FM promises a simplified GST regime, improved GSTN network

05 Feb 2021


After record revenue collections from the Goods and Services Tax (GST) finance minister Nirmala Sitaraman has proposed to simplify the indirect tax regime and improve the capacity of the GSTN network.

She said several measures have been taken to further simplify the GST.  The capacity of GSTN system has been announced.  Deep analytics and artificial intelligence have been deployed to identity tax evaders and fake billers, launching special drives against them.  The finance minister assured the house that every possible measure shall be taken to smoothen the GST further and remove anomalies such as the inverted duty structure.
With respect to the custom duty policy, the finance minister said that it has the twin objectives of promoting domestic manufacturing and helping India get on to global value change and export better. She said the thrust now has to be on easy access to raw materials and exports of value added products. In this regard, she proposed to review 400 old exemptions in the custom duty structure this year.  She said extensive consultation will be conducted and from 1 October 2021 and a revised custom duty structure free of distortions will be put in place. She also proposed that any new custom duty exemption henceforth will have validity up to 31 March 2 years from the date of its issue. 
The finance minister announced withdrawal of a few exemptions on parts of chargers and sub-parts of mobile phones. Further, some parts of mobiles will move from “NIL” rate to a moderate 2.5 per cent. 
She also announced reducing custom duty uniformly to 7.5 per cent on semis, flat, and long products of non-alloy and stainless steel.  Steel scrap imports will be exempt from duty for a period up to 31 March 2022. 
Stressing  the need to rationalise duty on raw material inputs to man-made textile, the finance minister announced bringing nylon chain on par with polyester and other man-made fibers. Announcing uniform deduction of the BCD rates on caprolactam, nylon chips and nylon fibre and yarn to 5 per cent, the minister said this will help the textile industry, MSMEs and exports too.  She also announced calibration of customs duty rate on chemical to encourage domestic value addition and to remove inversions.  The minister also announced rationalisation of custom duty on gold and silver.
Sitaraman said a phased manufacturing plan for solar cells and solar panels will be notified to build up domestic capacity.  She announced raising duty on solar inverter from 5 per cent to 20 per cent and on solar lanterns from 5 per cent to 15 per cent. 
The finance minister in her budget speech said that there is immense potential in manufacturing heavy capital equipment domestically and the rate structure will be comprehensively reviewed in due course.  However, she announced an immediate revision in duty rates on certain items immediately, including tunnel boring machine and certain auto parts. 
The budget proposes certain changes to benefit MSMEs, which include increasing duty on steel screws, plastic builder wares and prawn feed.  It also provide for rationalising exemption on import of duty-free items as an incentive to exporters of garments, leather and handicraft items.  It also provides for withdrawing exemption on imports of certain kinds of leather and raising custom duty on finished synthetic gem stones. 
To benefit farmers, the finance minister announced raising custom duty on cotton, raw silk and silk yarn.  She also announced withdrawing end-use based concessions on denatured ethyl alcohol.  The minister also proposed an Agriculture Infrastructure and Development Cess on a small number of items.  “While applying the cess, we have taken care not to put additional burden on consumers on most items,” she said. 
Regarding rationalisation of procedures and easing of compliance, the finance minister proposed certain changes in the provisions relating to ADD and CVD levies.  She also said that to complete customs investigation, definite time-lines are being prescribed.  The minister said that the Turant Custom Initiative rolled out in 2020 has helped in putting a check on misuse of FTAs.

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