Withdrawal of Customs Duty Hike on Imported Laboratory Chemicals

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Context

• The Finance Ministry has withdrawn a customs duty hike on imported laboratory chemicals, which was proposed after the Budget, following protests from scientists.

What are 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.
• They are also essential in the medical diagnostics industry.
• Alongside these chemicals, laboratory instruments like funnels, beakers, test tubes, and burners are commonly used.
• Due to their varied properties and potential hazards, these chemicals are regulated, and their imports are carefully monitored.
• 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.

What was the Issue?

• On July 23, 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.
• Additionally, there was a 25% hike on imported plastic components for laboratory use.
• Senior scientists wrote to the Ministry of Science and Technology seeking clarity, but the issue had to be addressed by the Ministry of Finance and the Commerce Ministry.

Why are 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. Thus, the importance of these imported chemicals for scientific research cannot be emphasized enough.

How was the 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.

PRACTICE QUESTION Q. How many of the following statements are correct regarding laboratory chemicals? All imports must be accompanied by a letter stating that the goods will only be used for research purposes in laboratories. The Basic Customs Duty (BCD) on laboratory chemicals has been reduced from 10% to 5%.  Options: a) One only b) Two only c) Both d) None  Answer: a) One only  Explanation  Pointer 2. is incorrect.

 SOURCE: THE HINDU