Thursday, 1 February 2018

Jaitley goes local, gives 'Make in India' a dose of protection

Keen to spur local manufacturing, the Budget raised basic customs duty on a host of items including mobile phones and TV components, furniture and certain automobile parts, and unveiled a slew of measures to make it easier to do business in the country. The Budget also introduced a 10% social welfare surcharge on the duty. 

In the first Budget after the roll out of goods and services tax, the government turned to the import duty framework to foster domestic investment and boost the 'Make in India' programme. Customs tariffs have been raised by 5-20 percentage points on several items that have witnessed large imports. 

There have also been steps to make compliance easier for businesses. A select category of exporters and importers can avail of a special regime with simple procedures. Customs officials must call taxpayers for consultations prior to issuing demand notices, providing them an opportunity to settle. If the adjudication process didn't start within a time limit, the case will have to be dropped. 

Importers and exporters can also ascertain tax liability by seeking an advance ruling from the Central Board of Indirect Taxes and Customs — the renamed Central Board of Excise and Customs. 

Tax experts and industry executives said the message was loud and clear: "Make in India". 

"There is a clear policy shift in increasing customs duty to incentivise domestic manufacturing on many items including cell phones, smart watches, perfumes, juices and so on," said Pratik Jain, the indirect taxes leader at PricewaterhouseCoopers. 

Nine out of every 10 handsets sold in the country will be produced locally in 2018, after the government increased the customs duty on mobile devices to 20% from 15%, industry experts said. 

"We have doubled up our production capacity this financial year and will continue to scale up," said Motorola Mobility India managing director Sudhin Mathur. 

The duty hike on TV parts like cabinet and printed circuit board to 15% from 10% will force companies to start manufacturing or locally sourcing these components, said industry executives. 

"The writing on the wall is clear — we have to manufacture everything locally," said CM Singh, an adviser to consumer electronics manufacturer Videocon. 

Increased customs duty on specified automobile components to 15% from 7.5-10% will impact automakers who import parts, said 
Abhishek Jain, partner at EY

The government decision will encourage not only investments, but also technology development in the sector, said Nirmal Minda, chairman of auto parts maker Minda Industries.

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