Over 300 items likely to undergo revision in the basic customs duties

The Finance Ministry, together with the Prime Minister’s office, will be discussing this week to revise the Basic Customs Duties (BCD) across categories. With the ‘Aatmanirbhar Bharat’ envisioned, this initiative will be an on-going exercise to hike the customs duties, thereby encouraging the domestic producers and manufacturers. 

An immediate rise in the duties is mostly expected for textiles, electronics and solar equipment. The sources have claimed to the CNBC TV18 publication that additional restrictions will be put for the import of steel and aluminium products.

Power Minister RK Singh has stated in July 2020 that the government intends to impose 25% BCD on the import of solar modules, inverters and cells, as soon as possible. This rate will gradually be increased up to 40%. The decision once implemented, will reduce the import of power equipment that pose threats to the security and power system in the country. It will, in turn, boost the solar power sector in India, making the domestic producers self-reliant. 

Further, there will be a list of prior reference countries formulated from whom imports will not be permitted. The list may positively include China and Pakistan. In FY 2019, Rs.71,000 crore worth of power equipment was imported, of which close to 30% was from China alone. Imports from the rest of the countries will be cleared after a thorough inspection, considering the sensitivity of the power systems to the nation.

The Minister had further elaborated the vulnerability of the power systems due to trojan and malware attacks. It can lead to a complete power shutdown when attacked, also disrupting the communication lines and causing databases to crash across various industries, including defence. 

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Regarding the aluminium sector, an Inter-Ministerial Committee was recently constituted to analyse the kind of import restrictions needed for the sector. The import meets 60% of the nation’s aluminium demand, and China fulfils almost 16% of the raw aluminium imports. The secondary aluminium products are also majorly imported from China, such as tubes, screws, staples, foil, etc. 

Various associations representing the aluminium sector have requested a 12.5% import duty on secondary aluminium products while looking for increasing the BCD on primary aluminium up to 10%. The import of aluminium scrap has also been suggested for a significant duty hike from 2.5% to 10%.

Any import duty hike and restrictions during a national economic crisis must be implemented after careful consideration. Otherwise, it may leave India deficient of certain crucial supplies required to run the Indian manufacturing sector and supply chain.

Further, these must be implemented in a phased manner till the country is self-sufficient. Especially for the solar sector, the initial capital cost to set up the projects or plants may be on the higher side in case the import duty of solar equipment is hiked with immediate effect. It is because the solar modules already attract safeguard duty.

For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@cleartax.in