Impact of Customs Duty Hike on Imported Laboratory Chemicals and Research in India

What’s in today’s article?

• Why in News?
• About laboratory chemicals
• Budget 2024-25 and custom duty on laboratory chemicals
• Resolution of the issue

Why in News?

The Finance Ministry has withdrawn a customs duty hike on imported laboratory chemicals, which was proposed post the Budget.

About laboratory chemicals

• About
  • Imported chemicals, reagents, and enzymes are essential for experimental research across various scientific domains and the medical diagnostics industry.
  • These include oxidisers, corrosive acids, and compressed gases, used in experiments and product development.
  • Laboratory instruments like funnels, beakers, test tubes, and burners are closely associated with these chemicals.
• Need for regulation
  • Due to their diverse properties and potential hazards, these chemicals are regulated and their imports are scrutinised. They are often niche and expensive products.
  • The Customs Department defines laboratory chemicals as organic or inorganic chemicals, imported in quantities not exceeding 500 grams or 500 millilitres, identifiable by their purity and markings, intended solely for laboratory use.
• Need for imported chemicals
  • India is a major manufacturer and exporter of pharmaceuticals and complex chemicals.
  • However, there is insufficient local demand from Indian research institutions to justify the substantial capital investments needed to produce niche chemicals.
  • According to scientists, replicating results from experiments conducted abroad, a crucial aspect of experimental research, often necessitates using the exact same materials.

Budget 2024-25 and custom duty on laboratory chemicals

• The Budget documents released on July 23 increased the Basic Customs Duty (BCD) on imported laboratory chemicals from 10% to 150%, leading to a significant price hike.
• For example, a batch of chemicals that previously cost ₹1,00,000 would now cost ₹2,50,000.
• Additionally, there was a 25% hike on imported plastic components for laboratory use. Researchers were shocked by the steep increase, with some considering it a misprint.

Resolution of the issue

• The customs department has raised import duties on ethanol that was previously being classified as ‘laboratory chemicals’ to avoid a 150% customs duty.
• There are two main types of ethanol: regular ethanol used for alcohol production and ‘denatured’ ethanol, which is mixed with additives and used in laboratories and commercial applications.
• While local manufacturers typically produce denatured alcohol, the new Finance Ministry regulations require imported laboratory chemicals to include a letter stating that they will only be used in a laboratory and not for commercial resale.
• This could cause some delays in the procurement of these chemicals, although the duty rate will return to its original level.

Q.1. What is Customs Duty?

Customs duty is a tax imposed by a government on goods imported into or exported from a country. It aims to protect domestic industries, regulate international trade, and generate revenue. The duty varies based on the type, value, and origin of the goods, influencing their final market price.

Q.2. What are corrosive acids?

Corrosive acids are chemical substances that can cause severe damage to living tissues and materials upon contact. Examples include hydrochloric acid, sulfuric acid, and nitric acid. They are commonly used in industrial processes, laboratory research, and chemical manufacturing, requiring careful handling and storage due to their hazardous nature.

Source: Why was a customs duty hike imposed for lab chemicals? | Explained | Business Line