Arun Jaitley raises rates to boost Make in India

Arun Jaitley raises rates to boost Make in India

In his Budget speech, Finance Minister Arun Jaitley said there was potential for domestic value addition in certain sectors

The government is hoping to garner Rs 60 billion by raising import duties on about 50 items — ranging from phones and TV parts to juices and edible oil — in the Budget for 2018-19. The customs duty hike in the range of 5 to 10 percentage points is aimed to encourage local manufacturing under the government’s flagship Make in India programme launched in 2014.

This is the second hike in two months by the government, as it aims to achieve twin objective of boosting domestic manufacturing and garnering additional revenue amid floundering goods and services tax (GST) collections. There is a Rs 500 billion shortfall in GST revenue for Centre in the current fiscal.

The customs duty on mobile phones was increased from 15 to 20 per cent, while that on parts of LCD and LED panels of televisions has been doubled to 15 per cent. These changes will come into effect from Friday.

“There is a clear policy shift in increasing customs duty to incentivise domestic manufacturing on many items including cell phones, smart watches, perfumes, juices and so on.  The message is loud & clear: ‘Manufacture in India if you want to access the Indian market’,” said Pratik Jain, partner, PwC India. Meanwhile, the duty on  solar tempered glass, used to produce solar cells and panels was cut from 5 per cent to nil.

M S Mani of Deloitte India said, “While the intention behind increasing the customs duties on some products such as mobile phones is to incentivise domestic manufacturing, this will lead to an increase in the prices for these products denting the middle class consumers wallets.”

In his Budget speech, Finance Minister Arun Jaitley said there was potential for domestic value addition in certain sectors, like food processing, electronics, auto components, footwear and furniture. Central Board of Excise and Customs (CBEC) chairperson Vanaja Sarna told Business Standard that the government was hoping to garner close to Rs 60 billion from the increase in customs duty on the range of items.

“There is a Rs 500 billion shortfall in GST collections this fiscal,” said finance secretary Hasmukh Adhia on Thursday. The Centre will only get 11 months of GST revenue in the current fiscal instead of 12. Of the Rs 4.44 trillion of GST collections this fiscal, Rs 2.2 trillion pertain to central GST, Rs 1.61 trillion integrated GST and Rs 613 billion as cess to compensate states for their revenue shortfall.

Besides, Jaitley annnounced a social welfare surcharge of 10 per cent on aggregate custom duties on imported goods to provide for social welfare schemes. It has been imposed in lieu of the education cess, and secondary and higher education cess on imported goods at 2 per cent and 1 per cent, respectively, which the government abolished.

The government cut excise duty on petrol and diesel by Rs 2. It abolished road cess of Rs 6 and instead created a new cess of Rs 8 called “road and infra cess”. This essentially means that there will be no net impact on the consumer.Jaitley also announced a change in the name of Central  Board of Excise and Customs (CBEC) to Central Board of Indirect Taxes and Customs (CBIC).

The Business Standard, New Delhi, 02nd February 2018