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Union Budget 2023: Customs duty hike on dozens of items likely

7 Mins 31 Jan 2023 0 COMMENT

The Union Budget is a critical event for businesses, individuals, and investors in the country. The various changes in taxation policies announced during the budget can significantly affect the various components of the country’s economy.

Some important aspects of the Union Budget are the changes brought about to the customs duty for multiple items. Custom duty refers to charges levied on goods when they are transported across the borders of a country. These changes play a significant role in the operations of businesses involved in the importing and exporting of goods. Customs duties are also an important way for the exchequer to generate revenue and regulate the production, import and export of goods.

In the Union Budget 2023, the customs duty on around 35 goods is said to be increased, as per various media reports. Let us take a look over some of the goods whose customs duty may be increased and the effects it might have.

The main reason for the hike in the customs duty for some of the goods is to reduce the import of goods considered as ‘non-essential.’ Moreover, this increase will aid in increasing local production and act as a boost to the ‘Make in India’ initiative.

Another reason for the increase in customs duties stems from the demand contraction that may be witnessed in other countries. This contraction of demand will lead to a reduction in exports from the country. In order to make sure the trade deficit does not impact the economy severely, the revenue generated from the customs duty hikes will be beneficial.

India’s Current Account Deficit (CAD) increased to 4.4% of the GDP in the quarter that ended in September 2022. A high CAD was driven by a widening trade deficit in goods due to a fall in exports. Hence, to calm the deficit, the government is likely to take action on boosting exports and curbing the imports of non-essential goods.

Custom Duty hike on up to 35 goods likely

Higher customs duties could be levied on the import of private jets, helicopters, and certain consumer electronic goods. Additionally, plastics, some iron and steel products, and leather goods might also witness a hike in the customs duty levied on these products.

Among other goods, vitamins and high-gloss paper could also be subjected to increased custom duty hikes, reports suggested.

Another change that is likely to be witnessed is a slash in the import duties levied on gold. India is one of the largest importers of gold due to a large demand from the jewellery sector. Lower import duty on gold will help boost retail demand for the jewellery sector and also curb the smuggling of gold in the country. The import duty on gold was increased to 15% from 10.75% in the previous budget.

Moreover, industries also expect the rationalisation of import duties in order to correct the inverted duty structure where the tax rate for raw materials is higher than that of finished goods.

Experts recommend reducing the import duties on products used as raw materials in India’s manufacturing sector. This would help reduce the cost of production and boost domestic industries by making Indian goods competitive in the global markets.

With the budget right around the corner, a customs duty hike on dozens of items is likely. Importers, exporters and even investors would be paying close attention to any changes in the customs duty policy.

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