The Union Budget presented for 2022-2023 has largely been a growth-oriented endeavour with a special focus on domestic manufacturing, skill development, sustainability, infrastructure capacity building, and incentives to states becoming active stakeholders in the road to economic recovery. The amendments in the tax laws also forward the above objectives and seek to nurture an emerging talent pool and provide nourishment to core sectors, with an eye on trust and ease of doing business in India.
From a trade and Exim laws perspective, a key change has been the proposal to replace the existing SEZ laws with new regulations, that will have the states as more engaged stakeholders. The proposal also suggests an enhanced alignment with the Customs administration and the Customs IT systems, and the introduction of more risk-based checks to promote trust and business. This will help SEZ(s) to utilise their unleveraged capacity and may also help them to operate at par with non-SEZ units, in terms of compliances and other benefits.
Another important step is the complete rationalization of the concessional duty regulations for the import of goods for domestic manufacture. These will now transit to a completely automated system which will standardise, among others, forms and compliance, the ability to claim notification benefits, payment etc. on a common e-portal. There is a greater emphasis on trust on exporters and self-assessment to provide duty benefits.
To incentivise domestic manufacturing, it has been proposed that concessional rates in capital goods and project import scheme be phased out gradually, and a moderate tariff rate of around 7.5 per cent be imposed. The customs duty rate for some goods is also being calibrated to also facilitate imports. Some key duty changes in this context are the reduction of customs duties on petroleum oil, ATF, wool products, woven fabrics, synthetic yarn, certain fabrics, cotton, specified generators, electric motors, iron and steel scrap, lens used in the manufacture of cellular camera modules, parts for use in the manufacture of chargers, adapters etc. Customs duties are being increased for goods like umbrellas, solar energy cells and modules, imitation jewellery etc. to promote domestic manufacture.
The PLI Schemes introduced through the last budget have largely been successful in implementation. To this end, two new PLI schemes in solar module manufacturing and 5G telecom equipment supply, technology and R&D processes have been proposed. Further, to promote domestic manufacturing in the smart watch, hearables (speaker, Bluetooth headphones etc.), and smart meters sectors, a graded Phased Manufacturing Program has been proposed which implements a phased Customs duty increase from 2022-23 to 2025-26 on inputs required for manufacture in this sector.
On an administrative front, an important prospective change is the introduction of DRI officers as ‘proper officer’ in the Customs Act. This emanates from the Cannon Judgement of the Supreme Court which had held these officers as not being ‘proper officers’ to initiate adjudication proceedings under the Customs Act. Advance Rulings of Customs would now be valid for three years, and the dissemination of data on imports and exports into India [which is submitted to Customs], unless authorised by law, is now made punishable with a fine and imprisonment.
Key changes in the GST laws include insertion of provisions to curtail availing of the input tax credit if the same is not been mentioned in the supplier tax returns, provision of auto-generated statements in return filing and abolition of availment of provisional credit. This puts an extended workload of the recipient of supply to ensure that the suppliers file their returns correctly, in order to protect its input credit books. Extension of time limit to issue credit notes and rectification of outward supply details to November for the next financial year, and to provide for levy of interest on excess input tax credit wrongly availed and utilized, from the initiation of GST laws, are other key changes.
The announcement of an AVGC (animation, visual effects, gaming and comics) task force to promote skill development, also shows that the government is aware of emerging trends, and is keen to provide opportunities to stakeholders in such sectors.
To summarise, this has been a growth-oriented Budget on a trust-based governance platform. Support to manufacturing industries and MSME(s) are welcome opportunities for these sectors to grow and become globally competitive. To this end, the Budget envisions that if there is one foot in kindling the fire of economic development and another in the ice-cold implementation of trust-based ease of doing business, the end product becomes an effective key to sustainable growth.
This article was originally published in Times Now News on 1 February 2022 Co-written by: Rajat Bose, Partner; Neeladri Chakrabarti, Consultant. Click here for original article
Contributed by: Rajat Bose, Partner; Neeladri Chakrabarti, Consultant
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