There is import duty levied for the motor in that toy car you bought for your kid, not as it was for a toy but as it was for motors! And the same applies even to a screw on it!
This is due to the Inverted Duty Structure, which according to Associated Chambers of Commerce and Industry of India (ASSOCHAM), has resulted in India's toy industry—dominated by micro, small and medium enterprises—struggling for survival. The advent and popularity of video games have also hit the traditional toys.
The toy industry in India is fragmented and over 70 per cent of it is unorganised, with about 2,000 units in the organised sector. The industry employs nearly 25 lakh people both in the organised and unorganised sector.
Though it caters to nearly four crore children across the country, domestically manufactured toys account only for 15 per cent of the market. The rest of the toys come from countries like China, the US, the UK, Korea and Malaysia among others.
According to ASSOCHAM, almost all parts used in toys are slapped with import duties, classifying them under the category of motor parts and not as toy parts. The duty on such parts can be 0,5,7,5 and 10 per cent plus the Countervailing Duty (CVD). Besides, the customs duties on toys may vary from 0 to 10 per cent with exceptions.
“There is an anomaly —importing of toy attracts 5 per cent duty whereas importing raw materials for domestic manufacturing attracts 20 to 30 per cent duty, making domestic production costlier,” said Sunil Kanoria, president of ASSOCHAM. He pointed out that for a zero duty on parts, the effective rate of duty on such a part is more than twice that of a finished toy.
Manufacturers have to import raw material in order to maintain the quality of finished products. The duties slapped by the government makes the manufacture of toys, using imported materials, noncompetitive. Instead of earning foreign exchange by exporting such toys, India is losing by importing toys, the ASSOCHAM study quoted small toy manufacturers as saying.
ASSOCHAM suggested the government to create ways and means by which talented toy makers, innovators and committed designers team up to salvage the sector and maintain India's design heritage. The industry body further urged the government to undertake cluster-based development programmes that include training and setting up training centres for those involved in the production of toys so that they improve their productivity and efficiency.
Marketing tie-ups for the toy industry at the state as well as the national levels , easy credit facilities, special assistance and financial support to enhance technological, research and development facilities to make them world class, besides assistance in bar coding and ISO certification are the other steps being suggested by the industry and trade body.