Rationalise custom duty structure: CII to govt

New Delhi, Dec 3: There is a need to rationalise the customs duty structure where the inputs to a product attract higher than the product itself.

Customs duty, for instance, on set-top box used in cable transmission system is nil whereas its imported inputs attract a duty of five per cent to 12.5 per cent. On synthectic fibres and yarn duty is 10 per cent in contrast to 12.5 per cent for its major inputs like methyle acrylate and dimethyl formamide.

The Confederation of Indian Industries (CII) in its pre-budget memorandum has also urged the government to review and rationalise all duty rates above the peak rate.

Despite the peak rate having been lowered to 12.5 per cent since March 1, 2006, several product categories continue to attract significant high duty rates, ranging from 15 per cent to 150 per cent and comprising of 15 rates.

The CII has suggested the government to follow the recommendations of the Kelkar Task Force on indirect taxes and further reduce the peak duty rate from 12.5 per cent to 10 per cent by making internal reforms.

In this context, CII has suggested two internal reforms -- first, reduction of transaction cost due to high infrastructure costs, power costs, cargo dwell time in ports and airports and second, reduction of central sales tax from four per cent to two per cent from April 1, 2007.

CII has also emphasised removal of zero per cent customs duty except for life saving drugs and security related items and those agreed through multilateral and bilateral agreements.

The other anomalies, as pointed out by the industry body, have arisen due to the bilateral free trade agreements (FTA) signed by India wherein import of specified products have been allowed at zero duty.

The India-Thailand FTA has boosted import of certain products from Thailand affecting the domestic industry. CII has urged for reduction of customs duty to five per cent on the major inputs required for manufacture of products, which are affected by zero duty due to India-Thailand FTA.

Due to such agreements, the import of full product is turning out to be cheaper than import of inputs at the prevalent customs duty rates and manufacture of the said product, CII said in a statement.

The confederation also suggested the removal of exemption of special counterveiling duty of four per cent, allowed in Budget 2006, on all type of projects and others to counter balance internal taxes such as central sales tax and value added tax.

UNI