Custom and Excise duty

SEZ administration to be reformed

Necessary reforms are to be undertaken in Customs Administration of Special Economic Zones (SEZs) to make the same fully IT-driven and function on the Customs National Portal for better facilities and risk-based checks. It is expected that these reforms would be implemented by September 30.

Phasing out exemptions for Project imports and capital goods

National Capital Goods Policy, 2016 aimed at doubling the production of capital goods by 2025 to create employment opportunities and increased economic activity. However, duty exemptions granted to capital goods for sectors like power, fertilizer, textiles, leather, footwear, food processing and fertilizers have hindered the growth of the domestic capital goods sector, according to Finance Minister. Since project import duty concessions deprive the domestic producers of a level playing field in areas like coal mining projects, power generation, transmission or distribution projects, railway and metro projects,  the concessional rates in capital goods and project imports would be gradually phased out with a moderate tariff of 7.5%. This will not include advanced types of machinery that are not manufactured in the country yet and exemptions in such cases would continue. A few new exemptions are also introduced on inputs such as specialised castings, ball screw and linear motion guide, to encourage domestic manufacturing of capital goods.

Phasing out 350+ customs exemptions

To rationalise customs exemptions, in continuation with previous budgets, after consultations, more than 350 exemption entries will be gradually phased out. These include exemptions on certain agricultural products, chemicals, fabrics, medical devices and drugs and medicines for which sufficient domestic capacity exists.  As a simplification measure, several concessional rates are now incorporated in the Customs Tariff Schedule instead of prescribing them through notifications.   It is expected to simplify the customs rate and tariff structure for sectors like chemicals, textiles and metals.

Customs duty rates for electronics

Since electronic manufacturing has grown rapidly, customs duty rates will now have a graded rate structure for the import of electronic to support domestic manufacturers of wearable/hearable devices and electronic smart meters.  New duty concessions are introduced for transformer parts of mobile phone chargers and camera lens of mobile camera module amongst other items.

Customs duty rate for Gems and Jewellery

To boost to the Gems and Jewellery sector, Customs duty on cut and polished diamonds and gemstones is now reduced to 5% while simply sawn diamond will have nil customs duty. Besides, a regulatory framework will be implemented to allow the sale of gems and jewellery through e-commerce. The customs duty on imitation jewellery has been introduced to ensure at least INR 400 per kg duty is paid on their imports.

Customs duty rate on Chemicals

Customs duty on certain critical chemicals such as methanol, acetic acid and heavy feedstocks for petroleum refining has been reduced. Meanwhile, duty on sodium cyanide for which adequate domestic capacity exists has been increased.

Customs duty on Umbrellas

The customs duty on umbrellas has been raised to 20% while exemption to parts of umbrellas now stands withdrawn. 

Customs duty exemption for steel scrap

Customs duty exemption to steel scrap has been extended for another year to provide relief to small secondary steel producers. Anti-dumping and countervailing duty on stainless steel and coated steel flat products, bars of alloy steel and high-speed steel have been revoked owing to high prices of metals.

Products used in exports

To incentivise exports, new exemptions have been introduced on embellishment, trimming, fasteners, buttons, zipper, lining material, specified leather, furniture fittings and packaging boxes that may be useful for exporters of handicrafts, textiles and leather garments, leather footwear and other goods. Customs duty has been reduced on inputs required for shrimp aquaculture to promote its exports.

Encouraging blending of fuel through excise tariff

To encourage the blending of fuel, unblended fuel will now attract an additional differential excise duty of INR 2/ litre from October 1, 2022.

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