Sitharaman may tackle duty structure issue to boost local manufacturing

The commerce ministry has provided a list to the finance ministry where the finished products face lower import duties compared to the materials used to produce them.

Finance Minister Nirmala Sitharaman is expected to address the issue of the inverted duty structure in the upcoming budget to support domestic manufacturing, particularly in sectors like textile staple fibres, electronics, and certain chemicals.

The commerce ministry has provided a list to the finance ministry where the finished products face lower import duties compared to the materials used to produce them. Additionally, they have submitted another list highlighting items affected by the inverted duty structure due to free trade agreements. The ministry conducted a comprehensive study across sectors to streamline these inverted duty structures.

An announcement regarding these issues is anticipated in the budget scheduled for July 23, pending final discussions, as per sources.

The government is expected to make efforts to correct instances of the inverted duty structure in the current budget.

Free trade agreements have also contributed to the inverted duty structure in industries like copper smelting, where the duty on inputs exceeds that on finished products. Suggestions include reducing the MFN duty on copper concentrate from 2.5 per cent to 0 per cent and on blister copper from 5 per cent to 0 per cent.

Another example is in viscose staple fibre, affected by the FTA with ASEAN countries, where India currently imposes zero duty on VSF products imported under the FTA, but imposes a higher duty of 2.5 per cent on raw materials.