Amidst the coronavirus pandemic and a challenging year for the Indian economy, Finance Minister Nirmala Sitharaman presented the Budget on February 1. Her previous budget speeches have spoken of the vision of 'Make in India' and India becoming a $5 trillion economy - and this year's budget continued a similar theme.
FM Sitharaman said that budget preparation was undertaken under circumstances "like never before" and is India's first ever "paperless budget".
From an indirect tax perspective, though tax collections are behind budget estimates, GST collections are seeing a high and this is being attributed to Artificial Intelligence ('AI') and use of analytics by GSTN. Further, excise collections have shown growth since the drop in crude oil prices allowed the government to increase excise duties on fuel, which enjoys a largely inelastic demand.
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Economic packages were announced by the government last year to revive the economy. This included the product linked incentive (PLI) scheme that was introduced for mobile phones, electronic components and the pharma sector. Also, in November 2020 the government announced the PLI scheme for another 10 sectors (technology, pharma/drugs, automobiles and auto components, telecom and networking products, textile and food products etc.) with a total outlay of Rs 1.46 lakh crore making the total incentives to Rs 1.97 lakh crore.
The indirect tax proposals forming part of the budget were largely from a customs perspective. Though few changes were announced in the GST law as well, GST changes are essentially proposed by the GST council throughout the year.
The current budget focuses on rationalisation of custom duties to make India self-reliant by promoting domestic manufacturing and to be a strong player in the global value chain towards its aspiration of becoming an economic superpower.
In this direction, the government eliminated 80 outdated customs exemptions last year and is now planning to review an additional 400 customs exemptions and bring in a revised customs duty structure from October 2021. Certain changes have also been proposed to align with the global classification of products. Customs exemptions now have a validity of two years unless specifically renewed.
In order to promote domestic manufacturing, basic customs duty (BCD) on various products such as certain mobile parts, automobile parts, chemicals, solar inverters and lanterns etc. has been increased.
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In order to finance agriculture infrastructure and other development expenditure, 'Agriculture Infrastructure and Development Cess' has been introduced on specified items such as apples, alcoholic beverages, crude edible oil, etc. with corresponding reduction in the BCD rates on most of the products, so that consumer does not bear additional burden.
Basis the recommendation of the GST Council, relief has been extended to certain taxpayers by removing the mandatory requirement of submitting a GST audit report that is certified by an accountant and a self-certified GST statement will be acceptable for future periods. Further, provisions for interest under GST law have been amended with retrospective effect from July 1, 2017 to charge interest on a net cash liability basis.
This year's budget was in the midst of the pandemic, but stayed on the path of 'AtmaNirbhar Bharat Abhiyan' that supplements the Make in India vision of the government.
The customs duty changes are in line with the objective to boost domestic manufacturing industry that will further strengthen the Indian economy. We look forward to the journey of self-resilience that we have embarked upon, with the aim of becoming an economic superpower.
(The author is Senior Director, Deloitte India.)