty and Agriculture Infrastructure and Development Cess (AIDC) components.
“Total imports under the above category are $95 billion, or 13 per cent of India’s total merchandise imports in CY 2022. Coal (Coking, steam, and Bituminous) and Gold were critical items.”
In the case of coal, effective duty was increased from 1 to 2.5 per cent while AIDC was decreased from 1.5 to zero. So a total of both effective duty and AIDC remained unchanged at 2.5 per cent. Coal importers will continue to pay the same duty.
For gold bars, effective duty was decreased from 12.5 to 10 per cent, while AIDC was increased from 2.5 to 5 per cent. So the total of both effective duty and AIDC remained unchanged at 15 per cent. Gold bar importers will continue to pay the same duty.
For gold, dore bars effective duty was decreased from 11.85 to 10 per cent while AIDC was increased from 2.5 to 4.35 per cent. So a total of both effective duty and AIDC remained unchanged at 14.35 per cent.
Gold dore bar importers will continue to pay the same duty.
President of the Federation of Indian Export Organisations (FIEO), A Sakthivel, said many of the changes in the customs duties will help to provide competitiveness to manufacturing and exports, besides attempting imports substitution.
The reduction in duty on denatured ethyl alcohol and crude glycerine will help the downstream users in the chemical sector.