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India Will Substantially Increase Import Tariffs On Multiple Industries
- Mar 26, 2018 -

On February 1st this year, Indian Finance Minister Arun Jaitley submitted a 2018-2019 annual budget proposal to Parliament. In the proposal, it plans to increase tariffs on products such as auto parts, mobile phones, lithium batteries, watches and clocks, toys etc., and add a 10% Social Welfare Surcharge based on basic tariffs, which aims to “promote local manufacturing, create more jobs for the country." The New Deal will be implemented from April 1st.

1. What are the main affected products?

Mobile phone tax rate rose from 15% to 20%;

Some mobile phone accessories (batteries, chargers, adapters) tax rate increased from 10% to 15%;

The tax rate for some LCD/LED/OLED panel and TV components increased from 7.5%-10% to 15%;

The tax rate for some auto parts, including spark ignition engines, compression ignition engines, crankshafts, and electric ignition equipment, rose from 7.5% to 15%;

The rate of artificial jewelry rose from 15% to 20%;

Some beauty products (perfume, cosmetics, and skin care products) tax rate rose from 10% to 20%;

The tax rate for watches, smart watches, and wearable devices rose from 10% to 20%;

The sunglasses tax rate rose from 10% to 20%;

Shoes tax rate rose from 10% to 20%;

Some toy tax rates rose from 10% to 20%;

The tax rates for edible oil such as peanut oil and safflower oil rose from 12.5% to 30%, and the tax rate for refined edible vegetable oil rose from 20% to 35%.

2. What is Social Welfare Surcharge?

For this additional social welfare surcharge, it will replace Education Cess, Secondary, and Higher Education Cess.

The previous Education Cess received a 3% tax on imported goods; after the proposal was passed, it was a 10% social welfare surcharge. At the same time, petrol, high-performance diesel, silver, and gold enjoy a 3% discount rate on social welfare surcharges. Previously imported products that were exempted from education surcharges can still be exempted from social welfare surcharges.

3. What is the purpose of India to do this?

The current fiscal plan calls for a substantial increase in import tariffs. It is in fact aimed at "Made in China" and aims to further strengthen the Indian government's "Make in India" and "Digital India" strategies. Transform India into a big manufacturing country.

According to statistics from the Indian Business Information Statistics Department and the Indian Ministry of Commerce, the trade volume between India and China in 2016 was 69.62 billion U.S. dollars, and China maintained a surplus of 51.69 billion U.S. dollars against India. From April to October last year, India’s trade deficit with China reached US$36.73 billion. China has become India’s largest trading partner and the country’s largest source of commodities. China's exports to India are mostly high value-added products, while India's exports to China are mostly low value-added products.

Because of India’s heavy reliance on Chinese products and huge trade deficit with China, India hopes to raise tariffs on imported goods, promote Indian manufacturing and protect domestic companies, and at the same time, force some manufacturers to set up factories in India to reduce Tariff costs.

According to statistics, in the first two months of 2018, India had launched 8 anti-dumping investigations against China, and India has become the country with the highest anti-dumping countermeasures against China.