The Indian Chamber of Commerce (ICC) has called on the government to rationalize customs duties in key sectors such as steel, solar batteries, aluminum, and lithium cells to strengthen domestic manufacturing. This suggestion comes ahead of the Union Budget for the financial year 2024-25, which is set to be presented by Finance Minister Nirmala Sitharaman on July 23.
Ameya Prabhu, President of the ICC, emphasized the need for protective measures to support the growth of domestic industries, particularly in sectors facing competition from imported goods. He argued that adjusting customs duties holistically in these areas could significantly boost India’s manufacturing potential and help the country become a global manufacturing hub.
Rationalization of Customs Duties
“There is a need for rationalization of customs duty in these specific sectors in a holistic manner. Huge potential is there to boost domestic manufacturing and make India a global hub for manufacturing,” Prabhu stated. He pointed out that levies on raw materials are affecting domestic players, particularly downstream firms, which rely on these inputs for production.
Prabhu also suggested a correction in the inverted duty structure, which refers to a situation where import duties on raw materials are higher than on finished goods, putting domestic manufacturers at a disadvantage. Specifically, he called for reducing the duty on mixed petroleum gas from 5% to 2.5% to support industries that rely on this input.
Additionally, Prabhu proposed increasing duties on certain polymers, including polyvinyl chloride (PVC), polyethylene terephthalate (PET), polypropylene, and polyesters, to 10%. “This will help in reducing import dependency and will drive India towards self-sufficiency in the petrochemical manufacturing segment,” he explained. By making these adjustments, India could reduce its reliance on imports and strengthen its domestic petrochemical industry.
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Challenges in the Aluminum Sector
Focusing on the aluminum foil sector, Prabhu highlighted the challenges faced by domestic manufacturers due to an anti-dumping duty on raw materials, while finished goods imported from China remain exempt from similar duties. “This dual effect has resulted in extensive net losses to the companies that have made significant investments into this industry,” Prabhu said. He urged the government to address these disparities in trade policies to ensure a level playing field for domestic manufacturers.
Taxation Recommendations
On the taxation front, the ICC suggested the government set up a commission to review the Income Tax Act of 1961, arguing that it has become overly complex due to yearly amendments. The Chamber pointed out that these changes have created anomalies, leading to a large number of legal disputes. “This is an old Act. Every year in the Budget, amendments are made which has made this Act complex to understand. These amendments have resulted in many anomalies which in turn have given rise to a large number of legal cases,” the Chamber noted.
Prabhu also recommended that the government refrain from imposing taxes on dividends, which would encourage further investments in the domestic market.
Global Expansion of ICC
In addition to addressing domestic policy, Prabhu shared that the ICC has significantly expanded its global presence. “We have opened 25 chapters globally in countries including New Zealand, the US, Europe, Australia, Korea, and Middle East nations,” he said. This expansion reflects the Chamber’s goal of becoming a world-class institution, with a strong presence both nationally and internationally.
Conclusion
As the government prepares the Union Budget for 2024-25, the ICC’s suggestions on rationalizing customs duties and reviewing tax policies are aimed at enhancing domestic manufacturing, reducing import dependency, and creating a more competitive environment for Indian businesses. These measures, if implemented, could help India achieve its goal of becoming a global manufacturing hub while ensuring sustainable economic growth.
