Protection to industry has to be balanced against consumer interest: Revenue Secretary

New Delhi: Decisions on giving tariff protection to domestic manufacturers from imports will have to be balanced against the interests of Indian consumers, revenue secretary Sanjay Malhotra said.

Speaking at a post-budget interaction organised by industry chamber Federation of Indian Chambers of Commerce and Industry (FICCI) here, Malhotra said that the government has, wherever needed, given the domestic industry tariff support to compete with cheaper imports, but its intent is to make manufacturers competitive over time. 

Decisions on calls for such support have to be balanced against the interests of Indian consumers as well, said Malhotra.

In the union Budget for FY25 presented on Tuesday, the government announced a reduction of basic customs duty on mobile phones, chargers and printed circuit board assemblies from 20% to 15%. 

‘Support is not permanent’

Malhotra said that usually, one sees duty revisions to offer protection to the industry. “While we did it (duty increase) when the industry did need it, through this reduction, we are saying the support is not permanent. It is not in perpetuity and the industry also has to become competitive after a certain time; they have to improve their productivity so that the benefit the government gave in the form of higher customs duty ultimately benefits the consumers too in the form of lower costs and prices of those products,” explained the Revenue Secretary. 

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Basic customs duty is the tax that gives local producers an edge over imported products as all other taxes on sale of imported items and locally produced ones remain alike. India also uses anti-dumping duty where significantly cheaper imports cause injury to domestic industry, a measure allowed under the World Trade Organisation. 

“We have to be conscious that we would like to give protection in the form of a support wherever it is due, but at the same time, we have to balance the interests of the consumers also,” said Malhotra. 

The duty cuts and the message that India will not forever give tariff protection to domestic industry implies the government is serious to get local producers to get their act together, become globally competitive and play a bigger role in the global supply chains as scaling up exports is essential to step up local manufacturing. Policy makers are looking at the manufacturing sector as a solution to creating more jobs. 

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Malhotra said that in most of the cases, when the Director General of Trade Remedies (DGTR) have recommended imposition of anti-dumping duty in the last six months, the Revenue Department has accepted the recommendations. DGTR under the Commerce Ministry investigates instances of dumping of cheaper products into India and the injury caused to domestic producers and recommends anti-dumping duty. The duty is notified by the Revenue Department.  Unlike basic customs duty, anti-dumping duty targets specific imports from specific countries.

The official also said that while the government’s effort is to correct duty anomalies where raw material attracts higher tax than finished products, many a time, it is not possible to correct this duty inversion because it is not one product that gets manufactured out of a raw material or feedstock. “There are multiple products. If we try to remove an anomaly in the case of one product, it creates another somewhere else. However, our effort is always to address this issue,” Malhotra said. 

This issue is decided upon by looking into not only the percentage of tax rate, but also in terms of the tax amount. The key consideration here is whether the lesser tax obligation on the finished product leads to big tax refund claims, the Secretary explained. Malhotra said that the government was aware of the issue of duty inversion in textiles industry. “Let us see how we can address it,” said Malhotra. 

“Our approach to taxation has always been and will continue to be one of collaboration, not confrontation,” the Secretary said on the administration of direct and indirect taxes.