Centre to levy import duties on non-essential items as exports fall: Report

The Centre may hike the duties on imports of "non-essential items" ahead of growing concerns around a slowdown in exports and a widening trade deficit. Several ministries are in the process of shortlisting the commodities for duty hikes, as reported by the Indian Express (IE). The list will reportedly be restricted to only the commodities that have "enough manufacturing capacity" in the country. 

"We are looking at non-essential imports for which there is enough manufacturing capacity. It is to identify non-essential items, where there is sufficient production capacity and allow for higher import substitution," an official told IE. 

The government is also looking for ways to separate commodities that come under the same Harmonized System of Nomenclature (HSN) code for imposing duties. An HSN code subsumes a broad sweep of items. All the items under one HSN code are, however, taxed at the same rate. But under the current deliberations, the Centre is likely to impose duty only on a few items under a code and not all. 

Say, in the case of LED lights, the government may want to levy a higher duty only for the single-wire LED light but not on the LED bulbs. This would require them to segregate the two products. Currently, they come under the same HSN code. 

The last major import duty hikes were imposed in Budget 2022 when duties on items like earphones, loudspeakers, and smart meters, among other items, were hiked. 

"On average, export growth fell -5.8 per cent YoY in Oct-Nov, versus 8 per cent in Q3, suggesting the underlying trend remains weak. Oil export growth fell to -1.7 per cent YoY from 17.6 per cent in October, reflecting lower global crude oil prices and the windfall taxes on petroleum products, while non-oil exports rose to a still-sluggish 0.8 per cent YoY from -16.9 per cent in October," Nomura said in a note last week.