Budget 2022 | FM announces changes to indirect tax regime; more duty concessions bring cheer

Finance Minister Nirmala Sitharaman while presenting her fourth Union Budget on February 1, 2022, commended honest taxpayers for contributing to India’s stupendous GST revenue collection in January 2022. GST collections touched a record of Rs 1.40 lakh crore in January on rapid economic recovery, she said.

In her 2022-23 Budget speech, Finance Minister Nirmala Sitharaman said there has been "remarkable progress made in the Goods and Services Tax (GST) regime, but still, a few challenges remain".

“Gross GST collection in January at record Rs 1,40,986 crores; this has been possible due to rapid economic recovery”, the FM said, adding that GST revenues remained buoyant despite the coronavirus pandemic and taxpayers deserve applause for this growth.

Check Budget 2022 LIVE Updates here

Here’s what else the Finance Minister said on India’s indirect taxation regime in her Budget speech 2022:

Special Economic Zones

Customs Administration of special economic zones (SEZs) to be fully IT-driven and function on the Customs National Portal. This shall be implemented by September 30, 2022.

As for customs reforms and duty rate changes, faceless customs has been fully established, the FM said, adding that during the COVID-19 pandemic, “customs formations have done exceptional frontline work against all odds displaying agility and purpose”.

Project imports and capital goods

Gradual phasing out of the concessional rates in capital goods and project imports and applying a moderate tariff of 7.5 percent will be conducive to the growth of the domestic sector and ‘Make in India’, she said in Parliament while presenting the 2022 Budget.

Sitharaman added: “Certain exemptions for advanced machineries that are not manufactured within the country shall continue. A few exemptions will be introduced on inputs, like specialised castings, ball screw and linear motion guide, to encourage domestic manufacturing of capital goods.”

As for the review of customs exemptions and tariff simplification, more than 350 exemption entries have been proposed to be gradually phased out, such as exemption on certain agricultural produce, chemicals, fabrics, medical devices, and drugs and medicines, for which sufficient domestic capacity exists.

The Finance Ministry will also remove exemptions on items that are or can be manufactured in India. Instead, concessional duties will be provided on raw materials that go into the manufacturing of intermediate products, in line with the objective of ‘Make in India’ and ‘Atmanirbhar Bharat’.

Further, customs rate and tariff structure have also been simplified by the Centre, particularly for sectors like chemicals, textiles, and metals to minimise disputes.

Sector-specific proposals

Electronics: Customs duty rates to be calibrated to provide a graded rate structure - to facilitate domestic manufacturing of wearable devices, hearable devices and electronic smart meters.

Sitharaman announced duty concessions on parts of transformer of mobile phone chargers and camera lens of mobile camera module and certain other items – To enable domestic manufacturing of high growth electronic items.

Gems and Jewellery: Customs duty on cut and polished diamonds and gemstones being reduced to five percent; Nil customs duty to be imposed on simply sawn diamond. This will give a boost to the gems and jewellery sector of the country, the Finance Minister said.

Additionally, a simplified regulatory framework will be implemented by June this year to facilitate the export of jewellery through e-commerce.

Further, customs duty of at least Rs 400 per Kg will have to be paid on imitation jewellery import to disincentivise import of undervalued imitation jewellery.

Chemicals: Customs duty on certain critical chemicals namely methanol, acetic acid and heavy feed stocks for petroleum refining being reduced; Duty is being raised on sodium cyanide for which adequate domestic capacity exists – This will help in enhancing domestic value addition.

MSME: Customs duty on umbrellas being raised to 20 percent. Exemption to parts of umbrellas being withdrawn.

Exemption being rationalised on implements and tools for agri-sector which are manufactured in India

Customs duty exemption given to steel scrap last year extended for another year to provide relief to MSME secondary steel producers

Certain anti-dumping and CVD on stainless steel and coated steel flat products, bars of alloy steel and high-speed steel are being revoked – to tackle prevailing high prices of metal in larger public interest.

Exports: To incentivise exports, exemptions are being provided on items such as embellishment, trimming, fasteners, buttons, zipper, lining material, specified leather, furniture fittings and packaging boxes.

The Centre will be reducing duty on certain inputs required for shrimp aquaculture to promote its exports.

Tariff measures will be introduced to encourage the blending of fuel. Meanwhile, unblended fuel will attract an additional differential excise duty of Rs 2/ litre from October 1, 2022, to further encourage the blending of fuel.