Budget 2019: Implications on indirect tax

Capital goods used for manufacturing of following electronic items like display module, set up boxes, camera module of cellular mobile phones, the compact camera module has been exempted to boost manufacturing of mobile and television sector of India.

Basic custom duty of floor covering of plastics, tiles, base metal fittings etc increased from 10% to 15%

Rates of optical fibre have increased from 10 to 15%

Basic custom duty of charger/power adapter for CCTV camera/IP camera/DVR/NVR has been increased from nil to 15%

Basic custom duty of 5% has been imposed on import of books

Stainless steel in ingots or other primary forms; semi-finished products increased from 5% to 7.5%

Rates for items like wool fibre alloy ribbon has reduced

Parts of electric vehicles has been exempted from basic custom duty

Specified defence equipment and their parts imported by the Ministry of Defence or the Armed Forces has been exempted from basic custom duty

Many exemptions based on end use like exemption on palm stearin and other oils used in manufacture of soap have been withdrawn

Overall, customs duty has been rationalized given the domestic industry demand, to protect them from overseas Industry.

An interesting change has been introduced in the Customs law, aimed at giving powers to the Customs officers to investigate and penalize defaulters of SEIS scrips, who have obtained these scrips incorrectly and the person who has obtained these scrips fraudulently will be liable to pay a penalty. The fear remains that the officers will not evoke the provision on technical grounds, given that SEIS scrips are issued by the officers after due application of mind.

To ensure the smooth compliance, better transparency and complete automation, government had decided in GST council meet and accordingly, the concepts of simplified return, electronic invoicing, single ledger for all tax heads and automated GST refunds, was introduced in the budget speech. To make these concepts legally viable, amendments have been proposed in the finance bills in the relevant provisions of the Act.

A dispute resolution cum amnesty scheme called the Sabka Vishwas Legacy Dispute Resolution Scheme is introduced to end up the piled-up cases with the government with respect to erstwhile laws in indirect tax. Given that large number of cases continue to be pending with the department in Service tax and Excise, and given that both the officers and trade are now involved in GST compliances, the dispute resolution mechanism will clear the pendencies and improve efficiencies all around. This will also boost government’s revenue given that credit cannot be used in paying these taxes, nor can credit be taken of the taxes paid.

Basic Excise Duty and Cess on petroleum product has been raised, given that the rate of crude oil in international market has softened.

While the expectations continue to be high, the current budget does not have major changes given the paucity of time since the government took over. Yet the budget incentivized ‘Make in India’, promoted manufacture of E-vehicles, protected industries like optical cables and found ways on increasing the revenue amicably. The wait for the next budget begins!