Union Budget 2020 India: As envisaged, amendments have been proposed in the customs law to provide a boost to the ‘Make in India’ and ‘Ayushman Bharat’ schemes.
By R Muralidharan
Union Budget 2020 India: In the backdrop of a slowing economy and economic tensions, it was expected that this Budget would focus on measures to boost growth and employment and provide the much-expected relief to all stakeholders. With the economy battling hard to revive growth, it was expected that the Budget would introduce key measures to encourage consumption and promote ‘Make in India’ initiative of this government.
To start with, a special impetus was on the cards to promote Indian manufacturing. The push was envisaged by making way for a new levy called ‘border adjustment tax’. This was anticipated to provide a level-playing field for the domestic manufacturers by introducing a countervailing duty on imports. Similarly, in the backdrop of the dispute at World Trade Organization, in relation to the export incentive schemes offered by India, expectations were flying high for a new alternative WTO-compatible export incentives.
From the GST standpoint, while new proposals are within the domain of the GST Council, certain tweaks in the legislative framework were expected as the path breaking reform is inching closer towards its third anniversary. These included introduction of stringent provisions to curb the menace of corrupt practices such as fake invoicing and fraudulent refund claims. Against the backdrop of the above expectations, the Budget proposals announced, from an indirect tax perspective, was on expected lines.
As envisaged, amendments have been proposed in the customs law to provide a boost to the ‘Make in India’ and ‘Ayushman Bharat’ schemes. This saw introduction of a ‘health cess’ on import of certain medical equipment. Such cess shall not be imposed on medical devices which are exempt from basic customs duty. The cess would be levied at the rate of 5% on imported equipment as a duty of customs to promote domestic manufacturing.
Coupled with this, another initiative to stimulate growth in the labour-intensive MSME sector saw a proposal to increase the customs duty rates on import of footwear and furniture. Similarly, a scheme is contemplated to be rolled out to provide a conducive environment to domestic manufacturing, specifically catering to players in the field of electronic equipment, mobile phones and semi-conductors. Instead of a border adjustment tax, refund of non-creditable electricity duty and VAT on fuels to exporters also formed part of the Budget proposals.
Watch Video: What is Union Budget of India?
A spectrum of changes has been proposed in the customs domain, which includes measures to prevent abuse of imports under foreign trade agreements by revisiting certificate of origin rules. Further, to prevent dumping of goods into India, amendments are proposed in the regulations surrounding anti-dumping and safeguard duties. Another move that is seen to be guided in this direction is withdrawal of various customs duty exemptions. The finance minister also stated that a comprehensive review is underway which shall conclude in September 2020. This is intended to curtail the exemptions presently provided in the customs law.
On the other hand, the GST law also embraced a few changes. As anticipated, provisions governing offences and penalties relating to fraudulent availment of input tax credit without invoices, have been proposed. In conclusion, from an indirect tax perspective, this was not a big-bang Budget. However the proposals are on expected lines with deep focus on identified areas.
The writer is senior director, Deloitte India