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Government Bans Duty Free TV Imports from August 26; Says The Move Unrelated To Falling Rupee

Amidst speculations that the government was seriously contemplating to extend its decision to hike import duty of items like Gold, Silver and Platinum to non-essential goods like TVs and refrigerators in order to curb the current account deficit, we first heard that the decision was shelved due to India’s compliance with various international treaties with other countries under WTO. However, in what appears to be a middle path, the government has now gone ahead with banning duty free import of flat TV sets by air travelers saying this rule was being grossly misused by black marketeers.

dutyfreetvTuesday, August 20, 2013: The government banned duty- free import of flat screen television by air travellers in a bid to support the falling rupee, which declined below the 63 level against US dollar on Monday. The value of rupee touched an all-time low of 63.30 to a dollar in the afternoon trade yesterday.

The government, according to a notification, has decided to “disallow import of flat panel (LCD/LED/Plasma) television as part of free baggage allowance” with effect from August 26.
This means that starting August 26, the government has decided to levy 36% customs duty on LCD and LED television sets that passengers bring along with them as part of the duty-free baggage allowance of Rs 35,000. Air travellers currently could bring a flat screen television for personal use without paying any duty.

It was widely speculated last week that government was seriously contemplating to levy higher customs duty on imports of non-essential items like electronic goods in the hope that these tariff restrictions would do some dollar savings in order to defend the falling rupee. In a series of measures aimed at this and also curbing the current account deficit from the current 4.8 percent to targeted 3.7 percent for the fiscal year 2013-14, Finance Minister P. Chidambaram had indicated that the imports of non-essential import items such as fridges and TVs could be reduced. The commerce ministry, however, was believed to have factored in with the finance ministry that most electronic goods were covered under Information Technology Agreements (ITAs) with other countries under WTO, and India unilaterally cannot raise the rates. (Read Here)

But the government appears to have found a middle path and have gone ahead with this ban in order to exhibit some expediency in face of current economic scenario. The government had already raised import duty on gold, platinum and silver to 10 per cent to contain the Current Account Deficit (CAD) and arrest declining value of rupee.

‘Move Unrelated to CAD’

However, a senior official in the Revenue Department has confirmed to EFY that the decision is aimed at stopping the misuse of the duty-free scheme of import of flat panel television sets as part of the baggage allowance rules. The local manufacturers had also complained about this malpractice. The government could not have a more opportune time to act against this malpractice.

Notably, this price arbitrage had turned into a lucrative business proposition for some who would bring them from South East Asia and make a huge profit in the domestic market.

The availability of cheap television sets in Thailand, Dubai and Singapore had bred a huge market from India as tourists took advantage of the price difference due to the baggage allowance.

For example, a 32-inch TV set in Thailand would cost around Rs 17,000 to Rs 18,000 and in India it costs around Rs 30,000.

According to the baggage rules all passengers above 10 years returning after more than three days stay abroad were allowed to bring articles up to a value of Rs. 35,000, if these are carried on the person or in the accompanied baggage of the passenger.

‘Local Industry Cheerful’

The Indian manufacturing industry has cheered the move by the government. According to the industry body, Consumer Electronics and Appliances Manufacturers Association (CEAMA), government’s decision to ban duty-free import of high-end flat screen plasma TVs will not only act as catalyst for increasing demand for TV sets produced in the domestic market but, will also provide relief to consumer electronics and appliances makers.

It approves of government notification that levies 36.05 per cent duty on import of high-end plasma television. The association informed that domestic producers have made an investment of over Rs 15 billion in establishing manufacturing facilities for flat panel TVs.

Estimates by CEAMA pointed to the fact that the loss to state exchequer owing to import of TVs as hand baggage amounted to Rs 7.5 billion. Moreover, out of a total demand of almost 8 Million flat panels in India, 3 to 3.5 Million demand would have been met through free baggage allowances or concessional rate of duties under FTA.

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