Budget 2020: Impetus to domestic industry, cess on medical device import right steps

Accordingly, the basic customs duty on PCBA has been increased from 10 percent to 20 percent and charger/power adaptor of cellular mobile phones has increased to 20 percent. Further, BCD on headphones and earphones will be increased to 15 percent. The withdrawal of exemption from BCD on fingerprint readers/ scanner for use in manufacture of cellular phones will lead to an effective rate of 15 percent. Exemption of social welfare surcharge on specified items as information technology software, microphones, PCBA, loudspeaker and set top boxes have been withdrawn. These measures would lead to incentivising manufacturing of mobile phones in India and promoting exports of the same. Also, the custom duty rate of electric vehicles has been increased with the same objective of reducing the focus on imports and the promotion of local manufacturing of eco-friendly technology. On the other hand, exemptions have been granted to inputs and raw materials used in the manufacture of certain parts of mobile phones which will aid the domestic manufacturers in reducing their cost of manufacturing.

From a common man’s perspective also, there is some relief in this budget such as concessional import duty rates have been prescribed for products such as milk, butter, cheese and ghee. Apart from some concessions, there has been an increase in import duty on household articles such as tableware, kitchenware as well as some domestic appliances, basically to promote domestic manufacturing by the MSME sector.

The budget also tends to strengthen anti-dumping duty measures and countervailing duty measures to avoid circumvention and also lays down stringent guidelines for administration of Rules of Origin to avoid misuse of FTA benefits. A concept of electronic duty credit ledger has been introduced and will be used to regulate the passing on of incentives to genuine taxpayers and avoid the misuse of benefits available in FTP.

From GST perspective, certain amendments have been incorporated in the central Goods and Services Tax, 2017 and the Union Territory Goods and Services Act, 2017 for improving compliance and putting in effect the decisions of GST Council. The government has taken further stringent measures in this budget in order to curb fraudulent practices such as issuance of fake invoices or availment/utilisation of credit on the same. Suitable amendments have been made in the Act to make the offence of fraudulent availment of input tax credit without invoice or bill cognisable and non-bailable.

Overall, the Budget is focussed on boosting the manufacturing sector in India and improve the ease of business as well. While the budget matched what the industry was expecting, there needs to be an alignment of incentives and production subsidy to create the necessary ecosystem to promote manufacturing in India. While the tariff barriers will create sufficient disability to serve the Indian market, the necessary ecosystem needs to be developed for the products manufactured in India to be competitive in global markets to promote export to harness the true potential of the labour-intensive industries. In this regard, acknowledging assemble in India as an end in itself is a step in the right direction at this juncture.