The Union Budget 2022-23 has reiterated the government’s commitment towards a stable and predictable tax regime, focusing on continuous reforms to establish a reliable tax regime. An indirect tax is a tax imposed on goods and services before they reach the customer. The consumer subsequently pays this indirect tax as a part of the market price of the purchased goods or service. Examples include Goods and Services Tax (GST) and import duties.
Key Proposals Tabled in the Budget
The budget included various key proposals aimed at enhancing economic growth and stability. Highlights include record GST collections, changes in customs administration in Special Economic Zones (SEZs), and reforms in customs and duty rates.
A Look at Record GST Collection
January 2022 saw an all-time high GST collection of Rs 1.40 lakh crore, demonstrating rapid economic recovery despite the ongoing coronavirus pandemic. The buoyant GST collection underscores India’s spirit of Cooperative Federalism, realizing the dream of one market-one tax.
Revamping Special Economic Zones (SEZs)
SEZs’ customs administration will be fully IT-driven and function through the Customs National Portal to promote higher facilitation with only risk-based checks.
Customs Reforms and Duty Rate Changes
With Faceless Customs firmly established, customs reforms have greatly contributed to domestic capacity creation, providing a level playing field for MSMEs, easing raw material supply-side constraints, and enhancing the ease of doing business. These reforms also serve as an enabler for other policy initiatives such as PLIs and Phased Manufacturing Plans.
Project Imports and Capital Goods
The National Capital Goods Policy, 2016, aims to double the production of capital goods by 2025, leading to job creation and increased economic activity. However, the substantial duty exemptions granted to several sectors have impeded the domestic capital goods sector’s growth. The budget, therefore, proposed a phased withdrawal of these concessional rates and suggested applying a moderate tariff of 7.5%—a step conducive to the growth of the domestic sector and ‘Make in India’.
Exploring Sector-Specific Proposals
The budget also put forth proposals across various sectors. These included a balanced customs duty rate for electronics, new manufacturing programs, reduction in customs duty on gems and jewelry, and rationalization of exemptions on implements and tools for the agri-sector.
Tariff to Encourage Fuel Blending
The budget has proposed tariff measures to encourage fuel blending. Unblended fuel will attract an additional differential excise duty of Rs 2/ liter from October 1, 2022, to promote fuel blending further.
Sources: IE
