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Budget 2020: Change in basic customs duties to boost Make in India

The 2021 union budget has corrected an anomaly in the duty structure of walnut kernels which had a custom duty of 30% as against 100% on walnuts (in shell), said Gunjan Jain, MD of New Delhi-based VKC Nuts. This had adversely impacted the domestic walnut processing industry, which is a major industry in Kashmir, he said.

, ET Bureau|
Last Updated: Feb 01, 2020, 11.43 PM IST
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NEW DELHI: The budget has proposed a change in basic customs duties to encourage domestic processing and manufacturing in the country. This involves raising customs duties and also withdrawing exemption from some to encourage value addition.

The 2021 union budget has corrected an anomaly in the duty structure of walnut kernels which had a custom duty of 30% as against 100% on walnuts (in shell), said Gunjan Jain, MD of New Delhi-based VKC Nuts. This had adversely impacted the domestic walnut processing industry, which is a major industry in Kashmir, he said.

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“With duty on walnut kernels now at par with walnuts whole at 100%, the walnut processing industry in general and that of Kashmir will get a definitive fillip, generating employment for women from marginalized section of India's labour force who are expert in hand cracking walnuts and taking out kernels,” he said.

Walnut (kernel) prices may increase by 40% to 1350 per kg (in wholesale) with the Budget announcing increase in basic custom duty to 100% from current 30%, said Vijay Bhuta, president, Mumbai Dryfruits and Dates Merchants Association. He added that the industry may go for higher imports of walnut (in shell) which was being quoted at Rs 525 a kg in wholesale market.

Also, the domestic production of whey powder, cheese, butter, ghee, butter oil will increase with the Finance Minister Nirmala Sitharaman proposing import duties to increase from 30% to 40%, said RS Sodhi, MD, Amul. “This will increase domestic production and consumption of milk products used by bakery and health drink manufacturers. Further, it will also keep a check on whey being used as adulterants in skimmed milk powder,” he said.

The health drink prices will also increase with concessional duty on isolated soya protein which was coming from US and China to be increased, said Davish Jain, chairman of the Soyabean Processors Association (SOPA). Custom duty on isolated soya protein which was at 10% is expected to now attract tariff of 30%. However, it will ensure domestic production to pick up, said Jain.

Further, the basic custom duty on dietary soya fibre has been increased to 30% from the current 15% to promote domestic production, said Jain.

The budget also proposed phosphoric acid which currently attracts 5% basic custom duty which the industry expects to increase. “Margins of NPK fertilizer manufacturers, who use imported phosphoric acid will be squeezed with the removal of concessional custom duty on phosphoric acid. However, it will be positive for domestic companies like Coromandel and Iffco which manufacture phosphoric acid," said K. Ravichandran, senior Vice-President & Group Head, Corporate Ratings, ICRA.

The Budget memorandum also omitted the entry of edible oil from the custom duty. It said that effective rate on certain edible oils is redundant as these goods are covered in certain other entries with lower or equal applicable rates.

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