The Indian government could lose 15-20 per cent of its indirect tax revenue, depending on the coefficient that is decided for the industrial tariff reduction formula proposal of the World Trade Organistion.
Senior government officials said that the estimate was a ballpark figure and the government was in the process of working out the exact revenue loss.
They said that the WTO should factor in the concerns of developing and least developed countries since customs revenue was formed a significant chunk of government resources and a steep reduction in tariffs could create fiscal imbalances.
The WTO has put forth a co-efficient linked tariff formula, which factors in the current average bound rates and the average of base rates.
The co-efficient is to be decided but it is expected that the developing and developed countries would have to work on different coefficients. The coefficient-based formula is a variant of the Swiss formula but low the value of the co-efficient, greater would be the tariff reduction.
According to a study carried out by Unctad's Trade Analysis Branch, the WTO formula with a co-efficient of 1, would mean that India's bound weights of average tariff would come down to 13.3 per cent, as against 20 per cent if India's linear tariff reduction formula was adopted.
India's average bound duty rate is estimated at 34.3 per cent, while the average base rate is at 43.84 per cent.