The change-over to an 8-digit level classification for imports is aimed at increasing the customs on sensitive items to the World Trade Organisation- bound level and lowering on key inputs required by export-oriented units.
At present, the classification for imposing customs which is based on a 6-digit level, results in levying the same duty on all items. The proposal to switch over to an 8-digit level seeks to correct this, besides giving the government greater flexibility in adjusting the duty structure in response to the changing situations and facilitating New Delhi at the forthcoming talks of the world trade body.
Commerce ministry officials say with the rupee depreciating, imports have become costlier and to counter the increase this strategy advocates an across-the-board tariff cut on imports, though this will have no negative impact on the domestic sector.
Lowering of customs and excise duties on key inputs required by exporters will also help bring down the cost of transaction besides obviating the need for duty drawbacks.
Officials also say the move has been approved by the taskforce consisting of members from the Central Board of Excise and Customs, Director-General of Commercial Intelligence and Statistics, and Director-General of Foreign Trade, besides the economic adviser in the commerce ministry, HAC Prasad.
Officials also point out that the post-Doha negotiations on market access will involve talks on both the already bound items as also the unbound ones at present. Switching over to the new system will help in these talks as New Delhi will be on an equal footing with the developed countries.
Yet another advantage, point out these officials, is that many export incentive schemes, aimed at offsetting higher import duties, can be phased out with nil or low duties.
The strategy unveiled by commerce and industry minister Murasoli Maran on January 30, this year advocates 15 major macro-policies including a comprehensive value-added tax regime. It focuses on 20 identified commodities grouped in sectors and 25 potential markets to raise the countrys share in the world trade from the present 0.67 per cent to at least 1 per cent in the medium-term, besides achieving a compound annual growth rate of 11.9 per cent during the next five years.