Financial Daily from THE HINDU group of publications
Wednesday, Mar 01, 2006
Industry & Economy
`Peak' rate take a bow
In line with the Government's policy of reducing customs duties, I propose to reduce the peak rate for non-agricultural products from 15 per cent to 12.5 per cent. I believe that we are now only a short distance away from East Asian rates. As the peak rate comes down, there is a need to reduce the duty on raw materials and intermediates. The duty on primary steel is at 5 per cent. I propose to reduce the duty on alloy steel and primary and secondary non-ferrous metals from 10 per cent to 7.5 per cent. This will also be the rate of duty for ferro alloys.
Lower tariffs galore
In 2004-05, in view of the high international prices of steel, I had reduced the import duty on steel melting scrap to zero. With prices of steel coming down, I propose to restore the duty to 5 per cent and bring it on par with primary steel.
Packaging machines serve a wide variety of industries, including food processing. I propose to reduce the duty on packaging machines from 15 per cent to 5 per cent.
Tough on plastics & chemicals
Basic inorganic chemicals are crucial raw materials. I propose to reduce the duty from 15 per cent to 10 per cent. On basic cyclic and acyclic hydrocarbons and their derivatives, I propose to bring down the rate to 5 per cent. I also propose to reduce the duty on catalysts from 10 per cent to 7.5 per cent.
Plastics are important raw materials. Hence, I propose to reduce the duty on major bulk plastics like PVC, LDPE and PP from 10 per cent to 5 per cent. Simultaneously, the duty on naptha for plastics will be reduced to nil. I propose to reduce the duty on styrene, EDC and VCM which are raw materials for plastics to 2 per cent.
Caring for health
I propose to give some concessions to vital drugs. I propose to reduce the customs duty on 10 anti-AIDS and 14 anti-cancer drugs to 5 per cent. I also propose to reduce the duty on certain life saving drugs, kits and equipment from 15 per cent to 5 per cent. These drugs will also be exempt from excise duty and countervailing duty (CVD).
Honourable Members would recall that last year I had taken the power to impose a CVD on all imports to compensate for State level taxes. This levy was applied only to imports of ITA bound items and their inputs, except IT software. After the introduction of VAT in most States, I have received representations from trade and industry that this levy should be extended to all imports. The argument is persuasive, and I propose to impose a CVD of 4 per cent on all imports with a few exceptions. Full credit of this duty will be allowed to manufacturers of excisable goods.
Fillip for man-made textiles
I have an important proposal that involves both excise and customs duties. Cotton textile industry has greatly benefited from the relief granted two years ago. The man-made textile industry is a growth- and employment-driver. It deserves encouragement.
Hence, I propose to reduce the excise duty on all man-made fibre yarn and filament yarn from 16 per cent to 8 per cent.
Simultaneously, I propose to reduce the import duty on all man-made fibres and yarns from 15 per cent to 10 per cent.
Consequently, the import duty on raw materials such as DMT, PTA and MEG will also be reduced from 15 per cent to 10 per cent. The import duty on paraxylene is proposed to be reduced to 2 per cent.
Giving EOUs `tariff advantage'
Export oriented units (EOUs) are allowed to clear their goods to the Domestic Tariff Area (DTA) at a concessional rate. With declining import duties, DTA units and EOUs should have a level playing field as regards excise duty or CVD. Hence, I propose to adjust the duty rates on clearances by EOUs to the DTA at 25 per cent of basic customs duty plus excise duty on like goods. This will still give the EOU a tariff advantage or, at any rate, in most cases, it will be on par with a DTA unit.
And a move at protection
To protect the domestic vanaspati industry, I propose to increase the customs duty on vanaspati to 80 per cent, the rate applicable to crude palm oil.
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