Taking forward its drive to rationalise customs duty structure to boost local manufacturing, the Centre has proposed to phase out more than 350 duty exemptions on identified items including certain agricultural produce, chemicals, fabrics, medical devices and pharmaceutical products for which sufficient domestic capacity exists.

At the same time, Budget 2022-23 also seeks to provide concessional duties on raw materials used for domestic manufacturing and processing in sectors such as gems & jewellery, shrimp, fuel, chemical & plastics, electrical and electronic sectors, toys and certain capital goods.

“Removal of exemption on items which are or can be manufactured in India and providing concessional duties on the raw material that go into the manufacturing of intermediate products will go many a step forward in achieving our objective of ‘Make in India’ and ‘Atmanirbhar Bharat’,” Finance Minister Nirmala Sitharaman said in her Budget speech on Tuesday.

Concessional rates in capital goods

Customs duty rationalisation had been carried out in the last two Union Budgets as well. The Minister also announced the proposal to phase out concessional rates in capital goods and project imports gradually and apply a moderate tariff of 7.5 per cent. Certain exemptions for advanced machinery that are not manufactured within the country, however, are to continue.

Items on which basic customs duty is being immediately withdrawn include a variety of items such as salmon, hazelnuts, other nuts, fresh fruits like pomegranates, custard apple, lichi, tamarind, crude glycerine, silica sands, kerosene imported by IOCL, BPCL, HPCL, IBP for ultimate sale through PDS, raw materials supplied by UNICEF for the manufacture of DTP vaccines, ceramic glasses, parts of an umbrella, polyester tyre cord fabric, goods for the manufacture of refrigerator compressor and synthetic tracks.

Basic custom duty rates

Changes have also been proposed in effective basic custom duty (BCD) rates in respect of phased manufacturing programmes for electronic goods including printed circuit boards, charging cables, specified parts of wearable devices, batteries and display assembly.

To boost exports, the Budget has proposed a scheme for duty-free imports for bonafide exporters. This is based on the condition of mandatory export of value-added products manufactured using inputs imported under these exemptions, within six months. This scheme will be based on end-use monitoring.

“This comprehensive review will simplify the customs rate and tariff structure particularly for sectors like chemicals, textiles and metals and minimise disputes,” Sitharaman said.

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