Budget 2023 – Key changes in the Customs law

Certain exemptions will not expire automatically

In 2021, the Central Government introduced a new section 25(4A) in the Customs Act, to make all conditional exemptions to be valid only for two years. The provision aimed to eliminate outdated exemptions and introduce new exemptions with limited validity. Thereby, all exemptions were automatically liable to expire after two years, on March 31. Now, this section has been amended once again to exclude certain conditional exemptions from such automatic expiry. These are –

Multilateral or bilateral trade agreements
Obligations under international agreements, treaties, conventions or such other obligations including concerning United Nations agencies, diplomats and international organisations
Privileges of constitutional authorities
Schemes under the Foreign Trade Policy
Central Government Schemes having a validity of more than two years
Re-imports, temporary imports, goods imported as gifts or personal baggage
Any duty of customs including IGST under Section 3(7) of the Customs Tariff Act, other than BCD leviable under section 12 of the Customs Act.

Determination and review of duties

Section 9, 9A and 9C of the Customs Tariff Act have been amended to clarify that determination and review of countervailing duty and anti-dumping duty refers to determination and review in a manner prescribed by the rules. This amendment is effective retrospectively from January 1, 1995.

Modification of tariff lines

The First Schedule to the Customs Tariff Act has been amended to introduce new tariff lines, modify existing tariff lines or rationalise the customs duty rate structure. After the rationalisation of customs duty rates, on goods excluding textiles and agriculture, the number of rates has been reduced from 21 to 13. The Second Schedule and General Explanatory Notes have also been amended along the same lines. These amendments will be effective from May 1, 2023, if they do not involve a change in the rate of duty.

Changes in customs duties

Basic Customs Duty (BCD), Agriculture Infrastructure and Development Cess (AIDC) and Social Welfare Surcharge (SWS) have been recalibrated without changing the total tax incidence on gold, gold dore, platinum, coal, peat and lignite. Similar changes have been made in respect of aircraft and aircraft tyres.
The basic customs duty on seeds for manufacturing rough lab-grown diamonds has been reduced to Nil subject to IGCR conditions for two years. Further, the basic customs duty for certain inputs used for aquatic feed has also been reduced.
Concerning Petrochemicals, basic customs duty has been reduced on denatured ethyl alcohol, acid-grade fluorspar and crude glycerin. The same has been increased on Naphtha, Styrene and Vinyl Chloride Monomers.
Concerning Electronic Goods, basic customs duty has been reduced on camera lenses, parts of camera lenses for mobile, Pre-calcined Ferrite Powder, Palladium Tetra Amine Sulphate for Connectors, and parts of open cells of TV panels. Meanwhile, the same has been increased on electric kitchen chimneys and heat coils used in such chimneys.
Concerning Automobiles, basic customs duty has been reduced on specific vehicles if imported for testing or certification. Meanwhile, the same on vehicles imported in semi-knocked down form, or completely built form has been increased. Customs duty on specified capital goods and machinery for manufacturing lithium-ion cells for batteries used in electric vehicles has been exempted.
The basic customs duty on bicycles, toys and their parts, coal, peat, lignite, and compounded rubber has been increased. The same on pecan nuts and Warmblood horse imported by sports person is reduced.
Silver, imitation jewellery, platinum, bicycles, motor vehicles, aeroplane and other aircraft, and toys are now exempted from Social Welfare Surcharge. The Agriculture Infrastructure and Development Cess (AIDC) has been increased on the Silver bar and Silver Dore.
Customs duty exemption has been extended on the following items for five years – used items of a deceased person, challenge cups and trophies won by Defence Force, Cups and trophies to be awarded to winning teams in an international tournament or world cup to be held in India, specified sports goods imported by National Sports Federation or a sportsperson, goods from Antarctica used for Indian Antarctic Expedition or Indian Polar Science Programme.
Customs duty exemption has been extended on the following items for two years – inputs for manufacturing telecommunication grade optical fibre, silica and preform of silica, raw materials and parts for manufacture of Wind operated electricity generators, including permanent magnets.