Maintenance of aircraft, repairing ships and production of defence material, aluminum, textiles and mobile handsets are set to get a boost as the Budget proposes to raise customs and excise duties on various inputs, intermediaries and components aimed at promoting domestic manufacturing and ensuring the Make in India initiative is a success.
While raising duties, mostly in the range of 2.5-10%, would not only reduce the cost of domestic manufacturing, it would also enhance competitiveness, the two primary demands of industry. With these moves, India can compete with imports and provide more jobs locally. The move would help information technology hardware, capital goods, mineral fuels and mineral oils, chemicals and petrochemicals, paper, paperboard and newsprint, among other sectors.
Stating that start-ups are expected to be a key partner in the Make in India initiative, the finance minister also offered assistance for their propagation through 100% deduction of profits in three out of five years for units set up during April 2016 to March 2019. However, MAT would be applied to them. Capital gains will not be taxed if invested in regulated/notified fund of funds and by individuals in notified start-ups, in which they hold majority shares. This is part of a Rs 1,804-crore allocation on investment promotion and technology upgrade schemes for Make in India.
In sync with practices followed in advanced countries, the FM stated that foreign investors will be accorded ‘residency status’, subject to certain conditions. Currently, these investors are granted business visa only up to five years at a time.
The dampener is the silence on the long-pending demand for an exit policy. The Economic Survey, too, had said the problem of ‘exit’ was one of the reasons that India had too many small and unproductive firms. “Impeded exit has substantial fiscal, economic and political costs,” the document said.
“Customs and excise duty structure plays an important role in incentivising domestic value addition towards Make in India campaign of our government. In line with that, I propose to make suitable changes in customs and excise duty rates on certain inputs, raw materials, intermediaries and components and certain other goods, and simplify procedures, so as to reduce costs and improve competitiveness of domestic industry,” FM Arun Jaitley said in his speech.
The customs and excise duty exemption accorded to tools and tool kits for aircraft maintenance, repair and overhauling and removal of the one-year restriction for duty-free parts of MRO would help domestic airlines that send their aircraft abroad for maintenance. Industry has been batting for rationalising the duty structure. Defence production would also get a boost with the Budget proposal to withdraw, with effect from April 1, custom duties on direct imports of specified goods for defence purposes by the government and the contractors or sub-contractors of public sector enterprises.
Ship repairing is expected to get the much-desired fillip with the exemption of excise duty on capital goods and spares, raw materials, parts, material handling equipment and consumable for repairs of ocean-going vessels by a ship-repairing unit. Rajesh Agarwal, co-founder, Micromax Informatics, said the proposal to reduce excise duty on inputs, parts and components, battery and wired headsets/speakers of mobile phones is a welcome move. The FM has raised basic customs duty on imitation jewellery to 15% from 10% earlier, on primary aluminum to 7.5% from 5%.
* Basic customs duty (BCD), excise hiked on inputs, raw materials, intermediaries and components to incentivise domestic value addition in IT hardware, capital goods, chemicals & petrochem
* No BCD, countervailing duty or special additional duty will boost investments in setting up of aircraft MRO facility. Ship repair gets a boost with no excise