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Imports of television sets which drew 20% customs duty since December 2017, has been restricted since the end of July.
Imports of television sets which drew 20% customs duty since December 2017, has been restricted since the end of July.

Customs hike is tool of choice in self-reliance push

  • Experts said the 10 industries for which the government has offered another round of production-linked incentive may see tariff action to attract investments in manufacturing and cut down import of finished products

Arjun Ranga, owner of the Cycle Pure Agarbathi brand of incense sticks, spends considerable time these days helping farmers cultivate a critical raw material—bamboo sticks.

Considering that bamboo is not a restricted forest produce since 2018 and can now be cultivated as a cash crop, the rise in customs duty on imported bamboo sticks from 10% to 25% in June prompted him to take the initiative to source the raw material for the Mysuru-based company, N. Ranga Rao and Sons Pvt. Ltd.

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In fact, India’s 7,000-crore incense stick industry is travelling that extra mile to source the raw material in an attempt to increase production since the Narendra Modi administration imposed curbs on the import of finished incense sticks in August 2019.

Ranga said his company had signed a deal with the Assam government earlier this year and, since, has identified 36 entrepreneurs who help farmers cultivate bamboo in non-forest areas—in line with the government’s focus to boost the domestic industry and curb imports from China.

The Centre has been trying to help companies across sectors to become self-reliant by offering incentives and raising tariff and non-tariff barriers on imports. Furthermore, it has also taken steps to check abuse of free trade agreements with other countries. In September, new rules were introduced on the origin of a product to prevent dumping into India through the misuse of FTAs.

In the FY22 Union Budget, Sitharaman is expected to take the initiative to the next level. Experts said the 10 industries for which the government has offered another round of production-linked incentive (PLI) may see tariff action to attract investments in manufacturing and cut down import of finished products. The Centre is expected to give tariff protection to local producers of technology products, auto components, solar photovoltaic modules, telecom and networking equipment so that they can compete with imported items.

Incentives and tariff measures to encourage telecom and electronic goods production have so far resulted in considerable investments, said Uday Pimprikar, tax partner and national leader, indirect tax services, EY India. “This approach is being replicated and PLI schemes have been announced for several sectors. Final products in these sectors could witness some increase in tariffs and other non-tariff action, whereas duties on inputs could be rationalized," he added.

“Realignment of duty rates or exemptions may be undertaken keeping mind the focus sectors, objectives of ‘Make in India’ and promoting India as a key hub in the global value chain," said Rahul Shukla, executive director, PwC India.

For example, imports of television sets which drew 20% customs duty since December 2017, has been restricted since the end of July, while 5% basic customs duty was imposed in November on imported components used in making display panels to encourage local production.

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