SME Times News Bureau | 02 Jul, 2009
India's Economic Survey for 2008-09 called for revising specific custom duties on the textiles sector to ensure that they match ad valorem tax rates.

"Specific duties are intrinsically more opaque than ad valorem tariffs, tending to conceal high ad valorem equivalents. Reduce these gradually so that they do not exceed 30 percent ad valorem," the survey said.

Ad-valorem tax rates are a proportion of the value of product and hence rises automatically when the value of a product goes up.

The survey suggested that the ad valorem rate conversion be done once the Doha Round trade talks of the World Trade Organisation (WTO) conclude.

"Though specific duties in India form a very small percentage of total imports, there is a need to examine this issue along with specific duties in other countries while rationalising the tax structure," the survey said.

If the specific duties in developed countries are imposed on agriculture, textiles and leather sectors, in India such duties are mainly on the textiles sector.

This is levied along with ad valorem customs duty of 10 percent.

The textile sector in India accounts for about 15 percent of exports and is the second-biggest employer after agriculture.