India has significantly rejigged basic customs duties to promote domestic manufacturing and help the country become part of the global value chain. A comprehensive review of the customs duty rate structure will be undertaken over the next six months to rationalise and simplify it for ease of trade, removal of duty inversion, and reduction of disputes.Duty inversion happens when finished products are subject to lower import duty than the inputs needed to make them.Finance minister Nirmala Sitharaman announced a rejig in customs duty on a plethora of products including mobile phones and electronics, gold, silver, critical minerals, leather and certain chemicals to support local manufacturing.”My proposals for customs duties intend to support domestic manufacturing, deepen local value addition, and promote export competitiveness,” Sitharaman said. “However, the most important step is the commitment to tackle the inverted duty structure through a six-monthly drive,” said Pratik Jain, partner, PwC. “This will considerably facilitate domestic manufacturing, provided stakeholder inputs are duly factored in. Overall, a progressive budget for India’s manufacturing ecosystem.”The push for the mobile phone sector comes amid a quadrupling in domestic production and an almost 100-fold jump in exports over the last six years, while the boost to the processing and refining of critical minerals such as lithium copper, cobalt and rare earth elements will help secure their availability for these strategic and important sectors. Medical devices, solar energy, marine products, chemicals, petrochemicals and telecom equipment are the other sectors where basic customs duties have been tweaked to incentivise local manufacturing.To amplify the benefits of the goods and services tax (GST), the minister announced a further simplification and rationalisation of the tax structure and expanding it to the remaining sectors. Besides, to enhance domestic value addition in gold and precious metal jewellery in the country, the budget cut custom duty on gold and silver to 6% and platinum to 6.4%, respectively.
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