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The government had hiked custom duties on imported furniture to 25% from 20% to safeguard the interests of MSMEs. (Photo: Reuters)
The government had hiked custom duties on imported furniture to 25% from 20% to safeguard the interests of MSMEs. (Photo: Reuters)

Retail sector seek cut in customs duty on furniture in run-up to Budget

  • CII is batting for an amendment of a law under GST to permit cross-state returns for retailers. Companies should be able to offer the option to customers to return goods at any place of its business in the country, it said in its pre-budget memorandum

NEW DELHI: Industry body Confederation of Indian Industry (CII) on Wednesday put forth several recommendations on behalf of the retail sector ahead of the upcoming Union Budget in February, among them a call to reduce custom duties on furniture imports, overhauling of local testing facilities for import of certain items such as toys, and enabling pan-India return of goods in stores.

CII’s Pre-budget Memorandum for the fiscal 2021-22 listed several points that the country’s $854 billion retail trade could benefit from.

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Earlier this year, the government had moved to hike custom duties on imported furniture to 25% from 20% to safeguard the interests of India's micro, small & medium enterprises. The announcement was made as part of the government’s Union Budget 2020-21.

CII’s set of recommendations said higher taxes are detrimental for most retailers as it prevents them from keeping costs low for end consumers.

“Recently we have seen that customs duty on furniture products and raw material to manufacture furniture products has been increased substantially. This has resulted into disturbance in the furniture industry. This further has resulted into inflation for the final customers," CII said in its note.

While tariff increases result in higher cost of imports, they reduce incentives for keeping the cost of production down. This puts a brake on plans to make products affordable to customers and make more in India initiatives, it said.

As part of its recommendation, it has sought a reduction in custom duty structure for furniture products and raw materials used to manufacture furniture products and asked the government to avoid frequent changes to the rates.

This will go a long way in making India competitive to do business and make products affordable to the consumer, it added

India’s toy industry has also been affected by some recently announced changes that enforce stricter compliance on imported of toys in order to boost domestic production.

For instance, imported toys are now subject to stringent quality checks. India’s toy traders have been seeking an extension to adhere to this certification.

“While it’s good that we as a country are becoming increasingly aware and working on increasing the quality standards of products being sold in the country, it should not be done without developing the relevant infrastructure in the country to verify these compliances," it said.

For each article of toy imported, importers draw samples and hand it over to the customs officer for sealing and allocating the lab for testing. These labs are not all located in the city of import and can be sent to any lab in India making it very challenging for traders, it said.

CII in its recommendations has asked the government to first develop test lab infrastructure near major ports of India.

“Implement such changes only after the necessary infrastructure is in place. Permit AEO (authorized economic operator) importers to get sampling done from container after receipt at their warehouse to send to labs under importer self- declaration as existing. This will reduce handling at port," it said.

It has also sought an extension to adhere to Quality Control Order on toys to be applicable by June 2021.

These steps will effectively reduce handling of cargo at port that leads to damages and delays, it said.

The retail industry is also eyeing as extension on the proposed e-invoicing applicable from 1 October, 2020, for assesses having total turnover exceeding 500 crore during the previous financial years.

CII said that due to the pandemic, companies are struggling on manpower as well as facing financial hardship.

It has therefore sought that e-invoicing system be deferred till April 01, 2021. “New scheme which is easier for compliance need to be rolled out for easier implementation and compliance. Current scheme of e-invoicing would put financial and compliance stress on the business already struggling due to covid-19," it said.

The industry body is also batting for an amendment of a law under GST to permit cross-state returns for retailers. Companies should be able to offer the option to customers to return goods at any place of its business in the country, CII said in its note. Current GST rules do not specify the procedure of goods sold in one state to be accepted as return in the other state. “This will amplify One country, One tax to create One Country, One Tax, One Market approach, making cross border State business within India easy and benefiting customer everywhere," it added.

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