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Wednesday
Feb 28 2001
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0909 hrs IST
2239 EST
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More populist tariff lines on the cards
Arun Goyal
INDIA has one of the most complex tariff structures in the world. A special analysis of the 5,145 tariff lines under amendment in the forthcoming Easy Reference Customs Tariff Budget edition shows that as many 84 tariff lines are under exceptional tariffs ranging from 40 to 210 per cent.
Spirits, agriculture, edible oils and other sensitive items are subject to special dispensations. Given the concern for populism, their number is expected to go up significantly in the budget.
The peak rate of 35 per cent applies to just two-thirds of the lines. Only 9.2 per cent of all lines are in the 20 per cent or below category. The rest of the lines are in the 35 per cent category or fall into complex duty structure category where the actual incidence in most cases is well above 35 per cent. The result is that the tariffs in India are very high.
The analysis at ABS does not cover surcharge, additional duty, special additional duty and antidumping and safeguard duty which, too, add to the costs of imports significantly. In most cases, the actual duty works out to more than double that indicated by the basic duty.
Textiles: As many as 449 tariff lines representing 8.5 per cent of lines are under the complex textile duty structure regime. A special duty structure based on ad valorem-cum-specific duty rate system has been prescribed to stop the inflow of low price goods into the country to compete with local industry. There are hardly any imports as the duty structure blocks even the strongest of the importers form bringing goods into the country.
Special Windows: Given the high duty structures, the only option for importers is to find special windows under the export promotion schemes or special schemes for infrastructure to reduce costs. However, the trend is on cutting down on the number of the schemes and also tightening conditions. It’s a moot point whether the DEPB scheme will remain in its original form in the budget.
The project imports heading represents a special window for low-cost imports of capital goods. Power projects and fertiliser projects, along with refineries, are subject to low duties. However, a recent amendment says that the benefits under power projects cannot be taken in conjunction with other notifications.
Thus a project importer may avail himself of a special dispensation on instruments which are otherwise covered under the project. The amendment says this is not possible. The scenario for imports is bleak if the law of the land is followed. However, the lucky ones who are able to cut corners successfully, the margins are good. The field is wide open for those who get past the customs barrier.
The author is with Academy of Business Studies
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