India cuts MDI import duty; plans six-month review of overall tariff structure

SINGAPORE (ICIS)–India will cut import duties for methylene diphenyl diisocyanate (MDI) by 2.5 percentage points to 5.0% effective 24 July, with plans to review the country’s overall tariff structure in the next six months.

MDI was among raw materials identified by the Indian government on which custom duties will be reduced.

India’s finance minister Nirmala Sitharaman announced the changes to the country’s Basic Customs Duty (BCD) – a tax levied on imported goods at the time of their entry into the country – in her presentation of India’s national budget for the fiscal year ending March 2025 before parliament.

HIGHER DUTIES FOR SOME PRODUCTS
Conversely, the minister said that the customs duty for polyvinyl chloride (PVC) flex films/flex banners will be raised to 25% from 10% currently starting 24 July, “to curb their imports”.

Flex banners are commonly used for outdoor advertising as billboards.

“PVC flex banners are non-biodegradable and hazardous for environment and health,” Sitharaman said.

The customs duty on ammonium nitrate will also be raised to 10% from 7.5% from 24 July “to support existing and new capacities in the pipeline”, she said.

EXEMPTIONS FOR CRITICAL MINERALS
Sitharaman also proposed full exemption of 25 critical minerals from import duties, a cut in duty rates for two other products in the same category.

“Minerals such as lithium, copper, cobalt and rare earth elements are critical for sectors like nuclear energy, renewable energy, space, defense, telecommunications, and high-tech electronics,” she said.

“This [cut in import duty] will provide a major fillip to the processing and refining of such minerals and help secure their availability for these strategic and important sectors,” Sitharaman said.

As for the electronics sector, the finance minister proposed to remove the BCD on oxygen-free copper for the manufacture of resistors.

GOV’T TO REVIEW CUSTOMS DUTY STRUCTURE
Over the next six months, the Indian government will conduct a thorough review of its customs duty rate structure, Sitharaman said.

“I propose to undertake a comprehensive review of the rate structure over the next six months to rationalise and simplify it for ease of trade, removal of duty inversion and reduction of disputes,” she said.

“We will continue our efforts to simplify taxes, improve taxpayer services, provide tax certainty and reduce litigation while enhancing revenues for funding the development and welfare schemes of the government.”

It was not immediately clear how the revised BCD structure will impact implementation of import certifications of various chemicals under the Bureau of Indian Standards (BIS).

BIS certification for some chemicals has been extended many times since they were introduced in 2019-20 to allow domestic end-user industries more time to adhere to the quality-control orders (QCO).

Focus article by Nurluqman Suratman

Thumbnail image: At the Vallarpadam Terminal in Kochi, Kerala, India. 2014 (By Olaf Kruger/imageBROKER/Shutterstock)