Budget 2020 | Manufacturing has something to cheer

Abhishek Jain

Budget 2020 has pencilled in a growth of 12.75 percent in GST collections for 2020-21. This assessment appears to tie in with the projected nominal GDP growth of 10 percent and the government’s tax collection estimates.

The measures against tax evasion figured prominently in the Budget – implementation of new GST (goods and services tax) returns effective April 2020 and e-invoicing in a phased manner, strengthening penalty and prosecution provisions for those using fake input tax credits, a cash reward system to incentivise customers seeking tax invoice and Aadhaar-based verification for taxpayers. The idea is to weed out dummy or non-existent units.

Other changes in GST include relaxation in norms for September 30 or annual return deadline for input tax credit on debit notes. That is now being linked to the debit note date instead of the original invoice date. This should financially benefit various sectors, especially the ones where finalisation of price adjustments is a long-drawn battle or gets into continuous supply and price monitoring by customers.
The theme of the customs announcement in this Budget was inclined to the government’s leitmotif – ‘Make in India’.  This is evident from the proposed increase in customs duty on imports of several products, including electric vehicles, refrigerating equipment, furniture, footwear, parts of mobile phones, headphones and earphones with an exemption on parts used for the manufacturing some of these products in India.

The said proposals should incentivise domestic industries and boost indigenisation of various goods, including local value addition. To further motivate the domestic industry, proposals have been made to keep a tab on any undue benefits being claimed by businesses, including under the preferential tariff regime.

There were other proposals to strengthen safeguard measures, including additional duties and tariff quotas, to provide protection against dumping of goods and boost ‘Make in India’.

On similar lines, the proposal of a health cess on imports of certain medical devices should help boost domestic healthcare manufacturing. A limited use of this cess for generating resources for health services should help the larger Indian population as well.

Confirmation on implementation of the RoDTEP (Remission of Duties or Taxes on Export Product) scheme for exporters in this fiscal year has come as a shot in the arm for our foreign exchange earners. This is continuation of fiscal incentives and the provisions on electronic duty credit ledger by allowing transfer of funds in the said ledger, which provides a blueprint for exporters.

Abhishek Jain is Tax Partner, EY. Views are personal.