Budget 2020-21: If you plan to revamp your bedroom with a new fan or an air conditioner, or make your kitchen more effective with new appliances like a food grinder or a microwave then you may have to shell more than you had planned after Finance Minister Nirmala Sitharaman’s budget. Import duty on various items ranging from machinery to household goods has been increased abd consumer durable manufacturers might transfer that burden to customers.
In her second budget, the Finance Minister said that a measured restraint on import of items that are produced by Micro, Small and Medium Enterprises (MSME) is being taken. “Labor-intensive sectors in MSME are critical for employment generation. Cheap and low-quality imports are an impediment to their growth,” the Finance Minister said.
Accordingly, the government has decided to hike the customs duty on items such as iron, fans, food grinders, mixers, shavers, toasters, heaters and compressors of refrigerators and air conditioners, among others. According to the government, the move is in line with its efforts to promote the make in India initiative. Customs duty on compressors for air conditioners and refrigerators has been increased from 10 per cent to 12.5 per cent while the rate of customs duty for fans has jumped from 10 per cent to 20 per cent.
The likely impact of the rate in custom duty will be shed on-to the consumers by the companies. “Costs for domestic manufacturers who import these appliances will go up. However, companies would most likely pass on this cost and it would increase the cost for consumers,” said HDFC Securities in a Budget impact analysis report.
Duties have been raised on ceiling fans, food grinders, iron, room heaters, tea and coffee makers, kitchenware, tableware and hairdryers from 10 per cent to 20 per cent.
With sales down for the industry that has been battling a consumption slowdown, rise in input cost on the back of the revamped customs duty is likely to be placed on the consumers. The Commerce and Industry Ministry in its pre-Budget recommendations to the Finance Ministry had proposed rationalisation of basic customs or import duty on over 300 items from different sectors, according to PTI.
However, many are just seeing this move of the finance minister with a positive connotation.
“From a consumer electronics industry perspective, the decision to encourage domestic manufacturing of mobiles and electronic goods in India is a welcome move while a definitive timeline would have helped further boost the industry sentiments,” said Manish Sharma, President & CEO, Panasonic India.
Trade Promotion Council of India, labeled the hike of customs duty as a “great move”. Chairman Mohit Singla said the hike in duty on furniture is a great move by the government which will provide impetus to domestic manufacturers to augment ‘Swadeshi’ products.
The move might dissuade unnecessary imports from countries like China and could help domestic manufacturers but the amount you shell out on consumer durables is set to witness a surge.