Automating customs process, correcting inverted duty structure, easing compliance and introducing an amnesty scheme to settle past customs-linked disputes are some of the key recommendations of the industry for the Budget for FY26.
Last week, industry unions and tax experts had met the revenue secretary to submit their proposals pertaining to tweaks necessary on the taxation front. In July 2024, finance minister Nirmala Sitharaman had announced a comprehensive review of the customs duty rate structure to rationalise and simplify it, in order to enhance ease of trade and address the duty inversion.
In July, Niti Aayog had said that India needs to “significantly overhaul” the import tariffs, and use fiscal incentives for being a major player in global value chains for electronics, and set a target of $500 billion for the sector by 2030 from a little over $100 billion at present.
Besides electronics, industry experts have recommended correction of inverted duty structure in textiles, apparel, leathers, automotive parts, telecommunications, and toys, among others. At present, manufacturers have to pay import duties on many such raw materials and intermediate goods, which are higher than the levies on finished goods.
Typically, this scenario exists because the government encourages firms to source input items locally rather than externally, but manufacturers are heavily reliant on imported inputs and thus have to pay a high price.
Brijesh Kothary, partner, Khaitan & Co, said, “The industry is specifically looking for reduction in the rate of customs duty on import of medical devices which would bring down the overall cost of provision of healthcare services and also curtail smuggling of such devices into India.”
The Confederation of Indian Industry (CII) has recommended duty on raw materials to be in the range of nil-2.5%; on intermediaries to be 2.5-5%; and on finished goods to be 7.5-10%. “The government should undertake duty changes for imported goods based on sector-wise industry consultation and review of existing FTAs and exemption notifications to correct cases resulting in inverted duty structure,” the CII has said.
Adjusting customs duties can effectively reduce imports, stimulate domestic manufacturing, and attract investments in strategic sectors, promoting self-sufficiency and enhancing India’s manufacturing capabilities, say experts.
Meanwhile, the government should introduce more automation in customs reporting that could ensure better compliance and curb tax evasion, fostering a more efficient and competitive business environment, suggest experts.
Krishan Arora, Partner, Grant Thornton Bharat said that the industry eagerly anticipates the announcement of an amnesty scheme for Customs to settle long-standing disputes, and the digitisation of the customs litigation process. Also, an efficient online refund system for customs would ensure timely repayments and improve cash flows, he added.
According to industry estimates, an estimated 30,000 cases are pending in various courts, involving an amount of more than Rs 40,000 crore, which may reduce substantially with the operationalisation of an amnesty scheme, thereby increasing revenue for the government and providing much-needed relief to businesses.
From: financialexpress
Financial News
