The tyre industry has urged the Central Government for recast of India's Free Trade Agreements (FTAs) that currently allow easy import of tyres. In its pre-Budget memorandum submitted to the finance minister, the Automotive Tyre Manufacturers Association (ATMA) has also sought that customs duty on natural rubber (NR) be slashed from 20% to 7.5% and that on tyres be raised to 20%.
Basic customs duty on tyres is 10%. But, under various trade pacts, the duty ranges between nil to 8.6%, facilitating tyre imports into India.
While tyres (finished product) can be imported into India at preferential/concessional duties under various trade agreements, NR, which is a basic raw material, falls in the negative list (no duty concession) across most trade pacts thus resulting in an inverted duty structure.
Under ASEAN FTA, Indo-Sri Lanka, India-Singapore or India-Malaysia trade pacts, NR is in the negative list leading to no duty concession. On the other hand, tyres can be imported at nil rate under Indo-Sri Lanka and India-Singapore pacts while there is 6% duty under ASEAN FTA and 8.6% under the Asia Pacific trade agreement.
ATMA has demanded the Government to scrap the inverted duty structure and tweak terms of trade to check the growing volume of tyre imports and to keep the domestic industry competitive.
In the wake of compelling circumstances, India needs to increase customs duty on tyres from 10%, without contravening WTO provisions as there is no bound rate on tyres.
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