Government’s plans to raise duty on non-essential goods

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    the government is planning to regulate imports of “non-essential items” through hikes in import duties because a slowdown in exports is being seen as a cause of concern in the context of a widening trade deficit. 

    Import duty

    • It is also known as customs duty, tariff, import tax, or import tariff.
    • It is levied when imported goods first enter the country.
    • Purposes: raise income for the local government and give a market advantage to locally grown or produced goods that are not subject to import duties. 
      • penalize a particular nation by charging high import duties on its products.

    About 

    • Several ministries are in the process of shortlisting the commodities for duty hikes.
      • The list will reportedly be restricted to only the commodities that have “enough manufacturing capacity” in the country.
    • 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.

    Harmonized System of Nomenclature (HSN) code 

    • It was introduced in 1988 by the World Customs Organization (WCO). 
    • This was introduced for a systematic classification of goods both national and international.

    Earlier Instances

    • The last set of duty hikes across a range of product categories happened in Budget 2022-23. 
      • Most of the products were being imported from China, either as complete units or as knocked-down units to be assembled in factories in India.

    Objectives 

    • Over the last five years, import duty hikes have been made on several occasions such as on almonds, apples, and others. 
      • Mobile phone parts and solar panels have seen the most regular hikes, in large part to protect and promote the domestic industry.

    Future Prospects 

    • To reduce the trade deficit, the government’s policy options are to push exports or disincentivise imports. 
      • But a poor outlook on global growth means India’s exports will suffer just like most other countries. 
      • The other way is to hike duties on imports, particularly those that are not critical and are produced in India. 
        • This will keep the deficit down.

    Source:IE

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