Government Increases Import Duty on ACs to Address Widening Current Account Deficit and Weakening Rupee
India: The government raised import duties on 19 non-essential items, including air conditioners, refrigerators, jewellery, diamonds, and jet fuel, impacting imports worth ₹86,000 crore (10.22 billion USD approximately) annually to help address the widening current account deficit (CAD) and a weakening rupee. Jet fuel imports, which amounted to only 181 million USD last fiscal year, saw a 5% duty hike, though this may not significantly impact airfares as most jet fuel is refined domestically. Abhishek Jain, tax partner at EY India, noted that “this hike in duty may not impact importers who procure from countries with which India currently has beneficial free-trade agreements.”
Finance Minister Arun Jaitley previously announced plans to cut non-essential imports and boost exports amid rising CAD. Despite increasing import duties, the government opted not to impose additional duties on gold and electronic goods. Rising imports of gold and electronics, which contribute significantly to CAD, were not impacted due to existing high tax rates and WTO tariff limitations, respectively. Kamal Nandi from Godrej Appliances highlighted that the impact of duty hikes on large white goods would be minimal, as they represent a small portion of total market volume and the “consumers of this segment are value-driven and not price-sensitive.”
Source: Live Mint