Union Budget 2022: Umbrellas to be costlier, diamonds cheaper

Keeping with the government's Atmanirbhar Bharat plank, FM Sitharaman increased Customs duties on a host of items, such as umbrellas, parts of wearable devices, and electronic smart meters

Keeping with the government’s Atmanirbhar Bharat plan, Finance Minister Nirmala Sitharaman on Tuesday increased Customs duties on a host of items, such as umbrellas, parts of wearable devices, and electronic smart meters. She also proposed to phase out more than 350 exemptions, including on capital goods, in a gradual manner to encourage domestic manufacturing.

“This comprehensive review will simplify the Customs rate and tariff structure, particularly for sectors like chemicals, textiles, and metals, and minimise disputes. Removal of exemption on items that are or can be manufactured in India and providing concessional duties on raw material that go into manufacturing of intermediate products will go many a step forward in achieving our objective of Make in India and Atmanirbhar Bharat,” Sitharaman said.

Concessional rates in capital goods and project imports are proposed to be gradually phased out by applying a tariff of 7.5 per cent. While the National Capital Goods Policy, 2016, aims at doubling the production of capital goods by 2025 to create employment opportunities and result in increased economic activity, several duty exemptions, even extending to over three decades in some cases, have been granted to capital goods for various sectors, such as power, fertilizer, textiles, leather, footwear, food processing, and fertilizers. “These exemptions have hindered the growth of the domestic capital goods sector,” Sitharaman said.

To encourage rapidly growing electronic manufacturing, Customs duty rates are proposed to be calibrated to provide a graded rate structure to facilitate domestic manufacturing of wearable and hearable devices and electronic smart meters. Duty concessions have been proposed for parts of the transformer of mobile phone chargers and camera lens of mobile camera module and certain other items.

Pratik Jain, partner at Price Waterhouse & Co LLP, said the government focused on aligning the indirect tax proposals with its long-term objectives, including incentivising domestic manufacturing and exports, committing to carbon neutrality, simplifying tax laws and increasing the use of technology in tax administration.

“The graded removal of several Customs exemptions and tariff changes should promote ease of doing business, though the industry’s demand for an amnesty scheme for Customs has not been considered,” he said.

To give a boost to the gems and jewellery sector, Customs duty on cut and polished diamonds and gemstones is proposed to be reduced to 5 per cent from 7.5 per cent earlier. However, simply sawn diamond would attract nil Customs duty. To facilitate export of jewellery through e-commerce, the Budget proposed to implement a simplified regulatory framework by June.

To disincentivise import of undervalued imitation jewellery, the Customs duty on imitation jewellery is being prescribed in a manner that a duty of at least Rs 400 per kg is paid on its import.

To protect MSMEs, import duty on umbrellas is being raised to 20 per cent and exemption to parts of umbrellas has been withdrawn. Exemption was also rationalised on implements and tools for the agri sector that are made in India.

Customs duty on certain critical chemicals namely methanol, acetic acid, and heavy feed stocks for petroleum refining are being reduced, while duty is being raised on sodium cyanide for which adequate domestic capacity exists. These changes are expected to help in enhancing domestic value addition.