Peak customs duty may be retained at 10% in Budget.

New Delhi: The government is unlikely to reduce peak customs duty rate from the current 10% level in the Budget 2009-10.

The peak rate of customs duty imposed on most of the items may not be reduced from the current 10%level in the Budget to be presented on 6 July, sources in the finance ministry said.

Industry body CII has recommended that the customs duty should not be slashed from the prevailing rate of 10%.

Also, the exemption of 4% special counter vailing duty (CVD) on imported goods should be withdrawn, as indigenous goods attract value added tax and central sales tax, the chamber said

The peak rate of customs duty on non-agricultural products was slashed from 12.5% to 10% in the budget 2007-08, while in 2008-09 it was retained at 10%.

The demand from the country’s corporate sector have come amid the global financial slowdown and cheap imports flooding the Indian markets.

Meanwhile, another industry body FICCI has suggested that the reduction in peak custom duty should be done with a focus on raw materials and not on finished goods, as also on those finished goods and raw materials not manufactured in the country.

In the first stimulus package announced in December last year, the government gave full exemption from basic customs duty on industrial intermediate naphtha to give relief to the power sector.

Finance minister Pranab Mukherjee, while presenting the interim budget also said, “...customs duty rates have been steadily reduced to eliminate the bias against the export sector and promote competition and efficiency in the manufacturing sector”.

India has time and again committed itself to reduce peak customs duty to the levels of Association of South-East Asian Nations (Asean), which is between five and 10%.

However, industry says that this is not the time to reduce peak customs duty with domestic industry already reeling under demand slump.