BUDGET 2023- Analysis of Custom Duty related amendments

The Finance Minister, Nirmala Sitharaman, unveiled the Union Budget 2023 on 1st February 2023. Generally, the budget before general elections is always a much-anticipated one with everyone hoping for big, bold moves. Various tax relief measures were introduced under the new tax regime. It looks like the government wants taxpayers to switch to the new tax regime and phase out the old tax regime. Various measures were included to boost consumption in the economy, ease the compliance burden, benefit MSMEs and the middle class, and simplify and streamline the tax system. This article briefly describes the Custom Duty related amendments in BUDGET 2023, Analysis in Amendment in Customs Act, 1962.

Introduction

The Union Budget Speech 2023 was presented by finance minister Nirmala Sitharaman Many changes, including exemptions and reductions, were proposed in the Customs Tariff Rates, in an attempt to curb inflation. Minor changes that were introduced to the Customs duties and Indirect taxes include GST-Excise duty exemptions to compressed biogas and E-Vehicles, along with Customs Duty exemptions for imports of mobile phone accessories and Televisions.

Custom Duty related amendments

The Finance Bill of 2023 also proposed to reduce the Customs Duty Exemption to Crude Glycerine, Marine Products, Electric Kitchen Chimney, seeds used for manufacture of diamonds. In addition to laying out the proposal to increase the custom duty on cigarettes by 16 percent, the finance minister, aiming to promote value addition in the manufacturing of Televisions, proposed to reduce the Basic Customs Duty on parts of open cells of TV panels to 2.5%.

• The basic customs duties, cesses, and surcharges on items like toys, bicycles, automobiles, and naphtha have been slightly modified.
• The customs duty exemption on the import of specified capital goods and machinery required for the manufacture of lithium-ion cells used in the batteries of electrically powered vehicles (EVs) has been extended until March 31, 2024.
• Vehicles, specified automobile parts and components, sub-systems, and tyres proposed to be exempt from customs duty when imported for testing and/or certification by notified testing agencies, subject to conditions.
• In order to increase domestic value addition in the manufacture of mobile phones, the finance minister announced a reduction in customs duty on certain parts and inputs, such as camera lenses. Customs duties on camera lenses and their parts that are used to make camera modules for cell phones have been cut to zero, and the reduced duty on lithium-ion cells used in batteries has been extended for another year.
• The basic customs duty on parts of open cells in TV panels has been reduced to 2.5 percent.
• The budget also proposes changes to the basic customs duty in order to correct the inversion of duty structure and encourage the production of electrical kitchen chimneys. The basic customs duty on electric kitchen chimneys has been raised from 7.5 percent to 15 percent.
• The basic customs duty on heat coils used to make electric kitchen chimneys has gone down from 20% to 15%.
• Denatured ethyl alcohol used in the chemical industry is set to be duty-free.
• The basic customs duty on acid grade fluorspar (containing more than 97% calcium fluoride by weight) has been reduced from 5% to 2.5%.
• The basic customs duty on crude glycerine used to make epichlorohydrin would go from 7.5% to 2.5%, according to a proposal.
• Duty reduction on key inputs for domestic shrimp feed manufacturing
• The basic customs duty on seeds that are used to make diamonds in a lab has been cut.
• Import duties on silver jewellery, bars, and articles have been raised to match those on gold and platinum.
• The basic customs duty exemption on raw materials used in the production of CRGO steel, ferrous scrap, and nickel cathode was maintained.
• The 2.5 percent BCD on copper scrap is maintained.
• The basic customs duty rate on compounded rubber was raised to 25% from 10% or Rs. 30 per kg, whichever is lower.
• Through the Budget 2023, the government also plans to reduce customs duty on shrimp feed to promote exports. The basic import duty on compounded rubber was also increased by 15%, reaching a new duty at 25% rate.
• Basic customs duty has also been hiked for articles made from gold bars.

Analysis in Amendment in Customs Act, 1962 

• Section 25 of the Customs Act is being amended to insert a Proviso to subsection (4A) to provide that the validity of two years shall not apply to exemption notifications issued in relation to multilateral or bilateral trade agreements; obligations under international agreements, treaties, conventions; UN agencies, diplomats, international organizations; privileges of constitutional authorities; schemes under Foreign Trade Policy or other Central Government schemes having a validity of more than two years; re-imports, temporary imports, goods imported as gifts or personal baggage; any duty of customs imposed under any law in force including integrated tax leviable under sub-section 7 of Section 3 of the Customs Tariff Act, 1975, other than under Section 12 of the Customs Act
• Section 127 C of the Customs Act is being amended to insert sub section (6) to specify a time limit of 9 months from the date of application, for disposal of the application filed before the Settlement Commission.

Conclusion

The Customs duty on kitchen electric chimneys have also been increased to 15 percent from 7.5 percent. The Government further laid down the proposal to reduce customs duty on import of certain inputs for mobile phone manufacturing. Changes in customs duty, also known as tariffs, can have several effects on the economy.