Duty evasion deflating Punjab’s bicycle industry

Vijay C Roy

Tribune News Service

Chandigarh, December 6

Bicycle importers have found a unique way of circumventing high customs duty by bringing in parts of bicycles as spares from countries like China and assemble them locally and evade taxes to the tune of about 10%.

Bicycles in fully build-up condition attract basic customs duty of 30% while duties on parts are around 20%. India imports bicycles from China, Cambodia, USA, Germany, Sri Lanka and Bangladesh.

“Some of the importers import complete bicycles in a knocked-down condition and show it as spare parts. Evasion of duty makes Indian products uncompetitive and also hurts retailers who are tax- compliant,” said a Hoshiarpur-based importer, Abhishek Kashyap.

Some manufacturers said, importers are also importing bicycles of other origin countries through Sri Lanka and Bangladesh route under South Asia Free Trade Agreement (SAFTA) and evading tax completely.

“On an average, India imports 50,000-70,000 bicycles per month from Sri Lanka. China-made products are often imported from Sri Lanka at zero duty by showing that the product is manufactured in SAFTA countries. This is hurting Ludhiana-based manufacturers,” Vishivkarma Industries Managing Director Charanjit Singh said.

The total turnover of the bicycle industry in Punjab is around Rs 5,000 crore. Important players in the market are Hero Cycles, Avon Cycles, TI and Neelam Cycles. Punjab accounts for over 4,000 manufacturing plants that employ over 2.5 lakh people.

“The influx of assembled bicycles from China and other countries by circumventing the duty is ruining the domestic industry,” said Badish Jindal, an industrialist from Ludhiana.

Currently, India produces 18 million bicycles per annum. Punjab accounts for 92% of the country’s total production of bicycle parts and 75% of bicycle production.

Normally, the duty evasion is rampant in high premium bicycles, which are priced between Rs 15,000 and Rs 7 lakh. Circumventing the tax has become a common practice by a large number of importers that helps them cut the cost of the products they import.

Industry representatives also pointed out that some of unscrupulous importers even got indulged in under invoicing in order to neutralise the impact of customs duty.

Last year, the tax department raided Ludhiana-based companies after getting a tip-off that these companies were evading huge amounts of customs duty on the import of cycle parts. According to them, the firms were under-billing their import purchases to fleece the government and were paying less customs duty than the actual amount due to them.

Indian manufacturers are heavily dependent on China for high-end bicycles and parts such as basket, spoke, air-pumps, hub-cup, hub-kone, carrier, bicycle chain, handle bolt and brakes among other items.

Rs 15,000 - Rs 7 lakh

Cost of imported bicycles             

Import duty on bicycle 30%

Import duty on spare parts 20%