Budget: SEZ customs administration soon fully IT-driven, concessional rates in capital goods to have tariff of 7.5%, Unblended fuel to attract additional duty of Rs2 per litre

1 Feb 2022 , 03:10 PM

Finance Minister Nirmala Sitharaman while presenting the Union Budget 2022-23 in the Parliament today said that customs administration of SEZs shall be fully IT-driven. Further, the FM announced various reforms on duties charged in various sectors. She said the Customs National Portal will function with a focus on higher facilitation and with only risk-based checks.

The FM announced that the Government proposes to phase out the concessional rates in capital goods and project imports gradually and apply a moderate tariff of 7.5%. Clarifying she said that certain exemptions for advanced machineries that are not manufactured within the country shall continue. Further, she announced that the Government would introduce a few exemptions in cases like specialised castings, ball screws and linear motion guide to encourage domestic manufacturing of capital goods.

Further, the FM pointed out that several duty exemptions granted to capital goods in various sectors such as power, fertilisers, textiles among others have hindered the growth of the domestic capital goods industry. Similarly, she said that project import duty concessions have also deprived the local producers of a level playing field in certain areas like coal mining, power generation among others.

The minister reviewed Customs Exemptions and Tariff Simplification. Sitharaman said that after extensive consultations along with crowdsourcing the Government proposes to phase out more than 350 exemption entries. These include exemption on certain agricultural products, chemicals, fabrics, medical devices, drugs among others. Further, she said that as a simplification measure, several concessional rates are being incorporated in the Customs Tariff Schedule itself instead of prescribing them through multiple notifications.

This review would simplify customs rate and tariff structure particularly in sectors such as chemicals, textiles and metals, and minimise disputes.

She added that removal of exemption on items which are or can be manufactured in India and providing concessional duties on the raw material that goes into the manufacturing of intermediate products will go many a step forward in achieving our objective of ‘Make in India’ and ‘Atmanirbhar Bharat’.

The minister pointed out that customs reforms have played a very vital role in domestic capacity creation, providing a level playing field to MSMEs, easing raw material supply-side constraints, enhancing the ease of doing business and being an enabler to the Government’s policy initiatives like PLIs and Phased Manufacturing Plans.

In the electronic segment, FM said that to facilitate domestic manufacturing of high growth electronic items, wearable and hearable devices, and electronic smart meters, Smt. Sitharaman announced that customs duty rates would be calibrated to provide for a graded rate structure. She also said that Duty concessions are also being given to parts of the transformer of mobile phone chargers and camera lens of mobile camera module and certain other items.

While in the gems and jewellery segment, the FM said that to give a boost to the Gems and Jewellery sector, customs duty on cut and polished diamonds and gemstones is being cut to 5 per cent, and simply sawn diamond to zero per cent. She also said that a simplified regulatory framework would be implemented by June 2022 to facilitate the export of jewellery through e-commerce. Further, to disincentivise the import of undervalued imitation jewellery, the Government proposes a customs duty of at least Rs. 400 per Kg on imitation jewellery.

Even the chemicals segment was taken into consideration. For the sector, the FM said that to enhance domestic value addition, the Government proposes to reduce the customs duty on certain critical chemicals namely, methanol, acetic acid and heavy feedstocks for petroleum refining, while increasing the duty on sodium cyanide for which adequate domestic capacity exists.

For blending of fuel, Sitharaman said that it is a priority for the Government. To promote the blending of fuel, the Government proposes to charge an additional differential excise duty of Rs. 2 per litre from 1st October 2022 on unblended fuel.

In terms of export, the minister said that to incentivize exports, exemptions are being provided on items such as embellishment, trimming, fasteners, buttons, zipper, lining material, specified leather, furniture fittings and packaging boxes that may be needed by bonafide exporters of handicrafts, textiles and leather garments, leather footwear and other goods. She added that duty is also being reduced on certain inputs required for shrimp aquaculture to promote their exports.