Hike in customs duty on electronics likely to boost revenue collection

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The recent hike in customs duty on electronic goods is expected to not only discourage imports and boost domestic manufacturing, but could also benefit the Exchequer in a year of muted revenue growth.

image for representational purpose only

The duty increase may help in netting about an additional ₹2,000 crore this fiscal, sources said, pointing out that electronic goods have become one of the major imports items.

The Finance Ministry had last week increased the import duty on electronic goods such as television sets and microwaves to 20 per cent and that on mobile phones to 15 per cent.

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“It will have the twin objective of boosting local manufacturing that will increase revenue from the Goods and Services Tax and also by making imports costlier,” noted an expert.

Imports of electronics surged 24.97 per cent in November this year to $4,371.98 million from $3,498.44 a year ago.

This could provide some comfort to the government, which is faced with an uphill task in meeting the direct and indirect tax collections target for 2017-18.

Revenue collection from GST is estimated to have declined significantly to ₹83,346 crore in October compared with ₹92,000 crore in September.

Similarly, customs duty receipts have also been subdued with net collection in October estimated at ₹7,371 crore as against ₹18,884 crore in the corresponding period a year ago. The Centre is also expected to lose ₹13,000 crore from the excise duty cut of ₹2 per litre on petrol and diesel.

However, analysts pointed out that imports of electronics have been significant and may remain so as domestic capacity is not sufficient enough to meet demand.

“The main aim of the customs duty hike was to boost domestic manufacturing but if in the process it also increases revenue, it will be an additional bonus,” said Sunil Kumar Sinha, Principal Economist, India Ratings and Research.

DK Srivastava, Chief Policy Advisor, EY India, also said that though the main objective was to curb imports, it will also have a revenue impact.

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