Boost for Local Manufacturing
India’s ambitious Make in India programme got a boost with the budget unveiling fresh steps to correct anomalies in the indirect taxes structure to encourage manufacturing in the country. Sectors including information technology hardware, capital goods, defence production, textiles, mineral fuels and mineral oils, chemicals and petrochemicals, paper, paperboard and newsprint, maintenance repair and overhauling (MRO) of aircraft and ship repair will see changes in their customs and excise duty structure. This will bring down manufacturing and compliance costs, boosting global competitiveness. In many of these cases, inputs attract higher duties than finished goods, making imports more attractive than local manufacture.
“Customs and excise duty structure plays an important role in incentivising domestic value addition towards Make in India campaign of our government,” finance minister Arun Jaitley said, announcing changes to indirect taxes that he said were aimed at improving competitiveness.
Silver medallion, silver coins having silver content not below 99.9%, semi-manufactured, will now face countervailing duty to encourage the domestic jewellery sector. As part of this exercise, the government has also widened and deepened the duty drawback scheme.
“Correction in excise and customs duty rates (is) largely to address duty inversion and support the Make in India initiative,” said Rajeev Dimri, leader, indirect tax, BMR & Associates LLP. “The budget continues to work towards the theme to encourage domestic manufacturing,” said Bipin Sapra, partner, EY, pointing to the levy of special additional duty of 2% on populated circuit boards to incentivise their manufacture in the country besides removal of customs duty on solar panels and its replacement with a creditable levy of countervailing duty. “Customs duties have been reduced on quite a few components,” said MS Mani, senior director, indirect tax, Deloitte Haskins & Sells LLP.
“In addition, there has also been an exemption of excise duty on several solar energy items, micro-ATMs and PoS (point of sale) devices, which is a further boost to the Make in India initiative,” said Mani. The government has also announced a number of initiatives to hasten trading across borders for ease of doing business. This will cut customs clearance time.
A host of procedural simplifications have also been made. Importers for instance won’t have separate conditions for getting their goods from courier or postal terminals at the ports.
Proposed abolition of the research and development cess, currently 5%, will benefit companies unable to offset this against service tax liability and encourage such activity in the country. “For some companies who were liable to pay research and development (R&D) cess but did not have any service tax liability, this cess became a cost,” Mani said. ₹ ₹
Importers won’t have separate conditions for getting their goods from courier or postal terminals at the ports