What if he were to do the latter
There cannot be a more opportune time to announce a concrete and binding medium-term roadmap to reduce tariffs to Asean levels. The industry seems to have become immune to customs tariff movements - not that there has ever been a valid co-relation, although reductions historically have always raised hackles!
And, more importantly, what the resting point would be is important since Asean tariffs are moving targets and the appropriate range in 2004-05 was considered to be 12-15%. Therefore, bringing the peak rate to 15% this year would be a good start. This will also wipe out some blushes from the embarrassment of forex riches.
Next would be to give finality to the number of rates. Numerous reports from Arvind Virmani to Vijay Kelkar have looked at the constant bickering from industry of value addition, anomalies, effective rates of protection and so on. The recommendations range from having a single rate of customs to a three-rate structure.
Except for some industry sectors, justifications for a graded 3-tier structure on raw materials, inputs and finished product are unfounded. The tariff lines can be cast in a single rate and the rest in a minimum rate. It would also do immense good to look at the 19 more rates ranging between 30% and 150% in our tariffs over and above the four basic rates of 0%,5%,15% and 20%.
Again, except for agricultural products and the like, there are a number of rates that can be collapsed. In fact, ghost rates can certainly be driven away. There are a number of commodities that are in a particular rate category but attract a different duty through exemptions.
The exemptions are notoriously famous for another reason also. They have kept our tariff books so complicated that even seasoned practitioners find it difficult to look up the effective duty on commodities. There are at least 55 tariff lines attracting nil customs duty in the 99 chapters of customs tariff, 94 entries attract nil customs duty by notifications translating to many more hundred items across chapters. In addition, a plethora of notifications giving duty concessions on several commodities exist.
What the 1997 dream Budget was all about
FII limit raised from 24% to 30%
The grand finale would be if the veil of secrecy on item-wise customs and excise duties each year were lifted. The task is all the more easy now since 85% of the 6,000-odd tariff lines are in the 20% slab in customs and around 88% are in the Cenvat rate of 16% in excise. Of course, industry would also like to know the resting point for excise instead of hoping for the removal of the SED rates every year.
Remove exemptions, go whole hog to widen service tax - for instance, bring movement of goods by rail under the tax net.
If the FM can do all this along with Vat implementation, a serious look at procedural simplification and tax administration and bring them to world standards, he can surely say Hum hai lajawab and announce to the world Rok sako tho rok lo.
The writer is head - customs & regulatory affairs, DHL Express. These are his personal views