The proposed reduction in the import duty on used commercial vehicles from 30 per cent to 25 per cent in the Budget has raised fears of large-scale dumping from Japan, South Korea and China.
These countries maintain a high bound rate to avoid low-rate imports. The bound rate in South Korea, for instance, is 80 per cent. Japan, South Korea and China also levy higher taxes on older vehicles to discourage their use beyond a certain period.
The bound rate, which is decided after negotiations with World Trade Organisation members, is the maximum import duty a country can levy on a particular item. In the case of India, the bound rate for commercial vehicles, both old and new, is 40 per cent.
India, however, has kept the basic duty well below the bound rate because there have not been significant imports in the segment.
Until last year, the basic import duty stood at 30 per cent. This year, however, Finance Minister Jaswant Singh has reduced the basic rate from 30 per cent to 25 per cent, much to the chagrin of domestic manufacturers.
Prior to the Budget, the domestic automobile industry had lobbied hard for the bound rate on commercial vehicles to be raised to the applied rate for passenger cars.
It also demanded that in case it was not possible to revisit the bound rates, the applied rate should be increased to 40 per cent, that is, the bound rate.
An Ashok Leyland executive said domestic manufacturers had decided to take up the issue with finance ministry officials.
"It is a matter of concern. This kind of taxation will not help, especially when the domestic commercial vehicles industry seemed to be looking up," said Eicher Chairman S Shandilya.
