Basic customs duty reduced from 21% to 13%
01 February 2023
Union Budget 2023-24, presented in Parliament by finance minister Nirmala Sitharaman has proposed to reduce basic customs duty on all imported goods, except textiles and agricultural commodities, from 21 per cent at present to 13 per cent with the aim of promoting exports, boosting domestic manufacturing, enhancing domestic value addition and encouraging green energy and mobility.
“A simplified tax structure with fewer tax rates helps in reducing compliance burden and improving tax administration,” the finance minister stated.
The budget proposes to reduce the number of Basic Custom Duty (BCD) rates on goods, other than textiles and agriculture, from 21 to 13. This has necessitated minor changes in the basic custom duties, cesses and surcharges on some items, including toys, bicycles, automobiles and naphtha.
In order to avoid cascading of taxes on blended compressed natural gas, the finance minister proposed to exempt excise duty on GST-paid compressed bio gas contained in it. To further provide impetus to green mobility, she announced to extend the customs duty exemption to import of capital goods and machinery required for manufacture of lithium-ion cells for batteries used in electric vehicles.
Lithum-ion cells, camera lens
Sitharaman proposed to provide relief in customs duty on import of certain parts and inputs like camera lens and continue the concessional duty on lithium-ion cells for batteries for another year in order to further deepen domestic value addition in manufacture of mobile phones. The minister stated that mobile phone production in India had increased from 58 million units valued at about Rs18,900 crore in 2014-15 to 310 million units valued at over Rs2,75,000 crore in the last financial year as a result of various initiatives of the government, including the phased manufacturing programme.
She also proposed to reduce the BCD on parts of open cells of TV panels to 2.5% to promote value addition in manufacture of televisions.
Electric kichen chimneys
The finance minister proposed an increase in the BCD on electric kitchen chimney from 7.5 per cent to 15 per cent and to reduce BCD on heat coils from 20 per cent to 15 per cent. This change would rectify inversion of duty structure and encourage manufacturing of electric kitchen chimneys.
Chemicals and petrochemicals
To support the ethanol blending programme and facilitate India’s endeavour for energy transition, the minister proposed to exempt BCD on denatured ethyl alcohol. She also announced to reduce BCD on acid grade fluorspar from 5 per cent to 2.5 per cent to make the domestic fluorochemicals industry competitive. BCD on crude glycerin for use in manufacture of epicholorhydrin was also proposed to be reduced from 7.5 per cent to 2.5 per cent.
The Finance Minister proposed to reduce the BCD on key inputs for domestic manufacture of shrimp feed to enhance the export competitiveness of marine products. She stated that the marine products recorded the highest export growth in the last financial year, benefitting farmers in the coastal states of the country.
Lab grown diamonds
The Budget proposed to nullify the BCD on seeds used in the manufacturing of Lab Grown Diamonds from the current 5 per cent. The finance minister stated that India contributed about three-fourths of the global turnover by value in cutting and polishing of natural diamonds. With the depletion in deposits of natural diamonds, the industry is moving towards Lab Grown Diamonds.
The minister proposed to increase the duties on articles made from dore and bars of gold and platinum to enhance the duty differential. The customs duties on dore and bars of gold and platinum were increased earlier this fiscal. She also proposed to increase the import duty on silver dore, bars and articles to align them with that on gold and platinum.
To facilitate the availability of raw materials for the steel sector, the finance minister proposed to continue the exemption from BCD on raw materials for manufacture of CRGO Steel, ferrous scrap and nickel cathode. She also proposed to continue the concessional BCD of 2.5 per cent on copper scrap to ensure the availability of raw materials for secondary copper producers who are mainly in the MSME sector.
Sitharaman proposed to increase BCD rate on compounded rubber from 10 per cent to ‘25 per cent or Rs30/kg, ‘whichever is lower’, at par with that on natural rubber other than latex, to curb circumvention of duty.
The finance minister proposed to revise upwards the National Calamity Contingent Duty (NCCD) on specified cigarettes by about 16 per cent. It was last revised 3 years ago.
Changes in GST laws
The Budget proposed amendments to Sections 132 and 138 of the CGST Act in order to:
Raise the minimum threshold of tax amount for launching prosecution under GST from Rs1 crore to Rs2 crore, (except for the offence of issuance of invoices without supply of goods or services or both);
Reduce the compounding amount from the present range of 50 per cent to 150 per cent of tax amount to the range of 25 per cent to 100 per cent; and
Decriminalise certain offences specified under clause (g), (j) and (k) of sub-section (1) of section 132 of CGST Act, 2017, viz.- obstruction or preventing any officer in discharge of his duties, deliberate tempering of material evidence, and failure to supply the information.
Sitharaman also proposed to amend Sections 37, 39, 44 and 52 of CGST Act, 2017 to restrict filing of returns/ statements to a maximum period of three years from the due date of filing of the relevant return / statement.