The Modi government’s focus on manufacturing will continue with the overall objective of ‘Viksit Bharat’. Investment-based and production-linked schemes have been pivotal in promoting manufacturing in diverse sectors so far and have supported the ‘Make in India’ and ‘Atmanirbhar Bharat’ programmes.
However, as India aspires to emerge as an alternative to China and a global manufacturing hub, sector-focused growth strategy will provide a roadmap to the industry.
We might witness a transition from generic production-linked incentives to tailored sector-specific programmes that position India prominently on the global value chain map, all the while being steered by the fundamental principles of sustainability.
In addition to incentivising investments, a comprehensive revamp of custom rates and trade procedures has long been on the cards of the Finance Minister. The government has announced a campaign for the rationalisation of customs duty levies that will help reduce classification disputes, remove duty inversions, and provide ease of trade. A simplified customs duty structure taking into account classification inconsistencies, multiple exemptions, impact of free-trade agreements (FTAs) will have a constructive influence on India’s manufacturing capabilities and overall competitiveness.
Drawing inspiration from the success of past amnesty schemes in direct taxes and indirect taxes, an amnesty scheme under Customs Law will additionally lead to releasing the locked-up capital and will ease the burden on businesses and the judiciary. Less tax disputes, an indicator of a matured and investor-friendly jurisdiction will also provide required impetus to the local players and will reinforce investor confidence.
The initiatives to enhance the ease of doing business are central to the government’s policy strategy and hence it is expected that the Finance Minister may still include them in her budget proposals.
Crafting a strategic plan to automate trade procedures, with a particular emphasis on the digitalisation of customs compliance, would be advantageous. The remarkable success of the GST system, which has effectively bridged the gap between tax authorities and taxpayers, resulting in increased tax buoyancy, serves as an exemplary model. Customs procedures, while mostly automated, still entail manual processes like submission of Bill of Entries on ICEGATE portal. Replicating the GST model and enabling access to ICEGATE to be able to transmit huge volume of data digitally through APIs or intermediaries could be a viable approach to streamline this process. Implementation of online module for payment of differential custom duty/ interest/other amounts and online amendment of Bill of Entry and its alignment with GSTN would certainly help importers getting the credit for ad hoc payments currently made through TR6 challans.
Another measure towards ease of doing business is allowing periodic payment of customs duty as against each assignment under MOOWR Regulations and enable the functionality on Customs EDI portal for tagging multiple in-bond BoE with single ex-bond BoE.
The proposed introduction of Section 65A to the Customs Act, 1962 which mandates IGST payments for goods imported into MOOWR units would also reduce the scheme’s viability and impact working capital of taxpayers. The same can be withdrawn to maintain the attractiveness of the scheme.
Allowance of depreciation on clearance of capital goods to Domestic Tariff Area is another ask which will align this scheme with different export-oriented schemes.
Similarly, the current SEZ Act also suffers from treating goods cleared in DTA as imported goods and levying full customs duties while other export-oriented schemes only require the importer to pay taxes on the import duty foregone on the imported products.
Bringing all the schemes on parity will continue to give impetus to the SEZ sector. The government has consistently given economic impetus to the industry in the budget exercise in the past, and there is a strong belief that this administration will present a well-reasoned and enabling budget in Parliament, outlining the imperative policy directives to give boost to the industry.
Source from: https://indianexpress.com/article/business/budget/union-budget-2025-expectations-incentives-customs-9809475/
