Business

Government increases customs duty on 19 items: Here's what experts have to say about its impact

Updated : September 27, 2018 09:21 AM IST

The increase in the customs duty in the ATF is ultimately going to make air travel costlier.

Nomura said these measures will help the government reduce total imports only by $500 million or 0.1 percent.

HSBC said consumer durable companies may have to increase their prices between one and five percent to offset the increased duties.

Government increases customs duty on 19 items: Here's what experts have to say about its impact

In order to narrow the Current Account Deficit (CAD), the centre on Wednesday increased customs duty of 19 products including aviation turbine fuel (ATF) to curb import of certain imported items.

The government increased the customs duty on aviation turbine fuel (ATF) to 5 percent from nil.

The increase in the customs duty in the ATF is ultimately going to make air travel costlier. The total value of ATF imported during the financial year 2017-18 was $180.85 million.

Rising fuel prices, intense competition and inability to pass on spiralling expenses have been negatively impacting the domestic airlines and the latest decision to impose 5 percent customs duty on ATF, which is a major component of an airline's operational cost, would only add to the woes, experts told PTI.

However, Financial house Phillip Capital said 'any meaningful impact' from the import duty hike on ATF is highly unlikely "given that we produce a comfortable amount domestically and considering that our imports are negligible".

As far as the impact of the increase of the customs duty in other items is concerned, Nomura, a financial house, said these measures will help the government reduce total imports only by $500 million or 0.1 percent and will not have much impact on curbing imported items.

Nomura said the government chose consumer goods over capital ones, as the consumption growth has shown a robust and resilient in the past year.

Brokerage house HSBC said that the demand side has been weak as there is already an escalating cost pressure due to the rupee fall, adding that the consumer durable companies may have to increase their prices between one and five percent to offset the increased duties.

Financial major Morgan Stanley expect these measures to be incremental in nature with a limited overall impact and have estimated the current account deficit to widen to 2.5 percent of GDP this financial year as against 1.9 percent in the next.

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