Trade policies and practices by measure introduction



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Tariffs

  1. Applied tariff structure


      1. Under the Customs Tariff Act 1975, the MFN tariff is based on the standard rate, which is a statutory duty; however, the "effective" tariff may be lower because of general‑ or industrial‑use‑based exemptions. India's tariff is announced in the annual Budget at the end of February each year; however, additional changes to individual tariff rates may be made during the year by the Ministry of Finance's Central Board of Excise and Customs, through notifications published in the Gazette of India; this adds to the complexity of the tariff. During 2007‑10, the Government issued some 230 tariff‑rate amendment notifications.45 In addition to the standard rate, importers are required to pay an additional duty ("countervailing duty") and a special additional duty instead of local taxes (section (v)). To determine the applied tariff (and other customs duty) rate applicable to a particular product, separate customs and excise tax schedules must be consulted. These schedules should, in addition, be cross‑checked with any applicable customs or excise notification that may have raised or reduced the rate on the product.

      2. The 2010/11 applied tariff (HS2007 nomenclature) has 11,328 tariff lines at the eight‑digit level, comprising rates ranging from zero to 150%. Some 94% of tariff lines are ad valorem; duty is levied on the c.i.f. value of imports. Alternate or specific duties apply to 6.1% of all tariff lines, unchanged since 2006/07 (Table III.4). The simple average applied MFN tariff was 12% in 2010/11, down from 15.1% in 2006/07.46 Both agricultural and industrial average tariffs declined reflecting India's shift towards lower tariffs. India provides a number of exemptions on imported inputs for certain sectors or importers, depending on the industrial use of the import. As a result of these exemptions, the effective applied tariff is considerably lower than the simple average standard rate. However, because a large majority of the exemptions relate to industrial use, they cannot be included in the general tariff analysis. To the extent that a tariff exemption is clearly related to a particular tariff line, the Secretariat has tried to incorporate it in the tariff analysis.

Table III.4

Tariff structure, 2006/07 and 2010/11

(%)








MFN effective applied rates

Final bound
rate
a

2006/07

2010/11

1.

Bound tariff lines (% of all tariff lines)

75.2

75.6

75.6

2.

Simple average rate

15.1

12.0

46.4




Agricultural products (HS01‑24)

38.2

35.1

119.1




Industrial products (HS25‑97)

11.8

8.6

33.7




WTO agricultural products

36.2

33.2

118.3




WTO non‑agricultural products

12.0

8.9

32.0




Textiles

12.2

9.6

26.9




Clothing

12.5

10.0

37.1

3.

Duty free tariff lines (% of all tariff lines)

2.7

3.2

1.9

4.

Domestic tariff "peaks" (% of all tariff lines)b

2.5

2.2

6.5

5.

International tariff "peaks" (% of all tariff lines)c

12.5

11.9

87.7

6.

Overall standard deviation of tariff rates

15.0

14.2

40.8

7.

Coefficient of variation of tariff rates

1.0

1.2

0.9

8.

Non‑ad valorem tariffs (% of all tariff lines)

6.1

6.1

8.0

9

Nuisance applied rates (% of all tariff lines)d

0.5

0.7

0.0

a Based on 2010/11 tariff schedule. Implementation of final bound rates was completed in 2005. Calculations are based on 8,567 bound tariff lines, of which 8,503 are fully bound and 64 partially bound.

b Domestic tariff peaks are defined as those exceeding three times the overall simple average applied rate.

c International tariff peaks are defined as those exceeding 15%.

d Nuisance rates are those greater than zero, but less than or equal to 2%.



Note: The 2006/07 tariff is based on HS02 nomenclature, consisting of 11,695 tariff lines; the 2010/11 tariff is based on HS07 nomenclature consisting of 11,328 tariff lines. Calculations exclude specific rates and include the ad valorem part of alternate rates. MFN applied rates include exemptions, applicable at the full eight‑digit tariff line.

Source: WTO Secretariat calculations, based on data provided by the Indian authorities.

            1. Non‑ad valorem rates apply to 690 tariff lines: five are specific rates (i.e. almonds, shelled and in shell (two HS lines), and platinum (three HS lines)), while 685 (6.1% of all tariff lines) are alternate rates (textiles and clothing). The simple average applied MFN tariff in 2010/11 was 13.4% including AVEs (12% without AVEs). The inclusion of AVEs affects only industrial average tariffs, which increase from 8.6% to 10.3% (10.6% under WTO non‑agriculture). Mainly affected are textile and clothing, with average protection of 16.2% and 25.7%, respectively, and of 9.6% and 10% if AVEs are not included in the tariff analysis. This confirms that protection may increase considerably by the use of specific rates: some goods have protection of around 600% (e.g. shawls, scarves (exceeding 60 cm) and the like of silk (HS 6214.10.20 (598.32%)), women's or girls' suits of silk (HS 6104.19.20 (620%)), and scarves of silk measuring 60 cm or less (HS 6214.10.10 (656.41%)).

            2. In 2010/11, tariffs range from zero to 150%. The majority of lines (71% or 8,042) carry a rate greater than 5% but less than 10%, while 12.8% of total lines have a tariff rate greater than zero but less than 5% (Chart III.1). This is a major change from 2006/07, when 65% of all lines were within the 10‑15% range, and 10.4% of lines at 25‑30%. The number of duty‑free lines has increased slightly. Although average rates have declined, some products continue to bear very high rates, notably some beverages, spirits, and coffee and tea. Dispersion remains high: the standard deviation shows only a slight decrease, from 15 at the time of the last Review of India to 14.2.



            1. Average tariff protection declined from 15.1% to 12% in 2010/11. Since 2007, the simple average tariff for agricultural goods (WTO definition) has declined from 36.2% to 33.2%, but remains substantially higher than for manufactured goods (Table III.5). Beverages and spirits bear the highest protection, followed by coffee and tea, dairy products, and sugar and confectionary. Non‑agricultural products face an average tariff of 8.9%, down from 12% in 2007. The decrease in the average rate reflects a decrease from a peak rate of 12.5% in 2006/07 to rates of 10% and 7.5%. However, fisheries and transport equipment still bear above average tariff protection of 29.5% and 21.5%, respectively.

            2. India's tariffs are higher for agriculture goods and processed goods than for semi‑manufactures. This responds in part to the strategy of protecting agriculture and promoting the development of manufacturing activities, which require imports of intermediate goods. It may also reflect India's policy of granting import duty concessions for intermediate goods under different export and investment promotion schemes (section (3)(vii)(c)).

Table III.5

Summary analysis of the tariff, 2006/07 and 2010/11




2006/07 effective applied rates (MFN)

2010/11 effective applied rates (MFN)

Bound tariff

No. of
lines


Average
(%)


Range
(%)


No. of
lines


Average
(%)


Range
(%)


Range
(%)


Total

11,695

15.1

0‑150

11,328

12.0

0‑150

0300

HS 01‑24

1,466

38.2

0‑150

1,433

35.1

0‑150

10‑300

HS 05‑97

10,229

11.8

0‑100

9,895

8.6

0‑70

0‑150

By WTO definition






















Agricultural products

1,492

36.2

0‑150

1,431

33.2

0‑150

10‑300

Animals and products thereof

108

30.7

5‑100

106

30.8

5‑100

35‑150

Dairy products

32

35.3

30‑60

32

34.4

30‑60

40‑150

Fruit, vegetables, and plants

376

28.3

0‑100

355

27.6

0‑100

10‑150

Coffee and tea

75

74.7

17.5‑100

75

74.7

17.5‑100

17.5‑150

Cereals and preparations

138

32.8

0‑90

137

30.4

0‑90

35‑150

Oils seeds, fats, oil, and their products

204

42.7

0‑100

196

18.5

0‑100

15‑300

Sugars and confectionary

38

33.4

10‑60

38

33.4

10‑60

45‑150

Beverages, spirits, and tobacco

122

73.1

10‑150

123

78.7

7.5‑150

35‑150

Cotton

11

13.2

0‑30

11

5.5

0‑30

100‑150

Other agricultural products, n.e.s.

388

24.9

0‑70

358

25.1

0‑70

10‑150

Non‑agricultural products (incl. petroleum)

10,203

12.0

0‑70

9,897

8.9

0‑70

0‑150

Non‑agricultural products (excl. petroleum)

10,185

12.0

0‑70

9,879

8.9

0‑70

0‑150

Fish and fishery products

164

29.5

5‑30

176

29.5

5‑30

35‑150

Minerals and metals

1,955

9.1

0‑10

1,912

7.1

0‑10

0‑40

Chemicals and photographic supplies

2,511

12.1

0‑10

2,471

8.1

0‑10

0‑150

Wood, pulp, paper, and furniture

530

11.5

0‑10

495

9.2

0‑10

25‑40

Textiles

1,579

12.2

5‑10

1,555

9.6

5‑10

10‑40

Clothing

419

12.5

10‑10

397

10.0

10‑10

35‑40

Leather, rubber, footwear, travel goods

338

12.5

0‑70

322

10.2

0‑70a

3‑40

Non‑electric machinery

1,099

11.3

0‑10

1,094

7.1

0‑10

0‑40

Electric machinery

560

9.8

0‑10

537

6.7

0‑10

0‑10

Transport equipment

246

32.8

0‑60

244

21.5

0‑60

3‑40

Non‑agricultural products, n.e.s.

784

10.8

0‑10

676

8.6

0‑10

0‑40

Petroleum

18

9.7

0‑10

18

8.2

0‑10

n.a.

By sectorb






















Agriculture, forestry and fisheries

659

29.5

0‑100

621

28.8

0‑100

10‑150

Mining

229

5.7

2‑12.5

232

5.1

0‑10

5‑40

Manufacturing

10,806

14.4

0‑150

10,474

11.1

0‑150

0‑300

Manufacturing excl. food processing

9,934

12.0

0‑100

9,605

8.8

0‑60

0‑150

By stage of processing






















First stage of processing

1,300

23.6

0‑100

1,261

22.5

0‑100

5‑150

Semi‑processed products

4,465

11.7

0‑100

4,339

8.6

0‑60

0‑150

Fully processed products

5,930

15.8

0‑150

5,728

12.2

0‑150

0‑300

n.a.  Not applicable.

a Tariff lines with applied rates at 70% are unbound.

b ISIC Rev.2 classification. Electricity, gas, and water is excluded (1 tariff line).

Note: Calculations exclude specific rates and include the ad valorem part of alternate rates.



Source: WTO Secretariat calculations, based on data provided by the Indian authorities.
        1. Bound tariff


            1. The implementation of India's Uruguay Round tariff commitments was completed in 2005. Some 75% of India's tariff is bound, 100% for agricultural (WTO definition), and 71.6% for non‑agricultural products. Bound rates are mainly ad‑valorem (90.2%); non‑ad valorem bound rates apply mainly to textile and clothing. India did not bind any tariff lines in HS sections 12 (footwear and headgear), 19 (arms and ammunitions), and 21 (works of art); partial bindings are mainly in HS section 11 (textiles and clothing) (Chart III.2). Bindings range from zero to 40% for non‑agricultural products, with some exceptions such as fish products (150%); and range from 10% to 300%, for agricultural products, with most bound at 100% and 150%. Some edible oils are bound at 300%. The average bound tariff is 118.3% for agricultural products (WTO definition) and 32% for non‑agricultural products. Bound rates exceed applied rates; the average bound tariff is 46.4%, compared with an average MFN tariff of 12%.



            1. The gap between applied and bound tariff rates provides the authorities with scope to raise applied tariffs. These gaps allow the Government to modify tariff rates in response to domestic and international market conditions. If domestic agricultural prices rise, tariff rates are lowered to create downward pressure on domestic prices and minimize the impact on consumers; when prices fall, the rates are often increased to protect farmers by raising the overall cost of imports.

            2. Under Article XXVIII:5 of the GATT 1994, India reserved the right to modify its Schedule XII during the three‑year period commencing 1 January 2009.47
        1. Tariff‑rate quotas


            1. Tariff‑rate quotas are maintained on five lines at the HS six‑digit level (19 tariff lines at the HS eight‑digit level according to the authorities): milk and milk powder; maize (corn); rape, colza, and mustard oil; and crude sunflower seed and safflower oil.48 More recently (22 December 2010), due to a shortage of natural rubber, natural rubber (five tariff lines at the HS eight‑digit level) was put under a tariff quota regime for the remainder of the financial year 2010/11.49 A tariff quota was also put in place for butter and other animal fats.

            2. Tariff quotas are allocated by the Directorate General of Foreign Trade (DGFT), upon request by designated agencies: the National Agricultural Cooperative Marketing Federation of India Ltd.; the State Trading Corporation of India Ltd.; PEC Ltd.; and the National Dairy Development Board. The authorities noted that the fill ratio of these quotas is low, apparently because of lack of demand (Table III.6).

Table III.6

Products subject to tariff‑rate quotas, 2006‑11

(Tonnes)


Description

HS No.

In/out of quota rate (%)a

In/out of quota rate (%)b

Tariff‑rate quota (in‑quota total imports)

2006/07

2007/08

2008/09

2009/10

2010/11

Skimmed milk powder/whole milk powder

0402.10
0402.21

15c/60

0c, d/60

10,000
(0.0)

10,000
(0.0)

10,000
(0.0)

10,000
(3,000)

30,000
(..)

Maize (corn), other than seed quality

1005.90

15/60

0/50

500,000
(1,436)

500,000
(1,021)

500,000
(6,087)

500,000
(16,972)

500.000
(..)

Crude sunflower seed oil and safflower seed oil

1512.11

50/300

0

150,000
(95,883)

n.a.e

n.a.e

n.a.e

n.a.e

Rape, colza or mustard oil

1514.19
1514.99

45/75

7.5f

150,000
(0.0)

150,000
(0.0)

150,000
(0.0)

150,000
(0.0)

150,000
(..)

Butter and other fatsd

0405.10
0405.90.10
0405.90.20

n.a.

0/30

n.a.

n.a.

n.a.

n.a.

15,000
(..)

Butter and other fatsd

0405.20
0405.90.90

n.a.

0/40

n.a.

n.a.

n.a.

n.a.

..

.. Not available.

n.a. Not applicable.

a Based on WTO document W/LET/440, 4 April 2003.

b Based on the Indian tariff 2010/11.

c Applicable to cumulative imports of goods under tariff lines 0402.10 and 0402.21.

d Customs Notification No. 33/2010, 12 March 2010.

e Given that the applied tariff rate is 0%, the tariff quota has not applied since 2007.

f The 2010/11 tariff does not show an out‑of‑quota rate for rape, colza or mustard oil but just an applied rate of 7.5%, depending upon the product (information provided by the authorities).



Source: WTO documents W/LET/440, 4 April 2003; G/MA/TAR/RS/66, 1 May 2000; and G/AG/N/IND/5, 7 March 2011; Central Board of Excise and Customs online information, "Customs: Notifications". Viewed at: http://cbec.gov.in/cae1‑english.htm; and information provided by the Indian authorities (Indian tariff 2010/11).

            1. Under the free‑trade agreement with Sri Lanka, India maintains tariff‑rate quotas on clothing and tea imports (Chapter II). No data were available on the extent to which these preferential tariff‑rate quotas have been filled in recent years.
        1. Tariff concessions


            1. Under Section 25(1) of the Customs Act 1962, the Central Government is empowered to exempt any goods from customs duties on grounds of public interest. Tariff concessions are announced in the annual Budget and throughout the year through notifications by the Ministry of Finance.50 These concessions are both product‑specific and based on end‑use. During the review period, revenue forgone as a result of customs duty concessions increased from 29% to 39% of total revenue, amounting to some US$168 billion during 2006‑07/2009‑10.51

            2. Goods imported under processing‑for‑export regimes (e.g. special economic zones (SEZs) and export‑oriented units (EOUs)) are eligible for tariff concessions (section (3)(vii)(a)). Other programmes to promote exports and investment also provide for tariff concessions (section (3)(vii)(c)).
        2. Preferential tariffs


            1. Preferential rates are granted for certain articles under GSTP, regional (SAFTA, APTA, MERCOSUR, and ASEAN), and bilateral agreements (Singapore, Korea, Rep. of, Chile, and Sri Lanka). Under the GSTP, India has granted tariff concessions to 12 countries on a limited number of products.52 Only preferences under the SAFTA II (at 2.3%) and under the Sri Lanka FTA (at 2.3%) are significantly lower than the simple average applied MFN of 12% (Table III.7). In other instances, preferences are not substantial (Korea, Rep. of) or the number of tariff lines subject to preferences is minimal (e.g. MERCOSUR and Chile).

Table III.7

Summary analysis of the preferential tariff, 2010/11




Preferential linesa
(% of all tariff lines)

Total

WTO agriculture

WTO non‑agriculture

Textiles

Clothing

Avg. (%)

Duty‑free rates (%)

Avg. (%)

Duty‑free rates (%)

Avg. (%)

Duty‑free rates (%)

Avg. (%)

Duty‑free rates (%)

Avg. (%)

Duty‑free rates (%)

MFN




12.0

3.2

33.2

5.6

8.9

2.8

9.6

0.0

10.0

0.0

Regional agreements


































SAFTA Ib

69.3

8.9

3.2

22.5

5.6

6.9

2.8

7.4

0.0

10.0

0.0

SAFTA IIc

87.6

2.3

89.2

15

66.7

0.5

92.4

0.04

98.7

6.5

34.8

ASEANd

79.1

8.8

3.5

28.8

5.6

5.9

3.2

6.4

0.0

6.7

0.0

APTAe

10.3f

11.5

4.3

33.1

5.6

8.4

4.1

9.6

0.0

10.0

0.0

MERCOSURg

3.4

11.9

3.2

33.2

5.6

8.9

2.7

9.5

0.0

10.0

0.0

Bilateral agreement (FTA)


































Sri Lankah

91.6

2.3

79.1

6.4

91.9

1.7

77.3

7.1

4.4

5.0

0.0

Korea, Rep. ofi

50.8

11.0

4.8

30.5

5.6

8.2

4.7

9.0

0.5

9.4

0.0

Singaporej

43.0

8.8

22.5

31.0

12.4

5.7

23.9

7.9

13.7

8.7

0.0

Table III.7 (cont'd)

Thailandk

5.6

11.8

5.4

33.1

6.1

8.7

5.3

9.6

0.0

10.0

0.0

Chilel

1.3

11.9

3.2

33.1

5.6

8.9

2.8

9.6

0.0

10.0

0.0





































LDCsm

90.4

6.6

3.2

25.0

5.6

4.0

2.8

4.0

0.0

6.1

0.0

a The 2010/11 MFN tariff consists of 11,328 tariff lines, of which 359 are duty free. The number of preferential lines includes only lines on which the rates, at fully applied eight‑digit level, are lower than the corresponding MFN applied rate.

b Preferential rates for Pakistan and Sri Lanka (Customs Notifications Nos. 133/2010 and 134/2010).

c Preferential rates apply to SAFTA LDC members: Bangladesh, Bhutan, the Maldives, and Nepal (Customs Notifications Nos. 126/2007, 36/2010, and 133/2010). For Bangladesh, duty‑free in‑quota rates apply to textiles (Customs Notification No. 51/2008).

d ASEAN: preferential rates applicable to Malaysia, Singapore, and Thailand (Customs Notification No. 135/2010).

e Asia‑Pacific Trade Agreement: preferential rates apply to Bangladesh, China, Korea (Rep. of), and Sri Lanka (Customs Notifications Nos. 89/2006 and 134/2006).

f For Bangladesh, the percentage of preferential lines equals 10.9%.

g MERCOSUR: preferential rates apply to Argentina, Brazil, Paraguay, and Uruguay (Customs notification No. 57/2009).

h Customs notifications Nos. 43/2003, 57/2005, 128/2006, 3/2007, 52/2008, 126/2002, 75/2007, and 2/2007. Duty‑free in‑quota rates apply to clothing products (Customs Notification No. 52/2008). In‑quota rates are applied to tea (Customs Notification No. 60/2000) and to desiccated coconut (Customs Notification No. 2/2007).

i Customs Notifications Nos. 151/2009 and 137/2010.

j Customs Notifications Nos. 73/2005, 74/2005, 75/2055, 69/2009, and 131/2010.

k Customs Notifications Nos. 85/2004 and 86/2006.

l Customs Notification No. 101/2007.



m Customs Notifications Nos. 96/2008 and 95/2010. Preferential rates apply to 21 African and 5 Asian countries.

Source: WTO Secretariat, based on data provided by the Indian authorities and Central Board of Excise and Customs online information, "Customs: Notifications". Viewed at: http://www.cbec.gov.in/customs/cs‑act/notifications/
cs‑notfns‑idx.htm.



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