The Centre on Wednesday raised import duties on 19 “non-essential items” ranging from diamonds and jewellery to radial tyres and household appliances in an attempt to stem the outflow of US dollars and pare the widening current account deficit.
The objective is to stop the wobble in the rupee that has tumbled by 12 per cent since the start of the year.
The import duty was doubled to 20 per cent on air-conditioners, refrigerators and washing machines of less than 10kg, the finance ministry said. The changes in the rates of basic customs duty will be effective from Thursday.
The duty on jet fuel has been raised to 5 per cent from zero, which would impact airfare as aviation turbine fuel accounts for around 50 per cent of an airline’s expenses in India.
The duty on compressors for ACs and refrigerators, speakers and footwear has been raised to 10 per cent, 15 per cent and 25 per cent, respectively. The levy on radial car tyres was increased from 10 per cent to 15 per cent while that on cut and polished diamonds, semi-processed diamonds, lab-grown diamonds and coloured gem stones was hiked from 5 per cent to 7.5 per cent.
The articles of jewellery, goldsmith and silver wares will now attract a duty of 20 per cent, up from 15 per cent.
Imports of bath ware, packing material, tableware, kitchenware and office stationery items, decorative sheets, beads and bangles, trunks, suitcases and travel bags will attract a basic customs duty of 15 per cent against 10 per cent earlier.
The total value of imports of these items in 2017-18 was about Rs 86,000 crore, the ministry said.
Not everyone is convinced that import curbs will help reduce the merchandise trade deficit which stood at $80.35 billion in the April-August period compared with $67.27 billion in the same period last year.
In a note released earlier this week in response to speculation of import duty hikes, Bank of America-Merrill Lynch said demand for items like gold does not react to small tariff changes. In the case of consumer goods too, demand may not be very price-sensitive.
