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Special additional customs duty may go - Views on News from Equitymaster
 
 
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  • Jan 28, 2000

    Special additional customs duty may go

    According to newspaper reports, the government is contemplating a move to remove the 6% special additional customs duty (SAD) imposed on all imports (except petroleum products) in FY99.

    The decision to remove SAD comes in the wake of an improvement in the country's foreign exchange position and a reduction in dumping resorted to by international companies (as the global demand has picked up). The move will have two immediate effects. First, import prices will tumble, benefiting importers. This will exert a downward pressure on prices of a number of products and commodities, thus improving the price environment for consumers. The rise in competition will force domestic companies to improve their cost structure (increasing efficiency and productivity) in order to protect margins.

    Second, there will be a decline in the revenue collections of the government. In view of the deteriorating finances of the government this move will only increase the overall burden.

    This move should however also be seen in broader light. The removal of the SAD will strengthen India's argument against nations that have not brought down import duty levels in line with the WTO guidelines. In effect, India's bargaining power would increase in the international markets and this could help win certain concessions.

     

     

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