CII suggests review & rationalization of custom duty rates
04 Dec '06
3 min read
The pre-budget memorandum of CII brings out the fact that despite the peak rate having been lowered to 12.5% since 1st March 2006, several product categories continue to attract significantly high duty rates, ranging from 15% to 150% and comprising of 15 rates. There are many commodities whose duty has not been reduced during last five years. Therefore, CII has suggested that all duty rates above the peak rate be reviewed and rationalized.
On the most commonly used rate (the so called peak rate) of customs duty, while CII has urged the government to follow the recommendations of the Kelkar Task Force on Indirect taxes and further reduce the peak duty rate from 12.5% to 10% the Confederation has said that this must be accompanied by internal reforms. In this context, CII has suggested two internal reforms - First, reduction of transaction cost due to high infrastructure costs, power cost, cargo dwell time in ports/ airports, etc. Second, reduction of CST from 4% to 2% with effect from 1st April 2007.
While reducing the peak rate of customs duty, CII has recommended that there should be corresponding reduction of duty rates on intermediates and raw materials to maintain two/three tier duty structure. For instance, reduction of customs duty on fuel oils like furnace oil, LSHS from 10% to 5%, on non-ferrous metals and scrap of non-ferrous metals from 7.5% to 5% & 2% respectively, on melting scrap of iron and steel from 5% to 2%, etc. After reduction of peak rate to 10%, the three most common slabs of customs duty structure would be 10%, 7.5% and 5% and any further reduction below 5% should be allowed only in exceptional cases, said the CII Press Release issued here today.
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