The reduction of basic customs duty (BCD) on most items from 35 per cent to 30 per cent translates to an aggregate duty of 56.832 per cent instead of 62.864 per cent earlier - a reduction of 6.032%, on most items that attract additional duty of Customs (known as CVD) at 16 per cent and Special Additional Duty (SAD) at 4 per cent.
On such items, the CVD works out to 20.80 per cent on assessable value instead of 21.60 per cent earlier and SAD works out to 6.032 per cent instead of 6.264 per cent earlier.
As usual, the Govt. will adjust the Duty Entitlement Passbook (DEPB) rates only in April and the Duty Drawback (DBK) Rates in June. Till then, the exporters can continue to earn DEPB and DBK worked out on the basis of higher pre-budget import duty rates.
Importers who claim BCD exemption against DEPB automatically get SAD exemption. Till now, a DEPB worth Rs 35 earned exemption of Rs 6.264 i.e, a gain of 17.897 per cent on the DEPB face value. Now, a DEPB worth Rs 30 will earn an exemption of Rs 6.032 i.e a gain of Rs 20.107 per cent.
Items fully exempt from BCD and CVD automatically earn SAD exemption. This budget has moved many items from zero BCD to 5 per cent and zero CVD to 4 per cent or 16 per cent CVD. Also, the new SAD exemption notification (no. 23 dated 1.3.02) brings more items under the SAD net.
In theory, the steps taken towards greater capital account convertibility (CAC) should mean greater demand for foreign currency and hence, a weaker rupee. In practice, that need not necessarily happen. The bulging foreign exchange reserves called for bolder measures.
Duty free materials for special economic zone (SEZ) and consequent lower costs for the developers might mean low cost infrastructure for SEZ units.
But, the SEZ scheme is only one of the many competing export promotion schemes and this benefit alone need not translate into higher export performance.
Decanalisation of the export of agriculture commodities and phasing out remaining controls is one of the many significant initiatives announced in the agriculture sector. Such liberalisation will help our traders have a steady presence in the international commodity markets and realize better prices.
Our traders in international markets can now play a significant role in financing and creating many physical facilities in the supply chain from the farms to the buyers abroad, such as warehousing, testing etc.
Greater access to Indian markets for foreign banks could mean greater choice of better financial products and services for importers and exporters.
The proposal to restrict the export profits under Section 10 and 10A of the Income Tax Act to 90 per cent damages the credibility of the government and might adversely impact the investments in Export Processing Zones, 100 per cent export oriented units, software/hardware technology parks and special economic zones.
The Customs exemption notification No. 27 dated 1.3.02 grants exemption to machinery, tools and equipment taken on lease from abroad by an importer for his own use in the execution of a project.
The lessee need pay only 15 per cent of the duty leviable if the items are re-exported within six months and 30 per cent of the duty leviable, if re-exported after six months.
Specific initiatives to boost investment in ports and airports will help international trade but enough has not been done to reform the soft infrastructure of rules and regulations.
