Budget 2021

Customs duty being streamlined for ease of doing business

MS Mani | Updated on February 04, 2021

During the past few years, we have seen significant changes in Customs duty — both in terms of rates and procedures. There has been a gradual reduction in the Customs duty rates on many products with 7.5 per cent rate becoming common across a wide variety of goods. The procedures relating to payment of custom duties on import and clearance of goods have also been simplified, making it possible for importers to clear goods from seaports, airports and land Customs stations faster and with fewer delays compared to the past.

The clearance of imported goods from ports is one of the areas evaluated in the ease of doing business rankings, and an efficient import process helps businesses to reduce costs by eliminating delays and reducing the length of the working capital cycle. The Customs regime has also been replete with various exemptions and, hence, determining the effective rate of duty involves a reference to both the tariff rate and the exemption/concessional notifications.

In the previous Budget, the government had eliminated several exemptions which had outlived their utility.This initiative has been accelerated in the current budget to eliminate all conditional exemptions not having an end date by March 2023. Further, all future exemptions, which are based on fulfillment of conditions, will be valid for two years only.

Increase in import duties

These changes would ensure that, over the next few years, the number of conditional exemptions come down significantly and businesses find it easier to determine the effective custom duties applicable on goods imported by them. Further, there are some trade facilitation measures which would aid all importers such as:

A Common Customs Electronic Portal is being envisaged for facilitating registration, filing of bill of entry, shipping bill, other documents and forms, payment of duty and for such other purposes as may be specified by CBIC. Once the new portal starts functioning it would also enable service of orders, summons, notices, etc. and make interactions with Customs authorities increasingly digital.

Mandatory filing of Bill of Entry (BOE) before the end of the day preceding the arrival of goods (including holidays)

A two-year time limit for completion of any proceedings under the Customs Act, which culminates in the issuance of a show cause notice under section 28 of the Act.

Import duties on several goods have been increased in a calibrated manner to encourage manufacture.

There has also been a duty reduction in cases where the raw materials and intermediaries are used to manufacture finished goods. There appears to be a clear objective to assist domestic manufacturers in sectors where capacity exists to aid employment growth.

Customs duties have been reduced for several goods, including gems and jewellery items, covered by Chapter 71. The Custom duties for gold and silver have been uniformly reduced from 12.5 to 10 per cent. The customs duty changes in the Budget would aid importers and businesses by facilitating more streamlined import processes, increase digital interaction processes and provide a level-playing arena for domestic businesses.

The writer is Senior Director, Deloitte India. Views are personal

Published on February 04, 2021

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