Tyre manufacturers and MSMEs in rubber industry have expressed disappointment over the Union Budget not addressing their demand to remove inverted duty structure on tyre and rubber. While hailing the increased allocation for infrastructure and road sector in the Union Budget, the tyre industry expressed concerns over exclusion of rubber and tyres in the list of items on which duty inversion has been addressed.
"The tyre industry was pinning high hopes on long pending correction of inverted duty on natural rubber. Regrettably, tyres or rubber have not been included in the list of items where duty inversion has been addressed," Automotive Tyre Manufacturers Association (ATMA) Chairman K M Mammen said in a statement.
He further said: "Correcting inverted duty on rubber is important to increase competitiveness of the tyre sector. Currently, the import duty on natural rubber is 25 per cent while the duty on import of tyres is just one third at around 7 per cent." Expressing similar views, All India Rubber Industries Association (AIRIA) President Kamal K Chowdhury said: "In view of government's emphasis on domestic manufacturing, we were hopeful that inverted duty will be corrected. However our hopes have been dashed again." Rubber MSMEs have asked for an increase in import duty on finished rubber goods to 30 per cent with a view to correct inverted duty.
AIRIA also said finished products "can be easily imported as the import duty on rubber products is between 0 to 10 per cent, while the duty on raw materials for rubber industry is between 5 per cent to 70 per cent". Not only import duty on raw materials is higher, the duty is levied even on those raw materials which are not produced in the country thereby increasing the cost of production in India, it added. According to AIRIA, overall import of rubber products in India has gone up 120 per cent from Rs 4,180 crore to Rs 9,202 crore in four years between 2011-12 to 2015-16. Mammen, however, said the big push to the infrastructure spending is a big positive for the automotive tyre sector as the growth in tyre is closely linked to the growth in economy.
"Infrastructure investment means more movement of goods and that translates in increased demand for tyres especially commercial vehicle tyres. Increased allocation for the National Highways to Rs 64,000 crore will also aid the tyre sector," he added. Chowdhury also welcomed Finance Minister Arun Jaitley's move to reduce corporate tax for MSMEs saying it would help the industry that has been going through a challenging period. "Reduction on income tax for MSMEs from 30 per cent to 25 per cent is a highly positive move.
After demonetisation, MSMEs which are largely cash dependent have been reeling under stress. Relief in the corporate tax has not come a day too soon," Chowdhury said. Rubber industry is dominated by MSMEs. Out of the 6,000 rubber units in the country, approx 5,500 are in the MSME space, AIRIA said.