BOOSTING BHARAT’S MANUFACTURING SECTOR

 

 

‘Atmanirbhar Bharat’ movement has been a key initiative for the Indian Government. A great way to substantiate their commitment to this movement is to promote domestic manufacturing by providing various incentives to the domestic manufacturing sector of the Country and increase capital expenditure to upgrade the ‘hardware’ of the nation. In the time of global inflation and recession, the government has aimed to increase the capital investment outlay is by 33 per cent to INR 10 lakh crore, which is proposed to be 3.3 per cent of GDP.

The Government has already launched programs like PLI scheme, Start-up India and reduced duties on raw materials of products for which domestic manufacturing needs to be promoted. Further, the government has incentivised domestic manufacturing under the corporate structure by providing a subsidised direct tax rate of just 15% subject to conditions.

Following proposed measures are being taken in this year’s budget to further promote domestic manufacturing of products:

1. Subsidised Direct Tax rate for New Co-operatives

The Hon’ble Finance Minster mentioned that ‘Co-operation’ is a value to be cherished. The Government has proposed Income Tax rate of 15% to newly set-up co-operative society engaged in the business of manufacturing on or before 31 March 2024. This will promote the grass root manufacturing industries in tier 3 cities / towns of India and we may see ‘agro’ based co-operatives benefiting from this move.

2. Measures to increase liquidity and ease of compliance

To increase the liquidity in the hands of the co-operative sector, the Government has proposed to higher the limit of INR 2 lakh per member for cash deposits to and loans in cash by Primary Agricultural Co-operative Societies (PACS) and Primary Co-operative Agriculture and Rural Development Banks (PCARDBs). Similarly, a higher limit of INR 3 crore for TDS on cash withdrawal is being provided to co-operative societies.

This year, major indirect tax proposals are aimed to promote exports, boost domestic manufacturing, enhance domestic value addition, encourage green energy and mobility.

3. Increase in Customs Duty of certain end-use products and Reduction in Duties of their raw materials:

The Government has increased the duties on import of certain end-use products and reduce the duties on import raw materials of such products to promote domestic manufacturing.

The government has increased duties on imitation jewellery, Electric Kitchen Chimneys, Bicycles, Toys, Cars and Electric vehicles amongst others. On the other hand, the government has reduced duties on heat coil used for manufacturing chimneys, specific parts of automobile, machinery/goods used for manufacturing of lithium-ion batteries of Electric vehicles. The details of the same areas under:

Goods where duties have been increased	Upto 1st February 2023	After 1st February 2023
Toys and parts of toys (other than parts of electronic toys)	60%	70%
Bicycles	30%	35%
Vehicle (including electric vehicles)	30%	35%
Specified Vehicles in the CBU form	60%	70%
Electrically operated vehicles in the CBU form, other than with of specified CIF Value	60%	70%
Electric kitchen chimney (Hoods)	7.5%	15%
Silver (raw- semi raw)	7.5%	10%
Silver Dore	6.1%	10%
Imitation Jewellery	20%	25%

Goods where duties have been decreased	Upto 1st February 2023	After 1st February 2023
Seeds for use in manufacturing of rough lab-grown diamonds	5%	Nil
Heat coil for use in the manufacturing of electric kitchen chimneys	20%	15%
Warm blood horse imported by sports person of outstanding eminence for training purpose	30%	Nil
Vehicles specified automobile parts/components, sub-systems and types when imported by notified testing agencies, for the purpose of testing and/ or certification	As Applicable	Nil
Specific capital goods/machinery for the manufacturing of lithium-ion cell for use in the batteries of EVs	As Applicable	Nil

4. Manufacturing Mobile Phones and Televisions:

 

The mobile phone production in India has increased from INR 18,900 crore in 2014-15 to over INR 2,75,000 crore in FY 2021-22. To further encourage the manufacture of mobile phones, it is propose to provide relief in customs duty on import of certain parts and inputs like camera lens from 2.5% to NILand continue the concessional duty on lithium-ion cells for batteries for another year.

 

Similarly, to promote value addition in manufacture of televisions, it is proposed to reduce the basic customs duty on parts of open cells of TV panels from 5% to 2.5%

 

5. Green Mobility:

To avoid cascading of taxes on blended compressed natural gas, it is proposed to exempt excise duty on GST-paid compressed bio gas contained in it.

To encourage electric vehicle manufacturing in India, the government proposes customs duty exemption on import of capital goods and machinery required for manufacture of lithium-ion cells for batteries used in electric vehicles.

6. Steel and Copper:

To facilitate availability of raw materials for the steel sector, exemption from Basic Customs Duty on raw materials for manufacture of CRGO Steel, ferrous scrap and nickel cathode is being continued.

Similarly, the custom duty of 2.5 per cent on copper scrap is being continued to ensure the availability of raw materials for copper producers who are mainly in the MSME sector.

  

Our Comments:

The Government is aware that domestic manufacturing is the key in taking India to the next level in terms of growth, employment and ease of living. Therefore, it is leaving no stone unturned to promote domestic manufacturing and achieving its long-term goal of being completely self-reliant on items of basic necessity considering the modern times. India is surely headed the ‘Atmanirbhar’ way.

 

Disclaimer: The above information is intended for academic guidance and is to be used for informative purpose only. The said information is not to be considered as an opinion or advice. The aforesaid information is proprietary and privileged and is not to be used, reproduced and disclosed without consent. It is advisable to check with a subject matter expert before concluding on applicability or non-applicability of any provisions. The views expressed are strictly personal.

Author Information:

 

Shravan Suratwala

Partner – S.M. Suratwala &Co., Chartered Accountants

Chartered Accountant, B.Com., Dip. IFRS (ACCA UK), GST (Cert.)

 

Shravan has 8+ years of post-qualification professional experience in advisory, litigation and compliance areas of Corporate and International taxation. He has also worked three plus years in the field of Internal and Process Audit while pursuing chartered accountancy course.

Rucha Patil

Rucha is currently pursuing her Chartered Accountancy course and is currently completing her internship with S.M. Suratwala & Co., Chartered Accountants, Pune.

The Author can be reached at contact@smsuratwala.com orshravan.suratwala@outlook.com