On the Indirect tax front, Finance Minister Nirmala Sitharaman has brought some radical changes in customs duties driven by the idea of promoting 'Make in India' initiative of the government.
1. Make in India
Customs duties have been increased on precious metals, specified automobile parts (mirrors, intake filters, horns, lighting equipment, etc.), electronic equipment (digital video recorder, CCTV camera, optical fibres, indoor-outdoor unit of split AC etc.), iron and steel items, imported books, flooring materials etc. Moreover, the exemption given to specific electronic components (such as charger/power adapter for camera, plugs, sockets etc.), which are now being manufactured in India, is withdrawn, which indicate the government's intention to withdraw exemptions and promote Make in India by disincentivising imports.
2. Focus on defence
By giving exemption to specified defence equipment and their parts imported by the Ministry of Defense or Armed Forces, Sitharaman has given a message that the defence sector is an integral and important part of the nation.
3. Thrust to electric vehicles sector
In order to incentivise and give thrust to electric vehicles sector, customs duty on specified parts required for the manufacture of EVs has been brought down to nil. In addition, there is already a proposal before the GST Council to reduce the GST on e-vehicles from present 12 per cent to 5 per cent.
4. Rates rationalisation
Reduction in customs duties has also been made on a few items, which were considered necessary such as medical supplies, nuclear fuels and nuclear energy, wood fibre, capital goods for manufacture of specified electronic items etc.
Service tax and excise
1. Legacy Dispute Resolution Scheme
Recognising the huge pending litigation in excise and service tax, the government has heeded to demands of the industry by introducing the Legacy Dispute Resolution Scheme. While details and mechanics of the scheme would need to be analysed in detail, as of now it looks like that the government - by offering relief to the extent of more than 50 per cent of the disputed taxes in addition to waiver of interest and penalty - has clearly indicated that it also wants to end open legacy matters and unnecessary litigation clogging the system.
2. Hike in duties on petrol, diesel and tobacco
There has been an increase in duties on petrol & diesel by Rs 2 per litre, which will definitely attract negative response from the public at large since it will go in increasing the price of petrol and diesel. This would lead to an increase in transportation costs resulting in spiralling inflation.
(The author is Senior Director, Deloitte India)