Cutting peak tariff makes sense: Survey

Ahead of the Budget,the Economic Survey has come out with a prescription to lower peak customs duty from 10 per cent and above on items used by manufacturers. The Survey has suggested cutting the peak in a manner that treasury revenue isn’t lost.

If implemented, the suggestion will push the slackening industrial growth and exports, too. It will also provide India with greater bargaining power in World Trade Organisation and Free Trade Agreement negotiations, the Survey said.

Whether the Budget will lift a pause button pressed on peak customs duty for the past two years or not will be known tomorrow. The Survey says this is an idea worth trying for items used by manufacturers, even at a time when the current account deficit is at a high 3.7 per cent of gross domestic product, in the first half of this financial year.

S Madhavan, executive director, PricewaterhouseCoopers, said there definitely was head room to bring peak customs duty down by 2.5 percentage points or so, to move it closer to the average level of peak customs duty of six-eight per cent.

He argued that peak customs duty on items other than those that go into manufacturing should also be reduced.

The Survey said care has to be taken that the rates were tinkered intelligently.Explaining, it said there were 340 tariff lines under capital goods and 4,135 under intermediates, mainly goods going into manufacture of finished products with tariffs of 10 per cent and above.

The two groups in the high duty category account for as much as 39 per cent in the total number of tariff lines.