NEW DELHI, Aug 12: Companies manufacturing tyres, electrical equipment and medical instruments are suffering the most due to inverted duty structure, under which finished goods are taxed at lower rates than raw material, according to a survey by industry body Ficci.
Inverted duty structure impacts the domestic industry adversely as it has to pay a higher price for raw material in terms of duty, while the finished product lands at lower duty and costs low.
In its survey, Ficci said, “Imported raw material users in a range of manufacturing industry segments are in a spot due to inverted customs duty structure that makes them uncompetitive against cheaper finished product imports and discourages domestic value addition.”
It said that manufacturing segments which are suffering due to this include pumps for liquids, electronic hardware, aluminium and articles and technical textiles.
Higher import duty on raw materials results in an inverted duty structure that makes certain Indian manufactured goods (those dependent on imported raw materials) uncompetitive in both domestic and export markets, it added.
Citing example of tyre segment, it said this sector has caused huge cost disadvantages to domestic tyre manufacturers for the last many years.
“Inverted duty structure in this sector exists with respect to natural rubber which is the principal raw material for tyre manufacturing. Basic customs duty on tyres is 10 per cent as compared to 20 per cent or Rs 20/kg (which ever is lower) on natural rubber,” the survey said.
The problem is aggravating more on account of India signing free trade agreements (FTAs) with several countries, the survey said.
Under FTAs, duties on imported goods are either slashed or eliminated.
It also said that “many a time importers derive the benefit of lower duty or zero duty, due to some special exemptions such as nil duty on project imports and certain defence purchases. However, domestic manufacturers are not eligible for any matching concessions to nullify the impact of such duty anomaly”.
The survey, therefore, recommends that domestic manufacturers be provided a level playing field vis-à-vis imports under FTAs and various duty concession schemes. (PTI)
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