Finance minister Nirmala Sitharaman has proposed to phase out more than 350 customs exemptions on products ranging from farm produce and chemicals to drugs and medical devices in one of the most extensive exercises in recent memory, and trim duties on scores others, in an apparent bid to spur large-scale domestic manufacturing.
Similarly, concessional rates in capital goods and project imports will be abolished gradually and a moderate tariff of 7.5% will be imposed.
The proposals are in sync with the government’s bid to align its indirect tax proposals with its goals of promoting Make in India under the Atmanirbhar Bharat initiative, simplifying rules by cutting myriad of exemptions, weeding out archaic duty structure that has lost its relevance and correcting the inverted duty incidence in certain cases.
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To give a new lease of life to languishing special economic zones, the current law governing them will be replaced with a new one. Customs administrations of these duty-free enclaves will be suitably tweaked by September 30 to ensure greater ease of doing business for them.
Separately, commerce and industry minister Piyush Goyal said on Tuesday that the commerce ministry is in talks with the finance ministry to relax the customs duty rules for SEZs to sell their goods in the domestic tariff area. An equalisation levy is being proposed to be imposed on SEZ units, which will likely be lower than the regular customs duties they are currently mandated to pay while supplying to the domestic tariff area (DTA). However, it will neutralise the advantages that SEZs, being specifically delineated duty-free enclaves, enjoy vis-à-vis domestic manufacturers.
Goyal asserted that the new law, proposed in the Budget, will help develop these SEZs into large swathes of plug-and-play industrial structures, which will enable even new investors to take advantage of the existing infrastructure within these zones.
The finance minister also said customs duty on cut and polished diamonds and gemstones will be reduced to 5% from 7.5%, which will bolster gem & jewellery exports. To promote manufacturing of certain electronics products, customs duties will be calibrated to provide a graded rate structure in wearable and hearable devices and electronic smart meters. Duty concessions will also be extended to certain mobile phone parts and chemical products.