Custom duty changes to provide level playing field to domestic industries

05 Jul 2019


Budget proposals on customs duty, in general, are aimed at promoting `Make in India’, reducing import dependence, protection to MSME sector, promoting clean energy, curbing non-essential imports and correcting inversions.

Customs duty on gold and other precious metals increased from 10 per cent to 12.5 per cent.
A special additional excise duty and road and infrastructure cess of one rupee each on petrol and diesel has also been proposed.
To provide level playing field to domestic industry, the budget has proposed to enhance custom duties on certain products while reducing duties on certain other items.
Items on which customs duty will go up include: 
  • Cashew kernels
  • Fatty acids. 
  • Acid oils from refining used in manufacture of oleochemicals and soaps
  • Poly Vinyl Chloride
  • Floor cover of plastics, Wall or ceiling coverings of plastics
  • Articles of plastic
  • Butyl rubber
  • Chlorobutyl rubber or bromobutyl rubber
  • Paper for newsprint and magazines
  • Printed books (including covers for printed books) and printed manuals
  • Water blocking tapes for manufacture of optical fiber cables
  • Ceramic roofing tiles and ceramic flags and pavings, hearth or wall tiles etc.
  • Stainless steel products
  • Wires of other alloy steel (other than INVAR)
  • Base metal fittings, mountings and similar articles suitable for furniture, doors, staircases, windows, blinds, hinge for auto mobiles
  • Indoor and outdoor unit of split–system air conditioner
  • Stone crushing (cone type) plants for the construction of roads
  • Charger/power adapter of CCTV camera/IP camera and DVR/NVR
  • Loudspeaker
  • Digital Video Recorder (DVR) and Network Video Recorder (NVR)
  • CCTV camera and IP camera
  • Optical fibres, optical fibre bundles and cables
  • Friction material and articles thereof (for example, sheets, rolls, strips, segments, discs, washers, pads), not mounted, for brakes, for clutches or the like, with a basis of asbestos, of other mineral substances or of cellulose, whether or not combined with textile or other materials.
  • Glass mirrors, whether or not framed, including rear-view mirrors
  • Locks of a kind used in motor vehicles
  • Catalytic Converter
  • Oil or petrol filters for internal combustion engines
  • Intake air filters for internal combustion engines
  • Lighting or visual signalling equipment of a kind used in bicycles or motor vehicles
  • Horns for vehicles
  • Other visual or sound signalling equipment for bicycle and motor vehicle
  • Parts of visual or sound signaling equipment, windscreen wipers, defrosters and demisters of a kind used in cycles or motor vehicles
  • Windscreen wipers, defrosters and demisters, sealed beam lamp units, other lamps for automobiles.
  • Completely built unit (CBU) of vehicles falling under heading 8702, 8704
  • Chassis fitted with engines, for the motor vehicles of headings 8701 to 8705
  • Bodies (including cabs), for the motor vehicles of headings 8701 to 8705
Items on which customs duty has been proposed to be reduced include: 
  • Naphtha
  • Methyloxirane (Propylene Oxide)
  • Ethylene dichloride (EDC)
  • Raw materials used in manufacture of preform of silica, including silicon tetra chloride, germanium tetra chloride, refrigerated helium liquid, silica rods, silica tubes
  • Wool fibre, Wool Tops
  • Inputs for the manufacture of CRGO steel: 
  • MgO coated cold rolled steel coils
  • Hot rolled coils
  • Cold-rolled MgO coated and annealed steel
  • Hot rolled annealed and pickled coils
  • Cold rolled full hard
  • Amorphous alloy ribbon
  • Cobalt mattes and other intermediate products of cobalt metallurgy
  • Capital goods used for manufacturing of following electronic items, namely, populated PCBA, camera module of cellular mobile phones, charger/adapter of cellular mobile phone, lithium ion cell, display module 
  • Set Top Box
  • Compact Camera Module
While Customs duty is imposed on certain electronic goods, now being manufactured in India to promote domestic industry, custom duty on the other hand is removed on certain other capital goods required for manufacture of specified electronic goods.
To encourage export of sports goods, certain items to a certain limit, like foam and pinewood are included in the list of items allowed for duty free import. Similarly, “Export duty is being rationalised on raw and semi-finished leather to provide relief to this sector’ the minister said.
“Defence has an immediate requirement of modernisation and upgradation. This is national priority. For this purpose, import of defence equipment that are not being manufactured in India are being exempted from the basic customs duty,” the minister said. 
GST and way forward
While stating that with introduction of GST, 17 taxes and 13 cesses have become one tax, she said reduction of GST rates have led to relief of about Rs92,000 crore per annum.   
The introduction of GST also led to transformation of operations wherein a transport truck has started doing two trips in the same time that it was doing one with simplification of operations. 
The finance minister stated that free accounting software for preparation of tax returns is being made available to small businesses and a fully automated GST refund module is expected to be implemented soon. She said taxpayer with an annual turnover of less than Rs5 crore is to file quarterly returns. Electronic invoice details are to be captured in a central system to enable pre-filled taxpayer returns and a simultaneous e-way bill to be generated. These are expected to begin from January 2020 reducing the compliance burden significantly. 
Legacy dispute resolution
Sitaraman proposed a “Legacy Dispute Resolution Scheme that will allow quick closure of litigations.”  She said “more than Rs3.75 lakh crore is blocked in litigations in service tax and excise duties from pre-GST regime.” She urged the trade and business to avail this opportunity of dispute resolution scheme to be called as Sabka Vishwas Legacy Dispute Resolution Scheme, 2019. This scheme, to be notified in due course, makes persons discharged under it not liable for prosecution.
The minister also proposed certain amendments to the Customs Act to prevent certain bogus entities from resorting to unfair practices to benefit from export incentives. Provisions to make violations involving duty free scripts and drawback facility of over Rs50 lakh cognisable and non-bailable offence are being made in the Customs Act. The amendment to the Customs Act, 1962 proposes to introduce provision for verification of Aadhar or any other identity to prevent smuggling. It also empowers customs authorities to arrest a person who has committed an offence outside India.
Sitaraman said a provision for allowing all non-banking finance companies (NBFCs) to avail the facility of offering interest to be taxed in the year in which it is actually received like in the case of scheduled banks to be made.   
Several direct tax incentives, including 100 per cent profit-linked deduction under Section 80-LA in any ten-year block within a fifteen-year period has been announced for the International Financial Services Centre (IFSC) in GIFT City.  “Exemption from dividend distribution tax from current and accumulated income to companies and mutual funds, exemptions on capital gain to Category-III Alternative Investment Funds (AIF) and interest payment on loan taken from non-residents”, have also been announced for IFSC. 
The finance minister said as National Calamity and Contingent duty is contested with regard to tobacco products and crude as there is no basic excise duty on these items, a nominal basic excise duty is now proposed to be imposed. Rates for such basic excise duties have been announced as set forth in the Fourth Schedule to the Central Excise Act, 1944, she said.

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