[Opinion] Union Budget 2023 – Amendments proposed in the Customs Law

Authored by PS Krishnan – Partner, Indirect Taxes & Nimit Davey – Director | Grant Thornton

Table of Contents

1. Introduction

2. Ease of doing business

3. Dispute Resolution

4. Simplification of tax structure and tariffisation

5. Key proposals with respect to tariff

6. Conclusion

1. Introduction

Union Finance Minister Nirmala Sitharaman presented the Union Budget 2023, the last full year budget of the incumbent government. The theme and focus of the budget is a renewed vision for Amrit Kaal. The seven priorities were well laid out as part of the Amrit Kaal.

The Saptarishis or seven priorities listed by the Government are as follows:

1. Inclusive development.
2. Reaching the last mile.
3. Infrastructure and investment
4. Unleashing the potential.
5. Green growth.
6. Youth power.
7. Financial sector.

The Customs law proposals embedded in the tax proposals of the Budget were promulgated with the following objectives:

a. Boosting higher exports
b. Higher Domestic manufacturing
c. More value addition to the Economy
d. Boosting Green energy and mobility

The recent changes introduced in customs with regards to amendment in the tariff rates and amendment to the Customs Act can be summed up as follows:

2. Ease of doing business

Customs Act has been amended to exclude certain categories of conditional customs duty exemptions from the validity period of two years. Moreover, to remove ambiguity and to clarify the intent of the provisions relating to ADD, CVD, the Act has been amended to provide much needed clarity. The amendment in this regard is retrospective in nature (with effect from 01.01.1995).

3. Dispute Resolution

Time limit of 9 months from the date of application specified for disposal of the application filed before the Settlement Commission

4. Simplification of tax structure and tariffisation

A simplified tax structure with fewer tax rates helps in reducing compliance burden and improving tax Administration. Budget 2023 has seen amendments in the tariff structure of number of products impacting various sectors of the economy.
Rate changes have been introduced to impact the basic customs duty rates on goods, other than textiles and agriculture, cesses and surcharges on some items including toys, bicycles, automobiles and naphtha.

5. Key proposals with respect to tariff

A. Green mobility
To boost green mobility customs duty exemption is being extended to import of capital goods and machinery required for manufacture of lithium-ion cells for batteries used in electric vehicles.

B. Electronics
In a major relief extended to the electronics goods sector and to promote domestic manufacturing, the customs duty on import of certain parts of mobile phones and camera lens has been slashed. The concessional duty on lithium-ion cells for batteries is extended to continue for another year.

A proposal impacting white goods manufacturing, the customs duty has been reduced to 2.5% for open cells of TV panels.

C. Marine Products
The Basic Customs Duty has been reduced on key inputs of Marine products exports which will benefit shrimp exporters.

D. Compounded Rubber
To curb circumvention of duty, the Basic Customs Duty on compounded rubber is being increased from 10% to 25% or Rs. 30 per KG whichever is lower and is brought at par with natural rubber other than latex.

E. Lab Grown Diamonds and precious metals
Lab grown diamonds have seen a reduction in BCD which will boost the gem and jewellery sector in India and help in boosting exports. Additionally, Basic Customs Duty has been increased on articles made from gold/platinum bars/Dore.

F. Electrical – To address inverted duty structure
Most importantly, a pre-budget ask by the industry to address the issue of inverted duty structure, the Budget 2023 has rectified the inverted duty structure issue by increasing the BCD from 7.5% to 15% on Electrical Kitchen chimneys & reduction of BCD from 20% to 15 % on Heat coil used in Electrical Kitchen chimneys.

G. Chemicals and Petrochemicals
Denatured ethyl alcohol has been exempted from the levy of BCD.

H. Cigarettes
The Budget has proposed hiking the National Calamity Contingent Duty (NCCD) on specified cigarettes by 16% which will not only boost the revenue but will also increase the cost of cigarettes thereby making it a costly affair to the consumer.

6. Conclusion

With the advent of Amrit Kaal, the Budget 2023 is a successor of the previous Budget as it has focused on the seven Saptarishi’s.

The fruit of the proposals will be borne in years to come when India will be poised and hailed a global manufacturing hub. With Budget 2023, the objective of the Government is fixed- that is to make India Aatmanirnbhar.