India's Customs Tariff Reduction
India has reduced its average Customs tariff from 11.65% to 10.66%, aligning it with ASEAN countries. This adjustment is expected to improve trade perceptions of India as a high-tariff nation.
Key Changes in Tariff Structure
- Reduction in duty for motorbikes above 1,600cc from 50% to 40%.
- Import duty on semi-knocked down (SKD) kits reduced from 25% to 20%.
- Completely knocked down (CKD) units levy reduced from 15% to 10%.
Budget Proposals and International Relations
- Finance Minister proposed reducing the total Customs tariff rates from 15 to eight.
- This move is seen as a response to pressures from the U.S., particularly concerning high tariffs on products like Harley-Davidson motorcycles.
Impact on Imports and Domestic Industry
- Most items imported from the U.S. face tariffs below 10%, including crude (₹1 per metric tonne), coal (2.5%), and diamonds (5%).
- The rationalization aims to support domestic manufacturing, boost exports, and facilitate trade by correcting inverted duty structures.
Additional Measures
- 82 tariff lines subject to cess are exempted from the social welfare surcharge.
- The introduction of a new agriculture infrastructure and development cess.
Focus on Tax Transparency and Certainty
The Customs reforms focus not only on reducing tariffs but also on enhancing tax transparency and providing business certainty. The budget proposes capping the time limit for provisional assessments to two years.
Future Considerations
The rationalization primarily affects industrial goods, excluding sensitive items like agricultural goods. The government plans to review the existing cess structure further.
Remarks from CBIC Chairman
Chairman emphasized that India's tariff rationalization sends a positive signal to businesses, promoting business certainty and competitiveness, especially against regions such as Iran and Pakistan in the ship-building and ship-breaking industries.