Make in India push: Duty on footwear, furniture up
CHEAP, LOW-QUALITY IMPORTS IMPEDE THE GROWTH OF LABOURINTENSIVE SECTORS AMONG MSMES, WHICH ARE CRITICAL FOR JOB GENERATION
NEW DELHI: Finance minister Nirmala Sitharaman on Saturday proposed raising customs duty on items such as footwear and furniture on the premise of promoting “Make in India” and said the items had been “picked up carefully” as the locally manufactured products of comparable quality were available in India.
“MSMEs (micro, small and medium enterprises) should be given a fair chance ... They produce these items in good quality and quantity,” she said at a press conference after presenting the budget in Parliament.
Labour-intensive sectors among MSMEs are critical for employment generation. Cheap and low-quality imports are an impediment to their growth. Special attention has been taken to apply a measured restraint on the import of such products, she said.
Sitharaman proposed similar measures for the medical equipment segment. “Till a few years back, we were dependent on imports for medical equipment. Now, not only we are manufacturing medical equipment but also exporting them,” she said.
To achieve the twin objectives of giving impetus to domestic industry and also to generate resource for health services, she proposed to impose a nominal health cess on the imports of medical equipment, she said. “The proceeds from this cess shall be used for creating infrastructure for health services,” she added. “It has been observed that imports under Free Trade Agreements are on the rise. Undue claims of FTA benefits have posed a threat to domestic industry. Such imports require stringent checks. In this context, suitable provisions are being incorporated in the Customs Act.”
The finance minister hinted at a violation of rules of origin to dump cheap goods, particularly those manufactured in China, in India through its FTA partners. “In the coming months we shall review rules of origin requirements, particularly for certain sensitive items, so as ensure that FTAs are aligned to the conscious direction of our policy,” she said.
“We are also strengthening provisions relating to safeguard duties which are applied when a surge in imports causes serious injury to domestic industry. Amended provisions shall enable regulating such a surge in imports in a systematic way.”
The provisions for checking dumping of goods and imports of subsidised goods are also being strengthened for ensuring a level playing field for domestic industry, she said.
She said that many exemptions from customs duty that had been given in public interest had outlived their utility. “On review, certain such exemptions are being withdrawn. Remaining custom duty exemptions shall be comprehensively reviewed by September 2020 for taking a view on their relevance,” she said.
“I propose to crowd-source suggestions for such reviews. Suggestions would also be invited in respect of the customs laws and procedures for aligning them with the needs of changing times and ease of doing business.”
Under the “Make in India” initiative, well laid-out customs duty rates were pre-announced for items like mobile phones, electric vehicles and their components. This has ensured a gradual increase in domestic value addition capacity in India. “Customs duty rates are being revised on electric vehicles, and parts of mobiles as part of such carefully conceived phased manufacturing plans,” the minister said.
Pratik Jain, partner & leader of the indirect tax practice at PwC India, said: “Changes incorporated in the Customs Act to provide for stringent checks on preferential duty claims on goods imported under a Free Trade Agreement based on rules of origin requirements would necessitate a complete review of current imports by the businesses. There has been a decision to review all customs duty exemptions by September 2020, which is a directional shift to provide additional incentive to domestic manufacturing. However, it will have to be seen if increasing customs duty alone would help the Government meet this objective.”