As part of Prime Minister Narendra Modi’s vision to make India ‘Atmanirbhar Bharat’ that primarily aims at promoting and supporting domestic manufacturing, the government has been considering raising the import duties by 5 percent to 10 percent.
On February 1, 2021, Nirmala Sitharaman, the Union finance minister will unveil the annual federal budget for the financial year 2021-22 that will start from April 1. The unveiling will take place in the middle of the estimated economic contraction of 7.7 percent of the current fiscal year.
According to government sources, the government has been seeking to target an additional revenue of about INR 270 crore to INR 280 crore ($2.7 billion to $2.8 billion). The goal is to shore up the revenue during the pandemic as it has affected the economy of the country.
Three government sources who were in the discussions had told Reuters that the import duties will increase by 5 percent to 10 percent for more than 50 items, including smartphones, electronic components, and appliances.
Even though the officials had said that the hike on vehicles and electric cars has not been specified, the rise in import duties could have a potential impact on Ikea furnitures and Tesla electric cars respectively. Tesla is planning to come to India soon and this might be a major cause of concern as previously, the executives of Ikea and Tesla have already raised concerns about the same as their products already face a high import duty in India. However, more concerning is that the chances of gaining a higher import duty on home appliances, including air conditioners and refrigerators. As of last year, India had hiked import duties on many products such as footwear, toys, furniture, electrical and electronic items up to 20 percent.
The proposals for the rise in import duties may still be tweaked and may fall subject to change as they have not been finalized yet. According to government officials, in order to promote India as a significant destination for local manufacturing and to also support domestic businesses, such taxes are absolutely necessary.