The current import duty structure allows exemptions to capital goods for various sectors like power, textiles, leather, footwear, food processing and fertilizers. The government is of the view that these exemptions have hobbled the growth of the domestic capital goods sector, said Finance Minister Nirmala Sitharaman in her Budget speech on Tuesday.
“Project import duty concessions have also deprived the local producers of a level playing field in areas like coal mining projects, power generation, transmission or distribution projects, railway and metro projects,” the FM said.
“Our experience suggests that reasonable tariffs are conducive to the growth of domestic industry and ‘Make in India’ without significantly impacting the cost of essential imports,” she said.
Accordingly, the Budget has proposed to phase out the concessional rates in capital goods and project imports gradually and apply a moderate tariff of 7.5 percent.
However, certain exemptions for advanced machineries that are not manufactured locally, shall continue.
In addition, a few exemptions are being introduced on inputs, like specialised castings, ball screw and linear motion guide, to encourage domestic manufacturing of capital goods.
>>Also Read | No relief for individual taxpayers: FM Sitharaman announces no change in income tax slabs
Also, in its effort to at tariff simplication and rationalisation of customs exemptions, more than 350 exemption entries are proposed to be gradually phased out, Sitharaman said.
“These include exemption on certain agricultural produce, chemicals, fabrics, medical devices and drugs and medicines for which sufficient domestic capacity exists,” she said.
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