GST and Custom Duty Changes Proposed in Budget 2020-21

Budget 2020-21- Article explains proposed Major Amendments in the Customs Act, 1962, Amendments to Customs Tariff Act, 1975,  Amendment in Countervailing Duty Rules and Anti-Dumping Duty Rules, Customs duty exemption for certain imported goods, Changes in Customs duty for creating a level playing field for MSME and promoting MAKE IN INDIA for Electric Vehicles and Cellular Mobile Phones/Electronics sector, Reduction in Customs duty on raw materials and inputs imported by Domestic Manufacturers, Other changes in Customs duty, Imposition of Health cess on specified medical equipment, Revocation of Anti-Dumping Duty on Purified Terephthalic Acid, Increase in National Calamity Contingent duty (NCCD) on Cigarettes and tobacco products, Proposals involving change in provisions of Central Goods and Services Tax Act, 2017 and Retrospective amendments to give effect to the recommendations of the GST Council.

A. Legislative Changes in Customs:

1. Major Amendments in the Customs Act, 1962:

S. No.	Amendment
A	For improving compliance
1.	A new Chapter VAA (a new section 28DA) is being incorporated in the Customs Act to provide enabling provision for administering the preferential tariff treatment regime under Trade Agreements. The proposed new section seeks to specifically provide for certain obligations on importer and prescribe for time bound verification from exporting country in case of doubt. Pending verification preferential tariff treatment shall be suspended and goods shall be cleared only on furnishing security equal to differential duty. In certain cases, the preferential tariff treatment may be denied without further verification.
B	For reducing litigation
1.	An explanation is being inserted in section 28 to explicitly clarify that any notice issued under the said section, prior to the enactment of the Finance Act, 2018, shall continue to be governed by the section 28 as it existed before the said enactment, notwithstanding order of any Appellate Tribunal, Court or any other law to the contrary.
C	Other enabling provisions
1.	Clause (f) of the section 11(2) empowers the Central Government, for prevention of injury to the economy of the country by the uncontrolled import or export of gold or silver, to prohibit their import or export. This clause is being amended to include “any other goods” (in addition to gold and silver) in its ambit.
2.	A new section (section 51B) is being incorporated to provide for creation of an Electronic Duty Credit Ledger in the customs system. This will enable duty credit in lieu of duty remission to be given in respect of exports or other such benefit in electronic form for its usage, transfer etc. In this regard, enabling provisions for issuance of suitable regulations are also being inserted in section 157(2) of the Customs Act,1962.The provisions for recovery of duties provided under section 28AAA of Customs Act, 1962 are also being expanded to include such electronic credit of duties.

2. Amendments to the Customs Tariff Act, 1975:

S. No.	Amendment
A	Amendment in the Customs Tariff Act, 1975
1.	Section 8B of the Customs Tariff Act, 1975, which provided for imposition of safeguard duty as a trade remedy against surge in imports of a commodity, is being amended to make provisions for application of other safeguard measures such as Tariff Rate Quota and other safeguard measure as the Central Government may deem necessary to protect the domestic industry from injury due to significant surge in imports.
B	Amendment in the First Schedule of the Customs Tariff Act, 1975
1.	First Schedule to the Customs Tariff Act, 1975 is being amended to:(i) Create new tariff item 8414 51 50 for “Wall fans”. The tariff rate for this item is 20% and BCD on wall fans is being increased from 7.5% to 20% (ii) Create new tariff item 8529 90 30 for “Open Cell of television set”. The tariff rate for this item is 15%. However, these items will continue at ‘Nil’ BCD. (iii) Create tariff items 8541 40 11 for “Solar Cells, not assembled” and tariff item 8541 40 12 for “Solar Cells assembled in modules or made up into panels”. The tariff rate for these items is 20%. However, these items will continue at ‘Nil’ BCD.

3. Amendment in Countervailing Duty Rules and Anti-Dumping Duty Rules:

These rules provide for manner and procedure for investigation into cases of imports of subsidized goods and cases of dumping of goods, respectively, that cause injury to domestic industry. Following amendments are being made in these rules:

S. No.	Rules	Amendment
1	Anti-Dumping Rules	Changes are being made in the Rules to strengthen the anti-circumvention measures by making them more comprehensive and wider in scope to take care of all types of circumventions of antidumping duty in line with best international practice. Certain other changes are being made in these Rules for bringing clarity in the scope of these rules.
2	Countervailing Duty Rules	At present, there is no provision for investigation in case of circumvention of countervailing duties. A provision is being incorporated in the Countervailing Duty Rules to enable investigation into case of circumvention of countervailing duty for enabling imposition of such duty. Certain other changes are being made for bringing clarity in the Rules.

B. Review of Customs duty exemption for certain imported goods:

1. Customs exemption have been reviewed to weed out such entries that are redundant, outdated or have outlived their utility. On such review, 80 exemptions are being withdrawn by making suitable amendment/rescission of relevant notifications. The exemptions being pruned on review, inter-alia, include withdrawal of exemption/ concessional rates on the following goods, namely:

S. No.	Category of goods	Specific items
1.	Agro and animal based products	Tuna bait, skimmed milk and certain milk products, sugar beet seeds, raw sugar, certain alcoholic beverages, whey and isolated soya protein, soya fibre, etc.
2.	Items of Metal	a. Lead bars, rods and wireb. Zinc tubes, pipes and tubes c. Tin plates, sheets and strips
3.	Machinery	Machinery imported for use in certain projects such as specified electricity generation projects, specified Metro projects, certain other specified purposes;Specified goods required for construction of roads
4.	Electronic items	Copper and articles thereof used in manufacturing of 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.
5.	Miscellaneous	a. Peanut butter, preserved potatoesb. Instant print film, exposed cinematographic films c. A few redundant and outdated customs duty exemptions are being withdrawn. Further, a few exemptions are being re-aligned for consistency.

C. Changes in Customs duty for creating a level playing field for MSME and promoting MAKE IN INDIA:

1. Level playing field for domestic producers:

Customs duty is being increased on the following goods:

S. No.	Category of goods	Specific items	Rate of Duty
			From	To
1.	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%
2.	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%
3.	Footwear	a. Footwearb. Parts of footwear	25%15%	35%20%
4.	Furniture goods	Seats, articles of bedding including mattresses, lamps, lighting, illuminated signs, and other articles of furniture	20%	25%
5.	Stationery items	Filing cabinets, paper trays, binders, clips, staples, sign-plates, name plates, numbers and symbols etc. made from base metal	10%	20%
6.	Toys	Tricycles, scooters, scale models, dolls, etc.	20%	60%
7.	Machinery	a. Specified goods used in high voltage power transmission project	5%	7.5%
		b. Railway carriage fans	7.5%	10%
		c. Compressors of refrigerators and air conditioners	10%	12.5%
		d. Commercial freezers	7.5%	15%
		e. Welding and plasma cutting machine	7.5%	10%
		f. Rotary tillers/weeder	2.5%	7.5%
8.	Other miscellaneous items	a. Glass beadsb. Artificial flowers c. Bells, gongs, statuettes, trophies and like, statuettes, ornaments, photograph, frames, mirrors etc. of base metal.	10%	20%

2. Changes in Customs duty to promote MAKE IN INDIA under Phased Manufacturing Programme (PMP) for Electric Vehicles and Cellular Mobile Phones:

a.	Changes in customs duty under Phased Manufacturing Programme for Electric Vehicles	Rate of Duty
		From	To
1.	Completely Built Units of Bus and Trucks (with effect from 01.04.2020)	25%	40%
2.	Semi Knocked Down (SKD) units of bus, trucks and two wheelers (with effect from 01.04.2020)	15%	25%
3.	Semi Knocked Down (SKD) units of passenger vehicles and three wheelers (with effect from 01.04.2020)	15%	30%
4.	Completely Knocked Down (CKD) units of passenger vehicles, three wheelers, two wheelers, bus and trucks (with effect from 01.04.2020)	10%	15%
b.	Changes in customs duty under Phased Manufacturing Programme for Cellular Mobile Phones
1.	PCBA of Mobile phones (with effect from 01.04.2020)	10%		20%
2.	Vibrator/Ringer of Mobile phones (with effect from 01.04.2020)	Nil		10%
3.	Display Panel and Touch Assembly (with effect from 01.10.2020)	Nil		10%

3. Changes in Customs duty to promote MAKE IN INDIA in Electronics sector:

S. No.	Specific Items	Rate of Duty
		From	To
1.	Motors like Single Phase AC motors, Stepper motors, Wiper Motors etc.	7.5%	10%
2.	Specified chargers and power adapters	Applicable Rate	20%
3.	Fingerprint readers for use in cellular mobile phones	Nil	15%
4.	Earphones and headphones	Applicable Rate	15%

4. Reduction in Customs duty on raw materials and inputs imported by Domestic Manufacturers:

S. No.	Category of Inputs/ Raw materials	Specific Items	Rate of duty
			From	To
1.	Fuels, Chemicals and Plastics	Very low sulphur fuel oil meeting ISO 8217:2017 RMG380 Viscosity in 220-400 CST standards/Marine Fuel 0.5% (FO)	10%	Nil
		Calcined Petroleum Coke	10%	7.5%
		Calendared plastic sheets used in manufacturing of smart cards	10%	5%
		Polyester Liquid Crystal Polymers for use in manufacture of connectors	7.5%	Nil
2.	Precious Metals	Platinum or Palladium used in manufacture of:a) Colloidal precious metals, inorganic or organic compounds of precious metal, amalgams of precious metals b) Catalyst with precious metal or precious metal compounds as the active substance	12.5%	7.5%
		Spent Catalyst or Ash containing precious metal, subject to specified conditions	12.5%	11.85%
3.	Machinery and Electronic Goods	Following parts of Microphone for use in manufacture of Microphone namely,a) microphone cartridge b) microphone holder c) microphone grill d) microphone body	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
4.	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
5.	Newsprint	a) Newsprint, when imported by importer registered with Registrar of Newspapers, India.b) Uncoated paper used for printing newspaper, when imported by importer registered with Registrar of Newspapers, India. c) Lightweight coated paper used for printing magazines subject to actual user condition.	10%	5%

5. Other changes in Customs duty:

S. No.	Category of Goods	Specific Items	Rate of Duty
			From	To
1.	Food processing	Walnuts, shelled	30%	100%
2.	Chemicals and Plastics	Colloidal precious metals, inorganic or organic compounds of precious metal, amalgams of precious metals	7.5%	10%
		Butyl Acrylate	5%	7.5%
		Other prepared binders for foundry moulds or cores; Chemical products and preparations of the chemical or allied industries	10%	17.5%
3.	Auto and auto parts	Catalytic converter	10%	15%
		Noble metal solutions and noble metal compounds used in manufacture of catalytic converter and its parts	5%	10%
		Platinum or Palladium used in manufacturing of catalytic converter and its parts	5%	Applicable Rate
		Parts and other specified inputs for manufacture of catalytic converters.	5%	7.5%
		Completely Built Units (CBUs) of commercial vehicles (other than electric vehicles)(with effect from 01.04.2020)	30%	40%

D. Imposition of Health cess on specified medical equipment:

Health Cess at the rate of 5% is proposed to be imposed on the import of medical devices. This Health Cess shall be a duty of Customs. Health Cess shall not apply to medical devices which are exempt from BCD. Further, inputs/parts used in the manufacture of medical devices shall also be exempt from Health Cess. The proceeds of Health Cess shall be used for financing the health infrastructure and services.

E. Revocation of Anti-Dumping Duty on Purified Terephthalic Acid:

Revocation of Anti-dumping duty on import of Purified Terephthalic Acid originating in or exported from: –

1. South Korea and Thailand imposed vide notification No. 28/2019-Customs (ADD) dated 24.7.2019

2. China, Iran, Indonesia, Malaysia and Taiwan imposed vide notification No. 28/2016-Customs (ADD) dated 5.7.2016

F. Increase in National Calamity Contingent duty (NCCD) on Cigarettes and tobacco products:

National Calamity Contingent Duty is levied as a duty of excise on certain manufactured goods specified under the Seventh Schedule of Finance Act, 2001. NCCD is being proposed to be increased on tobacco products (except bidi) as detailed below:

1. On cigarettes, NCCD is being increased ranging from Rs. 200 – 735 per thousand, depending upon length of cigarette and on filter/non-filter basis.

2. On smoking mixtures for pipes and cigarettes, NCCD is being increased from 45% to 60%.

3. On other forms of smoking tobacco (other than smoking mixtures for pipes and cigarettes) and forms of chewing tobacco, NCCD is being increased from 10% to 25%.

4. NCCD on Bidis remains unchanged.

G. Proposals involving change in provisions of Central Goods and Services Tax Act, 2017:

S. No.	Amendments in the Central Goods and Services Tax Act, 2017 / Integrated Goods and Services Tax Act, 2017 / Union Territory Goods and Services Tax Act, 2017
A	For facilitating trade or consumer
1	Sub section (4) of the section 16 of the CGST Act is being amended to delink the date of issuance of debit note from the date of issuance of the underlying invoice for purposes of availing input tax credit.
2	Clause (c) of sub-section (1) of section 29 of the CGST Act is being amended to provide for cancellation of registration which has been obtained voluntarily under sub-section (3) of section 25.
3	A proviso to sub-section 1 of section 30 of the CGST Act is being inserted to empower the jurisdictional tax authorities to extend the date for application of revocation of cancellation of registration in deserving cases.
4	Section 51 of the CGST Act is being amended to remove the requirement of issuance of TDS certificate by the deductor; and to omit the corresponding provision of late fees for delay in issuance of TDS certificate.
5	Section 168 of the CGST Act is being amended to make provisions for enabling the jurisdictional commissioner to exercise powers under sub-section (5) of section 66 and second proviso to sub-section (1) of section 143.
B	For improving compliance
1.	Section 10 of the CGST Act is being amended, so as to exclude from the ambit of the Composition scheme certain categories of taxable persons, engaged in making-(i) supply of services not leviable to tax under the CGST Act, or (ii) inter-State outward supply of services, or (iii) outward supply of services through an e-Commerce operator.
2.	Section 122 of the CGST Act is being amended by inserting a new sub-section to make the beneficiary of the transactions of passing on or availing fraudulent Input Tax Credit liable for penalty similar to the penalty leviable on the person who commits such specified offences.
3.	Section 132 of the CGST Act is being amended to make the offence of fraudulent availment of input tax credit without an invoice or bill a cognizable and non-bailable offence; and to make any person who commits, or causes the commission and retains the benefit of transactions arising out of specified offences liable for punishment.
C	Other changes
1.	The definition of “Union territory” in clause (114) of section 2 of the CGST Act is being amended to update the definition of Union territory in view of the bringing into force of the Jammu and Kashmir Reorganization Act, 2019 and the Dadra and Nagar Haveli and Daman and Diu (Merger of Union Territories), Act, 2019.Consequential changes are also being made in UTGST Act, 2017.
2.	Section 31 of the CGST Act is being amended to provide enabling provision to prescribe the manner of issuance of invoices in case of supply of taxable services.
3.	Section 109 of the CGST Act is being amended to bring the provision for Appellate Tribunal under the CGST Act in the Union territory of Jammu and Kashmir and Ladakh.
4.	Section 140 of the CGST Act is being amended with effect from 01.07.17, to prescribe the manner and time limit for taking transitional credit.
5.	Section 172 of the CGST Act is being amended to make provision for enabling issuance of removal of difficulties order for another 2 years, i.e. till five years from the date of commencement of the said Act.Similar changes are also being made in the IGST Act, 2017 (section 25), the UTGST Act, 2017 (section 26) and the GST (Compensation to States) Act, 2017 (section 14).
6.	Entries at 4(a) & 4(b) in Schedule II of the CGST Act is being amended with effect from 01.07.2017 to make provision for omission of supplies relating to transfer of business assets made without any consideration from Schedule II of the said Act.

The proposed changes in GST laws will come into effect from the date when the same will be notified, as far as possible, concurrently with the corresponding amendments to the similar Acts passed by the States & Union territories with legislature.

H. Retrospective amendments to give effect to the recommendations of the GST Council:

S. No.	Retrospective amendment in the Goods and Service Tax rate and refund provisions
1	Exemption from Central Tax, Union Territory Tax and Integrated Tax is being given on fishmeal [HS 2301], for the period 01.07.2017 to 30.09.2019. However, GST paid on supply of fishmeal during the period shall not be refunded.
2	Concessional 12% rate of Integrated Tax and 6% Central Tax and 6% Union Territory Tax during the period 01.07.2017 to 31.12.2018, on pulley, wheels and other parts (falling under heading 8483) and used as parts of agricultural machinery of headings 8432, 8433, and 8436. However, GST paid at any other rate (higher than 12%) shall not be refunded.
3	The refund of accumulated credit of compensation cess on tobacco products arising out of inverted duty structure in Compensation Cess has been disallowed with effect from 1.10.2019 vide notification No. 3/2019- Compensation Cess (Rate) dated 30.9.2019. This notification is being given retrospective effect from 1.7.2017 onwards. Accordingly, no refund on account of inverted duty structure shall be admissible on tobacco products for any period.

For further details of the budget proposals, the Explanatory Memorandum and other relevant budget documents may be referred to.