Union Budget 2020: Protection, evasion prime concerns

This Union Budget takes forward the government’s agenda to protect Indian industries from import and strengthen the enforcement mechanisms to counter evasion or circumvention of duties. 

Duty exemptions are being pruned for import of certain agro and animal-based products, some items of basic metals, machinery for use in specified projects, copper and certain articles for use in manufacture of electronic items, and some sundry items. Import duty is raised on household goods and appliances, electrical appliances, footwear, furniture goods, stationery items, toys, certain machinery and miscellaneous products. Also under the phased manufacturing programme on electric vehicles and components of cellular mobile phones. Parts of a few electronic goods and specified food items, automobile and auto parts, chemicals and plastics also now attract higher Customs duty. 

Import of some raw materials and inputs by domestic manufacturers, such as specified fuels and chemicals, precious metals, machinery and electronic goods, sports goods and newsprint attract lower duty. A health cess at 5 per cent is to be imposed on import of medical devices. Exemption from social welfare surcharge has been removed on many items. 

The Finance Bill proposes to bring all goods under the purview of Section 11 of the Customs Act. Which gives the central government the power to prohibit export or import of any goods, either absolutely or subject to such conditions as may be notified. The specified 22 purposes for which a notification under Section 11 can be issued include maintenance of the security of India, prevention of injury to economy of the country, conservation of foreign exchange, safeguarding balance of payments and so on. Rules for anti-dumping and countervailing measures are being amended to cope with circumvention. 

A new Section 28DA is being introduced in the Customs Act, casting certain obligations on an importer who claims lower duty rates under trade agreements and prescribing for time-bound verification of origin criterion from the exporting country in case of doubt. Pending verification, preferential tariff treatment shall be suspended and goods cleared only on furnishing security equal to the differential duty. In some cases, preferential tariff treatment may be denied without further verification. 

Section 8B of the Customs Tariff Act provides for imposition of safeguard duty as a trade remedy against surge in import of a commodity. This is being amended to make provisions for application of other safeguard measures such as Tariff Rate Quota and any other measure as the central government may deem necessary to protect domestic industry from injury due to significant surge in import.

Section 132 of the Central Goods and Services Act is being amended. This is to make the offence of fraudulent availing of input tax credit without invoice or bill a cognisable and non-bailable offence. And, to make liable for punishment any person who commits or causes the commission or retains the benefit of transactions arising out of the specified offences. 

To achieve higher export credit disbursement, a new scheme, NIRVIK, is being launched. It provides for higher insurance coverage, reduction in premium for small exporters and a simplified procedure for claim settlements. A new scheme of Rs 10 billion to help mid-size companies to upgrade technology, pursue research and development, business strategy, etc, has also been announced. 

These measures are not going to suffice for boosting of export. 

Email: ncrajagopalan@gmail.com