Imposition of CVD to offset reduction in customs duty

08-Mar-06

Budget 2006-07 reduced peak customs duty from 15% to 12.5% indicating the government's determination in bringing duties down to the levels maintained by its East-Asian counterparts. However, most of these reductions have been offset by imposing an additional special countervailing duty (CVD) of 4% on many agriculture and non-agricultural products. The level of tariff cuts is higher than 2.5% in petrochemicals. Tariff rates on raw materials like styrene, EDC and VCM have been fixed at 2%; on petrochemical like LDPE, PP and PVC, duties have been reduced from 10% to 5%. In this context, it should be noticed that the Budget has announced that import duties on naphtha for production of petrochemical have been reduced from 5% to nil. This is an exemption from basic duty of naphtha for general imports, which is reduced from 10% to 5%. Imposition of 4% special CVD will effectively increase import duties of these products.