Reduce Customs Duty on Rubber: Commerce Dept.

NEW DELHI: The commerce department has suggested a reduction in customs levy on natural to address the flawed import duty structure where an input is taxed at a higher rate than the final product, in this case tyres.

Tyre manufacturers have been demanding a reduction in rubber import duties from the existing 20% as the import duty on tyres is much lower at 10%, creating an inverted duty structure that disincentivises local manufacturing. “We have submitted our taxation proposal to the revenue department (finance ministry). Now, the department has to take a call,” a commerce department official said.

The proposed reduction in duty, if implemented, will bring down the production cost for a number of industries which use rubber as input, especially tyres.

However, a decision is not going to be easy as rubber producers want duties to stay as they argue that imports at a lower rate will increase imports, forcing domestic prices lower and cause losses to farmers and traders.

The commerce department says it is aware of the farmers’ concerns. “Our proposal strikes a middle ground,” the official said, indicating that import duties would come down, but not to the extent (7.5%) demanded by various associations including the Automotive Tyre Manufacturer’s association (ATMA) and Indian Cycle and Rickshaw Tyres Manufacturing Association.

Prices of natural rubber are currently around Rs 170 a kg, as compared to below Rs 80-90 a kg last year. As per estimates made by ATMA, domestic rubber is likely to fall short of consumption requirements for 2010-11 by approximately 1,76,000 MT, leaving ample scope for imports. The rubber industry in the country manufactures around 35,000 different products and has an estimated turnover of Rs 45,000 crore. It employs more than five million people.

Source : economictimes.indiatimes.com