India hikes customs duty to 200% on all goods imported from Pakistan

New Delhi: India Saturday hiked the customs duty to 200 per cent on all goods imported from Pakistan, following revocation of the 'most-favoured nation' (MFN) status in the aftermath of the Pulwama terror attack.

"India has withdrawn MFN status to Pakistan after the Pulwama incident. Upon withdrawal, basic customs duty on all goods exported from Pakistan to India has been raised to 200% with immediate effect," Finance Minister Arun Jaitely said in a tweet.

Increasing duties would significantly hit Pakistan's exports to India, which stood at USD 488.5 million (around Rs 3,482.3 crore) in 2017-18.

The main items which Pakistan exports to India include fresh fruits, cement, petroleum products, bulk minerals and ores and finished leather.

MFN status to Pakistan

India granted the MFN status to Pakistan way back in 1996, but the neighbouring country has not yet reciprocated. The countries enjoying the MFN status have broader access to a market for trade goods and get competitive cost for their export items owing to highly reduced tariffs and trade barriers.

The status also reduces the bureaucratic hurdles and varied kinds of other tariffs for import. These benefits help to increase demands for goods and naturally give a boost to the economy and export sector.

The MFN status was earlier accorded under WTO's General Agreement on Tariffs and Trade (GATT). Both India and Pakistan were signatories to this; and are now members of the World Trade Organisation (WTO), which replaced the GATT.

Under the MFN pact, a WTO member country is obliged to treat the other trading nation in a nondiscriminatory manner, especially with regard to customs duty and other levies.

So as WTO signatories, both the South Asian neighbours have to treat each other and the other WTO member countries as favoured trading partners, especially in terms of imposing customs duties on goods.