Customs duty hike imposed for lab chemicals

Customs duty hike imposed for lab chemicals

Subject: Eco

Sec: Fiscal Policy

Context:

The Finance Ministry has withdrawn a customs duty hike on imported laboratory chemicals, which was proposed post the Budget, after scientists raised a furore.

Laboratory Chemicals:

• Laboratory chemicals include imported chemicals, reagents, and enzymes that are crucial for scientific research across various fields.
• These chemicals, such as oxidizers, corrosive acids, and compressed gases help researchers conduct experiments and develop new products.
• Essential in the medical diagnostics industry.
• Alongside these chemicals, laboratory instruments like funnels, beakers, test tubes, and burners are commonly used.
• Most laboratory chemicals are specialized and can be quite expensive.
• The Customs Department defines laboratory chemicals as any organic or inorganic chemicals, whether or not chemically defined, imported in quantities not exceeding 500 grams or 500 milliliters, intended solely for laboratory use.

Issue:

• The Budget documents revealed an increase in the Basic Customs Duty (BCD) on these chemicals from 10% to 150%.
• This change was noticed when scientists from public research laboratories in India reported on social media about receiving emails from suppliers indicating a sharp rise in prices. For example, a batch of chemicals that previously cost ₹1,00,000 would now cost ₹2,50,000.
• 25% hike on imported plastic components for laboratory use.

Imported Chemicals Necessary:

• Despite being a major manufacturer and exporter of pharmaceuticals and chemicals, India lacks sufficient local demand among research institutions to justify the investment needed to produce niche chemicals.
• Experimental research often requires the exact materials used in experiments conducted abroad to replicate results accurately.

Issue Resolved:

• The customs department raised the duty to stop imports of ethanol being mislabeled as ‘laboratory chemicals’ to avoid the 150% customs duty.
• Ethanol, used in alcohol production, and denatured ethanol, mixed with additives and used in laboratories, are the two main types. Denatured ethanol, produced locally, doesn’t usually need to be imported.
• The Finance Ministry’s revised notification restored the original duty rate but added new requirements for imported laboratory chemicals.
• All imports must now be accompanied by a letter stating that the goods will only be used for research purposes in laboratories and not for commercial gains.
• This resolution ensures that genuine research activities are not hindered while addressing the issue of misclassified ethanol imports.