Customs duty rates likely to be rationalised

a major time-bound customs duty reform is likely to be kicked off in the coming budget. the present set of duty rates is likely to be rationalised into a three-tiered structure. the report of the working group on customs anomalies recently submitted to the finance ministry is likely to be used as blueprint to classify goods into three broad categories —raw materials, intermediates, and finished goods. a graded duty structure — likely to be a three-tiered slab rate system — is proposed to be worked out on this basis using the concept of effective protection rate. most end-use customs duty exemptions and anomalies are also likely to be phased out over a time period, starting with this budget, as per the report's reccomendations. the report also sets out criteria to judge whether an exemption is justified and should be retained or not. the peak duty rate is also expected to come down from the present level of 35 per cent. currently, apart from the zero duty rate, there are four basic customs slab rates of 5, 15, 25 and 35 per cent with some exception rates for specific items such as the 10 per cent rate for crude oil. more interestingly, the report uses the concept of effective protection rate or eprs to work out and recommend a duty structure for different categories of products. for example, if silk cloth (raw material) is subject to 10 per cent customs duty and the finished product, silk shirts, are subject to 30 per cent then the effective protection rate would depend on: the duty differential of 20 per cent, contribution of the raw material (silk cloth) to the value of the finished product - silk shirts, and the value addition to the raw material in converting it to the final product. according to the report, it is the epr which impacts producers and not the nominal duty rate. in cases where the customs duty on the raw material is higher than that on the finished product, the finished product could receive negative protection. however, if a very small percentage of raw material is used in the final product, the anomaly may not be substantive. therefore, the report presents solutions to the removal of duty anomalies in terms of the epr required for different categories of products. the report essentially looks at where the duty structure should be over the medium to long term in terms of the weighted average tariff as well as the structure of the tariff. both these are put in a macro-economic setting to work out a desirable average weighted tariff, say sources.

Customs duty rates likely to be rationalised

<img src=/photo.cms?msid=408205718 align=left>A MAJOR time-bound Customs duty reform is likely to be kicked off in the coming budget. The present set of duty rates is likely to be rationalised into a three-tiered structure.

More from our Partners

Popular Categories

Hot on Web

In Case you missed it

Top Searched Companies

Latest News

Download ET APP

Follow us on

become a member