The Hindu Business Line : NMCC for phased reduction in customs duties, suggests 12.5% VAT on all imports

THE National Manufacturing Competitiveness Council (NMCC) has suggested that import duty reductions should be done in phases so that Indian industry could get time to readjust itself to the trend of low import duties.

Significantly, the council has also advocated a 12.5 per value added tax (VAT) on all imports as an alternative to the system of imposing 4 per cent additional countervailing duty (CVD) on all imports to compensate for the State-level taxes.

The Centre has so far exercised the power of levying the additional four per cent CVD only in respect of certain IT products.

In cases where the basic customs duty was zero per cent, the NMCC was of the view that imported products should face duties equivalent to domestic indirect taxes paid by domestic manufacturers.

Although CVD was meant for this, the duty was currently equal to central excise duty only and ignored state-level sales tax and other local levies.

As regards the calibrated approach to reduction in customs duty, the NMCC has in the final draft of the paper on `National Strategy for Manufacturing' said that such an approach was needed in the interest of a stable policy regime.

Stating that the peak import duty was already down to 15 per cent, the NMCC paper observed, "It is evident that the peak import duty would be no more than 10 per cent in future."

On inverted duty structures arising from free trade agreements, the council has noted that the FTA problem would remain as long as general reduction of import duties was not acceptable. "However, the inverted duty structure caused by FTAs as well as in all cases even otherwise need to be rectified," the NMCC has said.

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