On February 1 this year, Indian Minister of Finance Arun Jaitley submitted a 2018-2019 annual budget proposal to the Parliament. In the proposal, it plans to increase tariffs on products such as auto parts, mobile phones, lithium batteries, watches and clocks, and toys, as well as basic tariffs. Based on a 10% Social Welfare Surcharge, it is intended to 'promote the development of the local manufacturing industry and create more jobs for the country.'
1. What are the main affected products?
Mobile phone tax rate rose from 15% to 20%;
Some mobile phone accessories (batteries, chargers, adapters) tax rate increased from 10% to 15%;
The tax rate for some LCD/LED/OLED panel and TV components increased from 7.5%-10% to 15%;
The tax rate for some auto parts, including spark ignition engines, compression ignition engines, crankshafts, and electric ignition equipment, rose from 7.5% to 15%;
The rate of artificial jewellery rose from 15% to 20%;
Some beauty products (perfume, cosmetics, skin care products) tax rate rose from 10% to 20%;
Timepieces, smart watches, wearable equipment rates rose from 10% to 20%;
The sunglasses tax rate rose from 10% to 20%;
Shoes tax rate rose from 10% to 20%;
Some toy tax rates rose from 10% to 20%;
The tax rate for edible oil such as peanut oil and safflower oil rose from 12.5% to 30%, and the tax rate for refined edible vegetable oil rose from 20% to 35%.
2. What is Social Welfare Surcharge?
For this additional social welfare surcharge, it will replace Education Cess, Secondary, and Higher Education Cess.
The previous Education Cess received a 3% tax on imported goods; after the proposal was passed, it was a 10% social welfare surcharge. At the same time, gasoline, high-performance diesel, silver, and gold enjoyed a 3% Social welfare surcharges are preferential tax rates. Previously exempted imports of educational surtaxes can still be exempted from social welfare surcharges.
3. What is the purpose of India to do this?
This fiscal plan calls for a substantial increase in import tariffs. It is actually aimed at 'Made in China' and aims to further strengthen the Indian government's strategy of 'Make in India' and 'Digital India'. Transform India into a big country.
According to statistics from the Indian Business Information and Statistics Department and the Indian Ministry of Commerce, India’s trade volume with China was 69.62 billion U.S. dollars in 2016, and China’s trade surplus with India was maintained at 51.69 billion U.S. dollars. In April-October last year, India’s trade deficit with China was reduced. It has reached US$36.73 billion. China has become India’s largest trading partner and the country’s largest source of goods. China’s exports to India are mostly high value-added products, while India’s exports to China are mostly low value-added products.
Because of India’s heavy reliance on Chinese products, coupled with its huge trade deficit with China, India hopes to raise tariffs on imported goods, promote India’s manufacturing and protect domestic companies, and at the same time, force some manufacturers to set up factories in India to reduce Tariff costs.
According to statistics, in the first two months of 2018, India had launched 8 anti-dumping investigations against China, and India has become the country with the first anti-dumping against China.