Introduction
The Union Budget is a pivotal instrument for shaping India’s economic trajectory. Beyond its impact on taxation and expenditure, the budget also plays a crucial role in influencing the country’s trade dynamics. The fiscal year 2024-25 witnessed a series of amendments to customs laws, signalling a transformative shift in India’s import-export policies. This article delves into the key changes introduced through Budget 2024, analyzing their implications for businesses, trade, and the overall economy. Following are the key changes relating to the customs laws.
Proof of Origin
Amendment to Section 28DA of the Customs Act, 1962, now allows for various types of proof of origin to be accepted, as specified in trade agreements, including self-certification. The requirement for a Certificate of Origin has been amended to Proof of Origin, allowing self-certification following trade agreements, which simplifies claiming preferential duty rates. This alignment aims to streamline customs processes and facilitate trade under new trade agreements.
MOOWR Scheme
A proviso to section 65(1) has been inserted to empower the Central Government to specify certain manufacturing and other operations concerning a class of goods that shall not be permitted in a warehouse. Therefore, the Central Government is empowered to specify certain manufacturing operations that are restricted under the MOOWR (Manufacture and Other Operations in Warehouse) scheme, aiming to prevent misuse and reduce disputes.
Trade Facilitation Measures
The amendment to Section 143AA expands the definition of who can benefit from trade facilitation measures by including “any other persons” beyond just importers and exporters. The Board is now empowered to prescribe procedures or documentation for trade facilitation beyond just importers and exporters, improving the ease of doing business. This change is intended to enhance the efficiency and inclusiveness of trade processes, aligning with the broader goals of simplifying and facilitating international trade.
Reference to the Tariff Commission removed
Section 6 of the Customs Tariff Act, 1975, which allowed the imposition of protective duties based on the Tariff Commission’s recommendations, is being omitted following the Commission’s dissolution on June 1, 2022. Protective duties are tariffs imposed to protect domestic industries from foreign competition. The Tariff Commission, which was responsible for making recommendations on protective duties, was officially dissolved by the Government of India through a resolution dated 1st June 2022. This change will take effect from the enactment of the Finance Bill, 2024.
New Shipper Review
A provision for New Shipper Review has been added, effective from July 24, 2024. This review mechanism will allow new exporters to be evaluated separately, which may impact anti-dumping and countervailing duty assessments. A New Shipper Review is a process that allows new exporters to apply for a review of countervailing duties imposed on subsidized imports. This review can determine whether the duties should apply to these new entrants based on their practices and circumstances. The amendment necessitates the establishment of procedures for handling NSRs, including how new shippers can apply for the review, the criteria for evaluation, and how findings will be integrated into the existing countervailing duty structure.
Duty-Free Reimport of Goods
The duration for duty-free re-import of goods (excluding those under export promotion schemes) that were exported from India under warranty has been increased from 3 years to 5 years, with a further possible extension of 2 years. The time allowed for re-exporting aircraft and vessels imported for maintenance, repair, and overhaul has been extended from 6 months to 1 year, with a further extension of 1 year if needed. The requirement for re-exportation of foreign-origin articles imported for repair has been extended from 6 months to 1 year, with an additional possible extension of 1 year.
Exemption from GST Compensation Cess
Based on recommendations from the GST Council during its 53rd meeting, a change has been made regarding the GST Compensation Cess applicable to imports into Special Economic Zones (SEZs). GST Compensation Cess is exempted on imports made by SEZ units or developers for authorized operations, effective from July 1, 2017.
BCD and AIDC on Crude Soyabean and Sunflower Seed Oil
Notification No. 37/2023-Customs dated May 10, 2023, initially provided exemptions from Basic Customs Duty (BCD) and Agricultural Industrial Development Cess (AIDC) on imports of crude soyabean oil and crude sunflower seed oil. Amendment has been made to ensure that the exemption includes the period from the start of the financial year April 1, 2023, up to the date of the notification as well. The exemption is subject to the availability of unutilized quota under the Tariff Rate Quota (TRQ) authorization for FY 2022-23, which is allotted by the Directorate General of Foreign Trade (DGFT).
Key Customs Tariff Changes
- Crude Soyabean Oil and Crude Sunflower Seed Oil: Reduced Basic Customs Duty (BCD) and Agricultural Industrial Development Cess (AIDC) for imports.
- Critical Minerals: BCD has been reduced for 27 critical minerals to support sectors like nuclear, renewable energy, space, and defence.
- Medical Equipment: Customs duties reduced on specific medical equipment and three cancer drugs to enhance affordability and access.
- Precious Metals: Duties on gold, silver, and platinum were reduced to boost domestic value addition in jewellery.
- Textile and Leather Goods: BCD reduction on certain goods in the textile and leather sectors.
- Polyvinyl Chloride (PVC) Flex Films: BCD increased to 25%, effective from July 24, 2024.
- Laboratory Chemicals: BCD increased to 150%, effective from July 24, 2024.
- Roasted Nuts and Seeds: BCD increased to 150%, effective from October 1, 2024.
- Printed Circuit Board Assembly (PCBA): BCD increased from 10% to 15% for telecom equipment.
