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Gunjan Prabhakaran, Partner and Leader
Indirect Tax
Kartik Solanki, Partner
Indirect Tax

13 February 2023

The Union Budget 2023-24 as described by the Finance Minister is the first budget of ‘Amrit Kaal’, which seeks to build on the foundation laid in the previous budget. One of the cogs in the wheel, of course, is the ‘Make in India’ initiative of the government to promote domestic value addition to emerge self-reliant in critical areas.

The government has taken various steps to encourage domestic manufacturing and a notable one is the Production Linked Incentive (PLI) architecture, crafted for certain handpicked sectors. Another important plank in the ‘Make In India’ initiative is the calibration of customs duty rates for the identified sectors, to strengthen the competitive edge of domestic manufacturing and reduce import dependency. Accordingly, the government pursued the path of imposing a higher rate of customs duty on finished products, while lowering the duty on critical raw materials and intermediates required for domestic manufacturing, where the country has indigenous capability. 

The present Budget continues to travel the same path. To encourage the domestic manufacture of Lab Grown Diamonds (LGD), the seeds used in the manufacture of rough LGD are exempted from basic customs duty (BCD). Similarly, to provide impetus to green mobility, a focus area for the government is BCD on capital goods and machinery required for the manufacture of lithium-ion cells for batteries which in turn is used in electric vehicles has been exempted. BCD has also been exempted from the import of specified parts of mobile phones, and on parts of open cells of TV panels, BCD has been reduced. Various exemptions, the validity of which is expiring on 31 March 2023, have also been extended post-review. 

The exclusion of solar power plants and solar power projects from the ambit of Project Import is a step in the right direction to support domestic manufacturers. Similarly, an increase of BCD on specified completely built vehicles and EVs, toys, electric kitchen chimneys, etc would spur indigenisation. 

To promote ease of doing business, the following initiatives are taken:

1) Reduction in the number of BCD rates on goods, other than textiles and agriculture, from 21 to 13.

2) Amendment in customs tariff schedule to: 

a)Incorporate HSN 2022 amendments.

b)Aid in trade facilitation by better identification of the imported items and getting clarity on concessional import duty through notifications to reduce the dwell time of the vessel. 

While these are some important policy initiatives in the latest Union Budget to enable domestic manufacturers to unleash their potential and contribute to the growth push during the ‘Amrit Kaal’, the industry is keenly waiting for the introduction of the new DESH/SEZ bill, which is set to replace the existing SEZ laws.

The trade and industry have pinned hope in the new version of Foreign Trade Policy, to spread its reach across the globe and help India grab a larger share of international trade and propel the country into one of the largest economies of the world.

Source: Deccan Herald