Budget 2022: How Custom Duty Hike On Electronics, Umbrella Will Help Boost Local Manufacturing

Finance Minister Nirmala Sitharaman in the Budget speech on Tuesday announced increased taxes on certain commodities like umbrella, imitation jewelry while a decrease in certain others like cocoa beans, cut and polished diamonds. The prices of these will see a rise or dip from April when the Budget comes into effect.

While imported items, along with umbrellas and unblended fuel will see a rise in prices, chargers and cameras for phones, wearable tech like smartwatches, hearing aids, gemstones and diamonds, farming tools and smart meters, steel scraps and chemicals for petroleum refining will get cheaper, reports Indian Express.

The following goods will become cheaper as the government has slashed the customs duty:

1. Frozen mussels

2. Frozen squids

3. Asafoetida

4. Cocoa beans

5. Methyl alcohol

6. Acetic acid

7. Cut and polished diamonds

8. Camera lens for cellular mobile phone.

The Finance Minister said that in order to boost local manufacturing of the electronics products, custom duty rates are being revised.

“Electronic manufacturing has been growing rapidly and customs duty rates are being calibrated to provide a graded rate structure to facilitate local manufacturing of wearable devices, hearable devices, and electronic smart meters,” Sitharaman said in her speech.

The following commodities will reportedly see an increase in the tax rates:

1. Umbrella

2. Imitation Jewellery

3. Single or multiple loudspeakers

4. Headphones and earphones

5. Smart meters

6. Solar cells

7. Solar modules

8. X-ray machines

9. Parts of electronic toys

Many of the above items are currently imported from China in significant amount. The decision to hike duty on umbrellas to 20% and withdraw the exemption will lead to two-three fold increase in the prices of women’s umbrellas as well as garden umbrellas that are currently imported from China.

TOI quoted umbrella manufacturers in Kolkata as saying that the move will give a boost to the India umbrella manufacturers, however, the bulk of the fabric will continue to be imported from China. West Bengal is the hub of umbrella manufacturing in the country.

“Indian fabric has more longevity. But it will take a while to replace the fabric from China as only 30% of the demand can be met from Indian fabrics. Imports that will get replaced are ribs, tube, folding stick and handle. The Chinese components are more price competitive as of now. But, since the custom duty on these components will increase from 5% to 10%, the cost differential with components manufactured in India will be reduced," said Umbrella Manufacturers’ Association president Hemant Paul.