Customs duties at Asean levels

The coming budget could well see an across the board reduction in peak customs duty which is now at 20%. The pre budget economy survey has made out a case for continuing reforms in customs to align tariffs with Asean levels.

A reduction in customs duty will further improve the competitiveness of the economy and fuel export growth. Peak duties were lowered from 120% in 1991 to 20% in 2003-04. The average collection rate — ratio of revenue realised from imports to the value of imports — has dropped from 47% in 1990-91 to 14% in 2003-04.

Among the commodity groups, the collection rate is the highest for manmade fibres (46% in 2003-04), followed by metals (32%), chemicals (24%), capital goods and food products (19% each).

The collection rate has dropped to 14% for POL in 2003-04 compared to 51% in 1990-91. However, the government’s dependence on customs as a revenue source is set to come down in the coming years. More revenues will be garnered from service tax instead.