New Delhi: The Union Ministry of Finance, in a notification issued Wednesday, reverted to a 10 percent customs duty on imported lab chemicals, except industrial-grade ethanol, with a condition — an undertaking from importers.
The notification comes only a week after Finance Minister Nirmala Sitharaman announced a steep hike in customs duty on imported lab chemicals, from 10 percent to 150 percent, in the 2024-25 Union Budget. Sitharaman’s announcement triggered a swift backlash from the science community concerned that research costs would increase.
With the ministry now introducing a new section, allowing the import of lab chemicals at 10% basic customs duty under Harmonised System Code 9802, researchers and academicians are somewhat relieved.
For the slashed rates to apply, the importer has to submit an undertaking to the deputy commissioner or assistant commissioner of Customs.
The undertaking should state, “The goods so imported shall be for use in laboratory or for use in research and development purposes, and shall not be sold or traded after importation and that in case of failure to comply with this condition, he shall be liable to pay, in respect of such quantity of the said goods as is proved to have not been so used for the specified purposes, an equal amount to the duty leviable on such quantity but for the exemption under this notification (sic).”
The new notification will come into force on 1 August. However, with researchers, policymakers, and suppliers of chemicals interpreting the condition for importers differently, the notification has left some seeking clarifications on its implementation.
Researchers are also concerned that the condition will further delay their already-long wait for the deliveries of imported chemicals, impacting their research work.
“The new notification will save cost but will delay the process of procuring these products as it adds a level of scrutiny. This would further slow down the research process,” Shambhavi Naik, the head of the research wing at The Takshashila Institution and chairperson of its advanced biology programme, said.
“We are concerned about the waiting period after this new legislation. It already takes more than one month, and even six months in some cases, to import these niche chemicals. I wonder how long we would have to wait if this extra step is a requirement,” a senior PhD scholar from a government research laboratory, who did not wish to be named, said.
“Though this decision is intended to prevent the misuse of industrial-grade alcohol, the notification is expected to cause administrative havoc due to its wording,” said Sunil Laxman, the principal investigator at the Institute for Stem Cell Science and Regenerative Medicine (inStem).
On the issues with the notification, Laxman said, “The niche, fine-grade chemicals that require import are often supplied to research labs by local suppliers or third-party vendors. These vendors purchase the chemicals from the Indian branches of the principal (chemicals-supplying) companies — the primary importers. It is unclear how these companies would directly supply their products (to the laboratories) without routing them through third-party vendors.”
This raises the question of whether the primary importers will in that case be violating the notification.
“The company is happy with this decision, but our lawyers are still in the process of interpreting the new decision, and we will be able to gain more clarity after two to three days. We are not yet clear how the third-party supply chain would get impacted,” said a Merck Life Sciences employee, who did not wish to be named.
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‘Duty and tariff decisions have complex consequences’
While the reversal of the customs hike has been appreciated by the research community, some top scientists pointed out that it might have given a much-needed boost to the local market of chemicals.
VijayRaghavan, the former principal scientific adviser to the government, said that India’s chemical and biologics industries are robust despite many products falling under intellectual property. The domestic market for these industries — both in nonprofit research and for-profit sectors — has been expanding but remains only a small part, which, VijayRaghavan said, is the consequence of cheaper imports dominating the market. Additionally, the industries have taken up but little space in the global market.
Import duties aim to stimulate the local industry, which, Raghavan said, can boost the growth of some domestically produced chemicals while others take more time to pick up.
“Duty and tariff decisions have complex consequences. Allowing cheap imports of building blocks (of chemicals) makes the (final) products less expensive. Inhibiting cheap imports stimulates local manufacturers, or inhibits them if local products (building blocks of chemicals) are not available in sufficient quality and quantity,” he said. “To grow, the Indian industry must also capture a significant global market share, only then can they keep costs down.”
“Not-for-profit research requires special consideration, with duty exemptions, to avoid slowing down research while stimulating the development and use of local, quality products. Decisions on duty exemptions should be at the institutional levels, and not centrally, to avoid delays. A thoughtful, holistic involvement of institutional leaders can stimulate local industry and not slow research,” VijayRaghavan further said.
However, not many researchers are convinced by this argument, contending that the chemicals available in the domestic market often do not match international standards, and their use could potentially impact the quality of research, making any publication in international journals difficult.
“If this is to help domestic manufacturing of lab chemicals, agencies must recognise that many international journals require standardised reagents’ use for publication. It is easier to publish when using well-established foreign brands; that impact can not be made by domestic manufacturing, very easily,” said the policy expert Shambhavi Naik.
Muskan Bhatia is an intern with ThePrint.
(Edited by Madhurita Goswami)
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