With an aim to promote exports, boost domestic manufacturing, enhance domestic value addition and encourage green energy and mobility, Union Minister for Finance Nirmala Sitharaman on Wednesday announced a simplified tax structure with fewer tax rates which would help in reducing compliance burden and improving tax administration.
In the General Budget presented in Parliament, Nirmala Sitharaman proposed to reduce the number of Basic Customs Duty (BCD) rates, on goods other than textiles and agriculture, from 21 to 13. This has necessitated minor changes in the basic customs 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, she proposed to exempt excise duty on GST-paid compressed biogas contained in it. To further provide impetus to green mobility, she announced extending the customs duty exemption to the import of capital goods and machinery required for the manufacture of lithium-ion cells for batteries used in electric vehicles.
The finance minister also proposed to provide relief in customs duty on the import of certain parts and inputs like a 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 the manufacture of mobile phones.
The minister stated that mobile phone production in India had increased from 5.8 crore units valued at about Rs 18,900 crore in 2014-15 to 31 crore units valued at over Rs 2,75,000 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 per cent to promote value addition in the manufacture of televisions.
The finance minister proposed an increase in the BCD on electric kitchen chimneys from 7.5 to 15 per cent and a reduction on heat coils from 20 to 15 per cent. This change would rectify the inversion of duty structure and encourage the manufacturing of electric kitchen chimneys.
To support the Ethanol Blending Programme and facilitate India’s endeavour for energy transition, she proposed to exempt BCD on denatured ethyl alcohol. She also announced a reduction of BCD on acid-grade fluorspar from 5 to 2.5 per cent to make the domestic fluorochemicals industry competitive. The BCD on crude glycerin for use in the manufacture of epichlorohydrin was also proposed to be reduced from 7.5 to 2.5 per cent.
The minister proposed to reduce the BCD on key inputs for the domestic manufacture of shrimp feed to enhance the export competitiveness of marine products. She stated that marine products recorded the highest export growth in the last financial year, benefitting farmers in the coastal states of the country.
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 the natural diamonds industry. With the depletion in deposits of natural diamonds, the industry is moving towards Lab Grown Diamonds.
She 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, she proposed to continue the exemption from BCD on raw materials for the 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.