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Industry Seeks Withdrawal of Duty Exemptions Over 3-5 years

The government may take a step-by-step approach to phase out customs duty exemptions that are currently under review. This is to give trade adequate time to build domestic manufacturing competitiveness.

“We’ve begun the exercise, comments are coming in… government can take a favorable view, consultation are on with all stakeholders,” a senior government official said, asking not to be named.

The government should rationalize the overall import duty structure on raw materials and finished products, industry has suggested, seeking a roadmap of duties over three to five years to encourage local manufacturers top align with global trade trends.

“A graded roadmap may be strategized to shift duty slabs to a competitive level over three to five years and minimal exceptions for a few products presently in the higher slabs may be considered, accompanied by policy actions to boost domestic manufacturing for a specific tome period,” Chandrajit Banerjee, director general of Confederation of Indian Industry (CII), said.

The industry has shared its request with the Central Board of Indirect Taxes and Customs (CBIC), which has started reviewing 400 customs duty exemptions.

The first leg of the exercise began last month with the CBIC seeking the industry’s view on whether 79 such exemptions should be continued or modified to improve their scope.

The exemptions span a variety of sectors, including textiles, oil and gas, chemicals, fertilizers, fast moving consumer goods, agro-processing, toys, health and pharma, electronics and power, including solar and thermal.

Industry has proposed a framework similar to phased manufacturing program (PMP), which aided in boosting local manufacturing of smartphones as well as exports, said a senior industry executive involved in the consultation process.  

“PMP was given by the industry and greatly helped in developing the electronics manufacturing the electronics manufacturing ecosystem, a similar approach can benefit other industries if adopted in this case,” the executive said.

Industry has proposed that PMP be considered together with Production-linked Incentive schemes as the blueprint for a future roadmap, since it will make player aware and finished products in advance, while providing them incentives to meet output targets.

“CII suggests that the duty on import of final products should be in standard slab, and input or raw materials to be at the lowest or nil slab,” Banerjee said. S-ET

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