Indirect taxes
Rationalisation of Customs Tariff Structure for Industrial Goods
Finance Minister proposed to:
- remove seven tariff rates. This is over and above the seven tariff rates removed in 2023-24 budget. After this, there will be only eight remaining tariff rates including ‘zero’ rate.
- apply appropriate cess to broadly maintain effective duty incidence except on a few items, where such incidence will reduce marginally.
- levy not more than one cess or surcharge.
Relief on import of Drugs/Medicines
- To provide relief to patients, particularly those suffering from cancer, rare diseases and other severe chronic diseases, 36 lifesaving drugs and medicines will be added to the list of medicines fully exempted from Basic Customs Duty (BCD). 6 lifesaving medicines will be to the list attracting concessional customs duty of 5%. Full exemption and concessional duty will also respectively apply on the bulk drugs for manufacture of the above.
- Specified drugs and medicines under Patient Assistance Programmes run by pharmaceutical companies are fully exempt from BCD, provided the medicines are supplied free of cost to patients. 37 more medicines will be added along with 13 new patient assistance programmes.
Support to Domestic Manufacturing and Value addition
- Full exemption on Basic Exemption Duty (BCD) to cobalt powder and waste, the scrap of lithium-ion battery, Lead, Zinc and 12 more critical minerals. This will help secure their availability for manufacturing in India and promote more jobs for our youth.
- To promote domestic production of technical textile products such as agro-textiles, medical textiles and geo textiles at competitive prices, two more types of shuttle-less looms will be added to the list of fully exempted textile machinery. BCD will be revised for knitted fabrics covered by nine tariff lines from “10% or 20%” to “20% or INR 115 per kg, whichever is higher”.
- To rectify inverted duty structure, BCD on Interactive Flat Panel Display (IFPD) will be increased from 10% to 20% and reduced to 5% on Open Cell and other components.
- BCD on parts of Open Cells will now stand exempted.
- To the list of exempted capital goods, I propose to add 35 additional capital goods for EV battery manufacturing, and 28 additional capital goods for mobile phone battery manufacturing. This will boost domestic manufacture of lithium-ion battery, both for mobile phones and electric vehicles.
- Considering that shipbuilding has a long gestation period, finance minister proposed to continue the exemption of BCD on raw materials, components, consumables or parts for the manufacture of ships for another ten years. She also proposed the same dispensation for ship breaking to make it more competitive.
- To prevent classification disputes, BCD will be reduced from 20% to 10% on Carrier Grade ethernet switches to make it at par with Non-Carrier Grade ethernet switches.
Export Promotion
- To facilitate exports of handicrafts, time period for export to be extended from six months to one year, further extendable by another three months, if required. Additionally, nine items will be to the list of duty-free inputs.
- BCD exemption on Wet Blue leather to facilitate imports for domestic value addition and employment.
- Export duty exemption to crust leather from the current 20% to facilitate exports by small tanners.
- To enhance India's competitiveness in the global seafood market, BCD reduction from 30% to 5% on Frozen Fish Paste (Surimi) for manufacture and export of its analogue products. Finance Minister also proposed to reduce BCD from 15% to 5% on fish hydrolysate for manufacture of fish and shrimp feeds.
- In July 2024 Budget, to promote development of domestic MROs for aircraft and ships, the government had extended the time limit for export of foreign origin goods that were imported for repairs, from 6 months to one year and further extendable by one year. Similar rules will be applicable for railway goods now.
Trade facilitation
- Presently, the Customs Act, 1962 does not provide any time limit to finalise Provisional Assessments leading to uncertainty and cost to trade. As a measure of promoting ease of doing business, a time-limit of two years, extendable by a year, for finalising the provisional assessment has been proposed.
- A new provision will be introduced to enable importers or exporters, after clearance of goods, to voluntarily declare material facts and pay duty with interest but without penalty. This will incentivise voluntary compliance. However, this will not apply in cases where department has already initiated audit or investigation proceedings.
- For industry to better plan their imports, time limit for the end-use of imported inputs in the relevant rules, will be extended from six months to one year. This will provide operational flexibility in view of cost and uncertainty of supply. Further, such importers will now have to file only quarterly statements instead of a monthly statement.
