Govt Plans Comprehensive Review Of Customs Duties To Boost Manufacturing Competitiveness

New Delhi, Feb 15 (KNN) The government is gearing up to conduct a comprehensive assessment of customs duties on essential inputs used in the production of finished goods like garments, jewellery, metal items, and leather goods.

This initiative aims to improve cost competitiveness both domestically and internationally, senior officials revealed on Wednesday, reported HT.

While tax proposals were not addressed in the interim budget on February 1, officials indicated that a thorough review of customs duties in alignment with various free trade agreements (FTAs) is imminent, expected to take place after May.

The officials, who spoke on the condition of anonymity, emphasized that if urgent changes are necessary to safeguard specific sectors, decisions could be made earlier following meticulous scrutiny and consultations with stakeholders.

In a bid to stimulate domestic manufacturing, the government recently rationalized import duties on various mobile phone components, as mentioned by one official.

Specifically, on January 31, customs duties on several components were reduced from 15 per cent to 10 per cent, including battery covers, phone covers, main lenses, sealing gaskets, SIM sockets, screws, and other mechanical items made of plastic and metal.

This move is aimed at enhancing the cost competitiveness of finished products and facilitating greater compliance.

The issue of duty inversion stemming from FTAs signed in 2010 has been highlighted by various stakeholders and a parliamentary panel, with concerns raised about its potentially adverse effects on the manufacturing industry.

This inversion occurs when the duties on raw material imports are higher than those imposed on finished goods, resulting in unfair competition for exporters.

For instance, in sectors like engineering and chemicals, raw materials often incur higher duties compared to finished products under certain FTAs, creating a disadvantage for domestic manufacturers.

Similarly, domestic leather manufacturers face high duties on imported components, hindering their competitiveness despite growing interest from global brands to shift manufacturing bases to India.

Recent government data reveals a significant contraction in exports across various sectors, with leather, gem and jewellery, and garment exports experiencing double-digit declines.

In response, the government aims to address these challenges through a comprehensive review of customs duties, with the ultimate goal of enhancing the competitiveness of the manufacturing sector.

(KNN Bureau)