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

In News

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. 

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.

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