This budget is not about setting the indirect tax policy given the introduction of GST in 2017, a major reform which will change the entire policy on Indirect taxes in India. The Finance Minister in this budget session has reaffirmed the Government’s commitment to implement GST this year from 1 July. He elaborated on the developments which included passing of the GST amendment bill, finalization of the Model GST Law, IT readiness and most importantly, consensus between the Centre and the States represented at the GST Council. Since most of the obstacles stand addressed, it seems like the introduction of GST during the course of 2017 is nearly certain.
With GST around the corner, this budget has not made significant changes in the existing indirect tax legislations. A few amendments introduced by the budget are consistent with the government’s priority agenda of Make in India, Digitization and simplification of tax administration.
The government has imposed a levy of Special Additional Duty of 2% on import of populated circuit boards used in the manufacture of mobile phones. While this may marginally increase the price of phones in the short run, this would incentivize domestic manufacturing of PCBs. Further, the basic customs duty on import of solar tempered glass has been reduced from existing 5% to NIL and replaced with a levy of 6% CVD. While BCD is a cost, CVD is creditable and hence not a cost. Parts required for manufacture of solar tempered glass would be subject to lower rate of excise duty of 6%. The above moves would encourage domestic manufacturing of solar cells/ panels/ modules etc. in India.
The government also abolished the levy of Research and Development (R&D) Cess which is imposed on import of technology in India. The R&D Cess paid was adjusted against the service tax payable on import of technology under the reverse charge mechanism. While the service tax was usually creditable to the manufacturer, the R&D Cess paid was a cost. The abolition of the R&D Cess not only relieves the manufacturer from multiplicity of taxes but also reduces the cost for importing foreign know-how and technology for use in India.
In order to promote cashless transactions, it has been proposed that all taxes levied by the central government on import or domestic manufacturing of POS card reader for m-POS, micro-ATM, finger print reader/ scanner and iris scanner has been exempted. All duties are also being exempted on the parts of the above items if used in the manufacture of these items in India.
Further, to accelerate disposing off the pending rulings, it has been proposed to merge the Authority for Advance Ruling for Income tax with that of Customs, Excise and Service tax.
For standardization of import procedures, notified foreign post offices and international courier terminals have been included in the definition of Customs station and all the procedures of import would be applicable for import of foreign post office and international courier terminals. Further, Customs duty exemption provided to goods worth CIF value up to INR 1,000/- when imported through postal parcels, packets and letters. Relaxation has been provided to importers by waiving off the requirement of establishing unjust enrichment in case of refund of excess duty paid, if the same is evident from the self-assessed bill of entry.
Overall the budget did not lay down any major policy push in any particular direction except pursuing the broad contours of Make in India and digitization. With the entire industry gearing up for the transition to GST from 1 July, it is indeed a welcome relief that no major changes were made necessitating system changes for the industry. The entire industry now waits for the final law and rules and the rates and exemptions on each sector to plan the business and process changes in GST. Given that GST is being implemented this year and all major decisions need to be reached in the GST council representing the center and states, has the annual budget lost its meaning from an indirect tax perspective in the years to come? It is indeed a sobering thought.
Source: moneycontrol.com