Union Budget fosters 'Make in India'

With ‘Job Creation’ being a primary focus area, Government through the Budget 2017, proposed a slew of exemptions /reduction in customs and excise duties on inputs required to be procured by domestic manufacturers and at the same time also enhanced duties on finished products imported into India in order to further boost its 'Make in India' campaign.

Rationalization of Custom Duty

Significant inputs on which basic customs duties has been reduced are:

• Liquefied natural gas from 5% to 2.5%.
• Nickel from 2.5% to Nil rate
• Solar tempered glass for use in manufacture of solar cells/panels/modules from 5% to Nil rate

Further, customs duties have been increased on certain products such as Basic Customs Duty (BCD) on cashew nut from 30% to 45%.

Correction of Inverted duty structure

Smooth implementation of Make in India initiative has to address certain challenges such as challenge of inverted duty structure. Inverted duty structure is a scenario wherein higher burden of tax incidence is on raw materials as compared to the tax incidence on finished goods which is comparatively lower which leads to higher accumulation of credit. Inverted duty structure leads to blocking of working capital as huge tax burden is envisaged on import/procurement of raw material for manufacture.  To address this issue, excise duty on inputs i.e. machines required for biogas/bio–methane/by-product hydrogen, has been reduced from 12.5% to 6%.

These steps will assist in addressing the problem of inverted duty structure faced by certain sectors which would lead in cost saving, lesser or no blockage of working capital, etc. which will in turn aid the local manufacturers and such measures are likely to benefit the scheme reinstating the Government’s commitment to enhance the “Make in India” campaign.

By Bhadresh Vyas – Senior Manager, Bhairavi Vora - Executive at SKP Group

Disclaimer: Views expressed are strictly personal. The content of this document are solely for informational purpose, it doesn’t constitute professional advice or recommendation.