Customs will have to pay at least 10 per cent more for imported footwear, kitchen appliances and shell out Rs 500-700 more on air conditioners, washing machines and refrigerators with the Union Budget raising basic customs duty to as much as 100 per cent on some of them to encourage local producers.
The move comes at a time when prices of major appliances such as refrigerators, for instance, have already increased this year as a result of new energy efficiency norms.
“The duty increase on certain components like compressors and motors and in some cases on finished goods, will help further develop the manufacturing ecosystem in India in the long run, but could result in some price hike in short term on products like refrigerators, air conditioners, coolers, washing machines and air purifier,” said CEAMA President Kamal Nandi, who is also the business head and executive vice-president of Godrej Appliances.
The net impact of the 2.5 per cent increase in customs duty on components will be a few hundred rupees, he added.
A disappointed Ikea, the world’s largest furniture retailer, said it was evaluating the impact of the move to raise import taxes on a host of products, from furniture to kitchenware, on its overall business in India. “Ikea is disappointed with the customs duty hike, which impacts furniture and other home furnishing categories,” said Peter Betzel, CEO, IKEA India. Duties were doubled to 20 per cent on various types of kitchenware, while furniture items would now attract 25 per cent customs duties, from 20 per cent earlier.
The Swedish retailer, who has been rapidly shoring up presence in India, imports about 75 per cent of its products and also sells a sizeable portion of toys on which customs duties have been raised by 40 per cent. However, some retailers have opined that “only few components are being made in China while a bulk are being imported from countries with which India has free trade pacts”.
This means importers will be able to absorb the cost with minimal impact on consumers,” said a senior executive of a leading retailer. Similarly, prices of imported footwear may also go up by at least 10 per cent. Puma India managing director Abhishek Ganguly said about 70 per cent of the footwear sold by it is imported. “We don’t have the kind of technologies, expertise and skills required to manufacture high-end shoes in India. So ultimately, it will impact consumers as prices will go up by at least 10 per cent.”