Govt plans to raise duty on non-essential goods

SoGovt plans to raise duty on non-essential goods: The post is based on the article “Govt plans to raise duty on non-essential goods” published in Indian Express on 19th December 2022

What is the News?

The Government of India is planning to regulate imports of “non-essential items” through hikes in import duties. 

Trade Deficit of India

Trade deficit for April-October 2022 has widened to USD 173.46 billion as against USD 94.16 billion in April-October 2021.

To reduce this trade deficit, the government’s policy options are to push exports or disincentive 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.

What is the government doing to address this trade deficit?

The government is planning to hike the duties on imports of “non-essential items” to address this widening trade deficit.

Non-essential items include those commodities for which there is “enough manufacturing capacity” in the country.

To impose these import duties, the Government is looking for ways to separate commodities that come under the same Harmonized System of Nomenclature (HSN) code.

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.

For instance, in the case of LED lights, the government may want to levy a higher duty only on 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.