Unlike many prior Budget announcements, Union Budget announced various changes to the indirect taxation regime in India, including changes to both Customs Duty and GST rates. Read this article to know what changes have been made in terms of both laws and rates related to Customs Duty and GST.
Table of Contents :
- Effect of Union Budget 2020 on Customs Duty
- Withdrawal of Customs Duty Exemption
- Changes in Rates of Customs Duty
- Imposition of Health Cess on Specified Medical Equipment
- Tax Refund delayed due to late ITR filing
- Effect of Union Budget 2020 on GST
- Proposed Changes in GST after Union Budget 2020
- Retrospective Changes in GST after Union Budget 2020
- Other Changes in GST after Union Budget 2020
Effect of Union Budget on Customs Duty
Union Budget 2020 introduced various changes in the customs duty regime of India. The following is a short list of the major changes with respect to items exempted from customs duty and the goods for which customs duty has been changed:
Withdrawal of Customs Duty Exemption
Union Budget 2020 announced withdrawal of Customs Duty exemption on 80 imported goods. Following is the list of these goods as mentioned in the Budget 2020 Annex to Part B:
| Category | Specific Items |
| Agro and animal based products | Tuna bait, skimmed milk and specified milk products, sugar beet seeds, raw sugar, certain alcoholic beverages, whey and isolated soya protein, soya fibre, etc |
| Items of Metals |
|
| Machinery | Machinery imported for use in specific projects such as specified electricity generation projects, specified Metro projects, etc. Specified goods required for construction of roads |
| Electronic Items | Copper and articles made of copper used in specified electronic items; Parts for manufacture of printers, CD Writers, MP3 or MP4 or MPEG 4 players, pre-recorded cassettes, audio cassettes, colour television tubes, etc. |
| Miscellaneous |
|
Changes in Rates of Customs Duty
Union Budget 2020 also announced an increase in customs duty of the following goods to promote the Make in India initiative:
| Category | Specific Items | Rate of Customs Duty | |
| From | To | ||
| Household goods and appliances | Tableware and kitchenware of porcelain or china, ceramic, clay, iron, steel, copper and aluminium, glassware, padlocks, brooms, hand-sieves, combs, vacuum flasks, etc | 10% | 20% |
| Electrical Appliances | Fans, food grinders/mixers, shavers and hair removing appliances, water heaters, hair/hand drying apparatus, ovens, cookers, toasters, coffee/ tea makers, insect repellents, heaters, irons, etc. | 10% | 20% |
| Footwear |
|
25%
15% |
35%
20% |
| Furniture goods | Seats, articles of bedding including mattresses, lamps, lighting, illuminated signs, and other articles of furniture | 20% | 25% |
| Stationery items | Filing cabinets, paper trays, binders, clips, staples, sign-plates, name plates, numbers and symbols etc. made from base metal | 10% | 20% |
| Toys | Tricycles, scooters, scale models, dolls, etc. | 20% | 60% |
| Machinery |
|
5%
7.5% 10% 7.5% 7.5% 2.5% |
7.5%
10% 12.5% 15% 10% 7.5% |
| Other miscellaneous items | Glass beads, Artificial flowers, Bells, gongs, statuettes, trophies and like, statuettes, ornaments, photograph, frames, mirrors etc. of base metal. | 10% | 20% |
Changes in Customs Duty for Electric Vehicles and Cellular Mobile Phones under Phased Manufacturing Programme (PMP)
The following changes to Customs Duty are applicable from 1st April, 2020 onwards. However, the change in customs duty for display panel and touch assembly will apply from 1st October, 2020.
| Items | Rate of Duty | |
| From | To | |
| Completely Built Units of Bus and Trucks | 25% | 40% |
| Semi Knocked Down (SKD) units of bus, trucks and two wheelers | 15% | 25% |
| Semi Knocked Down (SKD) units of passenger vehicles and three wheelers | 15% | 30% |
| Completely Knocked Down (CKD) units of passenger vehicles, three wheelers, two wheelers, bus and trucks | 10% | 15% |
| PCBA of Mobile phones | 10% | 20% |
| Vibrator/Ringer of Mobile phones | Nil | 10% |
| Display Panel and Touch Assembly | Nil | 10% |
Changes in Customs Duty for the Electronics Sector
Quite a few imported electronics items have witnessed a change in the rate of duty applicable to them. The key ones to remember include:
| Items | Rate of Duty | |
| From | To | |
| Motors like Single Phase AC motors, Stepper motors, Wiper Motors etc | 7.5% | 10% |
| Specified chargers and power adapters | Applicable rate | 20% |
| Fingerprint readers for use in cellular mobile phones | Nil | 15% |
| Earphones and headphones | Applicable rate | 15% |
Reduction in Customs Duty on Raw Materials and Inputs Imported by Domestic Manufacturers
Union Budget 2020 also announced changes in the customs duty rate applicable to various raw materials such as:
| Category | Specific Items | Rate of Duty | |
| From | To | ||
| Fuels, Chemicals and Plastics |
|
10%
10% 10% 7.5% |
Nil
7.5% 5% Nil |
| Precious Metals | Platinum or Palladium used in manufacture of:
Spent catalyst or ash containing precious metal, subject to specified conditions |
12.5%
12.5% |
7.5%
11.85% |
| Machinery and Electronic Goods | Following parts of Microphone:
|
10% | Nil |
| Micro-fuse base, sub-miniature fuse base, Micro-fuse Cover and sub-miniature fuse cover for use in manufacture of micro fuse and sub-miniature fuse. | 7.5% | Nil | |
| Sports Goods | Willow is being included in the list of items allowed duty free import up to 3% of FOB value of sports goods exported in the preceding financial year | Applicable rate | Nil |
| Newsprint |
|
10% | 5% |
Other Changes in Customs Duty
A few other items witnessing a change in customs duty that are not mentioned above are as follows:
| Category | Specific Items | Rate of Duty | |
| From | To | ||
| Food processing | Walnuts, shelled | 30% | 100% |
| Chemicals and plastics | Colloidal precious metals, inorganic or organic compounds of precious metal, amalgams of precious metals | 7.5% | 10% |
| Other prepared binders for foundry moulds or cores; Chemical products and preparations of the chemical or allied industries | 10% | 17.5% | |
| Butyl Acrylate | 5% | 7.5% | |
| Auto and auto parts | Catalytic converter | 10% | 15% |
| Noble metal solutions and noble metal compounds used in the manufacture of catalytic converter and related parts | 5% | 10% | |
| Platinum or Palladium used in manufacture catalytic converter and related parts | 5% | Applicable rate | |
| Parts and other specified inputs for manufacturing catalytic converters. | 5% | 7.5% | |
| Completely Built Units (CBUs) of commercial vehicles apart from electric vehicles (effective 1st April, 2020) | 30% | 40% | |
Imposition of Health Cess on Medical Equipment Imports
Union Budget 2020 also took the step of imposing a health cess on specific imported medical devices. The details of this cess are as follows:
- Union Budget 2020 announced imposition of health cess at the rate of 5% on the import of medical devices for financing health services and infrastructure in India.
- The health cess will be imposed by increasing the customs duty applicable to the item.
- Please note that this new health cess will not be applied on medical devices which are currently exempt from Basic Customs Duty (BCD).
- Furthermore, the cess is applicable to finished medical devices inputs/parts used to manufacture medical devices will be exempted from health cess.
Other Noteworthy Customs Duty Changes
Revocation of anti-dumping duty on Purified Terephthalic Acid
Union Budget 2020 announced discontinuation of anti-dumping duty on import of Purified Terephthalic Acid from the following countries:
- South Korea
- Thailand
- China
- Iran
- Indonesia
- Malaysia
- Taiwan
Increase in National Calamity Contingent Duty (NCCD) on cigarettes and tobacco products
National Calamity Contingent Duty (NCCD) refers to an excise duty on certain manufactured goods as per Finance Act, 2001. This duty has been increased on the following tobacco products:
| Product | Change in NCCD |
| Cigarettes | An increase of Rs. 200 to Rs. 735 per thousand depending on the length of cigarette and whether the product is filtered or non-filtered |
| Smoking mixtures for pipes and cigarettes | Increased from 45% to 60% |
| Other forms of smoking tobacco and forms of chewing tobacco | Increased from 10% to 25% |
| Bidis | Unchanged |
Effect of Union Budget 2020 on GST
Union Budget 2020 announced both prospective and retrospective changes in GST. The changes in this regard have been discussed in the following sections.
Proposed Changes in GST after Union Budget 2020
The following changes to GST have been proposed in Budget 2020, however they will be implemented as per the government notifications and corresponding changes/amendments in the GST Act at a later date:
- The date of issuance of debit note will be delinked form the date of issuance of underlying invoices required for availing input tax credit (ITC).
- Issuance of TDS certificate by a deductor is no longer compulsory, and hence there will no late fee for delay in issuance of such TDS certificate.
- The following categories of taxable persons have been excluded from the scope of composition scheme:
- Suppliers of services exempt from GST as per CGST Act.
- Inter-state outward suppliers of services.
- Outward suppliers of services through an e-commerce operator.
- Unlawfully availing ITC is now a non-bailable and cognizable offence, as per Section 132 of the CGST Act.
- Both beneficiary of fraudulent ITC and the one committing such specified GST offences will be penalized similarly.
- Provision for cancellation of GST registration has been introduced for those registered for GST on a voluntary basis.
Retrospective Changes in GST after Union Budget 2020
The following changes in GST are retrospective in nature, which means they will be applicable from a date earlier than the date of announcement.
- CGST, UTGST and IGST on fishmeal (HS 2301) is exempted from 1st July, 2017 to 30th September, 2019. However, GST already paid on supply of fishmeal during the period will not be refunded.
- Rate of IGST has been reduced to 12%, while rates of CGST and UTGST have been reduced to 6% on pulleys, wheels and other parts (heading 8483) and parts of agricultural machinery under headings 8432, 8433 and 8436 for the period 1st July, 2017 to 31st December, 2018. However, GST paid at any other rate (other than 12%) will not be refunded.
- Refund of accumulated compensation cess on tobacco products due to inverted duty structure in Compensation Cess which was already disallowed with effect from 1st October, 2019 has now been retrospectively expanded with effect from 1st July, 2017. As a result, no refund resulting from inverted duty structure will be allowed on tobacco products from the date of GST implementation.
Other GST Announcements in Union Budget 2020
The following are some of the other changes in GST as announced in Union Budget 2020:
- Simplified GST Return will be implemented from 1st April, 2020 on a trial basis. This will make GSTR filing simpler with features such as SMS based filing of nil GST returns and availability of pre-filled returns. Moreover, it is expected to improve input tax credit (ITC) flow leading to overall simplification of the GST filing procedure.
- GST refund process is now fully automated with no human intervention at any stage of the process.
- A centralized system for electronic invoice has been implemented in a phased manner from February, 2020 on an optional basis. It is expected to improve GST compliance by increase in the filing of returns.