Tariff hike to bring Rs 2,500 cr more to central kitty

The Centre is expected to raise about Rs 2,500 crore in fiscal 2019 from the tariff increase on 19 items announced late Wednesday, senior finance ministry officials said.

But a back-of-the-envelop calculation by indirect tax experts suggests that the indirect tax kitty may swell by upto Rs 5,000 crore in the next six months of the current financial year provided the consumption remains the same and people do not go for import substitution.

However, the measure is unlikely to spur the 'Make in India' initiative of the Centre in the near to medium term as most of the items such as refrigerators and air conditioners that have attracted a 100% increase in import duty are meant mostly for industrial use or the super rich. These are neither produced in India nor there is any immediate proposal to manufacture them in the country.

For example, refrigerators and air conditioners under a particular code on which the duty has been hiked are all imported and in the past three years their imports have increased, especially from China.

“The duty hike list has been prepared carefully so as to maximise government revenues without hurting the common man,” an official said on the condition of anonymity. The government has maintained that the duty hike has been done only to maintain trade balance.

The total value of imports of these items in the year 2017-18 was about Rs 86,000 crore.

India's trade deficit or gap between exports and imports so far this fiscal has topped $45 billion and according to the Reserve Bank of India that was one of the major reasons for decline in the rupee.

The customs duty hike on gold and silver jewellery and precious stone comes in the wake of a whopping 60% rise in their imports which have valued more than $2.5 billion in a single month.

However, gold has been spared from a customs duty hike as it only increases smuggling, the official said. Gold currently attracts a 10% import duty.