Budget 2019: Customs changes to spur domestic manufacture and excise changes to garner revenues
Budget 2019 India: While expectations from the Budget in terms of indirect tax changes were few — on account of GST changes being outside the purview of the Budget — there appear to be quite a few changes that would impact businesses.
The desire to raise revenues from customs and excise duty by increasing rates has been accompanied by a clear statement that those misusing the law should expect stringent measures.
Several goods have seen an increase in import duties — ostensibly, to encourage manufacturing of these goods in India.
There seems to be a clear intent that import substitution with domestic manufacturing should be encouraged in sectors where capacity exists in order to provide a level-playing field for domestic businesses.
To incentivise domestic value-addition through Make-in-India, customs duty reduction on several inputs and raw materials such as naptha, propylene oxide, inputs for manufacture of CRGO steel, etc, have been proposed.
Continuing with the initiative of encouraging electric cars, customs duty has been exempted on parts for exclusive use of EVs. This needs to be viewed together with the recommendation to the GST Council to reduce GST on EVs from 12% to 5%.
It’s clear the Budget proposals seek to give a decisive push for manufacturing of EVs in India.
Despite the onset of GST, petroleum products continue to be taxed under the excise regime and it is expected that future GST reforms would take steps to include petroleum products under the GST purview.
There is across-the-board increase in the special additional excise duty (SAED) and road and infrastructure cess (RIC) applicable to petrol and diesel. While the increase, which comes into force immediately, is Rs 1 per litre each for SAED and RIC, the amendments in the respective Finance Acts permit the SAED to be increased by up to Rs 3 per litre and the RIC by up to Rs 2 per litre.
The announcement of a dispute resolution scheme covering excise duty and service tax was expected, considering that after the introduction of GST, there is a need to reduce litigation on erstwhile taxes and complete pending audits, assessments, etc, within a defined time frame.
While businesses would have appreciated a sunset clause on erstwhile taxes, it appears they will have to wait for one more year for this.
The relief under the scheme ranges from 40% to 70% of tax dues for cases other than voluntary disclosure (for which the relief is regarding waiver of interest and penalty). Businesses will need to carefully evaluate the merits of each pending case in order to decide whether to opt for the scheme or not.
The Budget seems to have continued with the practice of making customs changes to spur domestic manufacture and excise changes to garner revenues.
(The author is Partner, Deloitte India)