The latest development indicates that the government is planning to regulate imports of “non-essential items” through hikes in import duties as a slowdown in exports is being seen as a cause of concern in the context of a widening trade deficit.
Considering HSN Code
It appears that The economic ministries in the Central government are in the process of carrying out an exercise in which they are selecting a list of items on a granular basis to ensure that the proposed duty hikes are restricted to those items for which there is enough manufacturing capacity in the country.
It will not be considered for other items in the categories that come under the same Harmonized System of Nomenclature (HSN) code.
Pouring more light on the subject, a senior government official said, “We are looking at non-essential imports for which there is enough manufacturing capacity. It is to identify non-essential items, where there is sufficient production capacity and allow for higher import substitution,”.
So far, HSN codes are seen as subsuming a broad sweep of items even at the six or eight-digit classification levels in the current form.
Simply put, there are different types of materials for bicycle hubs including steel, alloy, ceramics but all bicycle hubs come under the same HSN code.
How Does This Help?
Consider the case when the government is considering a higher import duty only for steel due to excess capacity domesticall.
The official explained that they have to think of ways to separate other materials of bicycle hubs from the HSN category to ensure the higher import duty doesn’t affect them.
For instance, to regulate imports of LED lights, the government may consider levying higher duty only for the single-wire LED light but doesn’t intend to put a higher duty on LED bulbs.
In order to achieve this, the government has to segregate the different types of LED lights to make sure it’s levied only on the types it wants to stop.
The last set of duty hikes across a range of product categories happened in Budget 2022-23 wherein higher custom duties on items of daily use such as umbrellas, headphones, earphones, loudspeakers, smart meters, and imitation jewelry were introduced.
Notably, most of these products were being imported from China, either as complete units or as knocked down units to be assembled in factories in India.
The import duty hikes have been made on several occasions such as on almonds, apples, and others in the span of the last five years.
Besides these, mobile phone parts and solar panels have seen the most regular hikes, in large part to protect and promote the domestic industry.