Since the last few months the main focus of the government has been to increase protection to the domestic industry, try to reduce litigations in tax matters and simplify procedures. The Budget drew praise from most people for its fiscal prudence and rural orientation. It lifted the market sentiment. It had very little for exporters, something for importers and quite a bit for reducing litigations.
For procurement of inputs required for export production under claim of rebate of excise duty, the exporter can now submit a chartered engineer’s certificate regarding input-output ratio that will be usually accepted by the authorities. Sunset clauses have been introduced for income tax exemption for Special Economic Zone units and developers.
As usual, the customs and excise duty rates on many items were changed here and there and service tax exemptions withdrawn or extended. Consequently, the tariff remains complicated and the ‘exemption raj’ continues. Provisions for deferred payment of duty and records based control for bonded warehouses have been proposed. New simplified rules for import of goods at concessional duty rate for manufacture of excisable goods have been put in place.
The interest rate for delayed payment of customs duty, excise duty and service tax have been brought down to 15% per annum. Lower rate of 12% is prescribed for service tax assessees whose value of services in previous years is less than `60 lakh. Higher rate of 24% will apply only where a party has collected service tax but not deposited it with the government. The limitation period for making demands is being increased from 1 year to 2 years in case of excise and customs and from 18 months to 30 months in case of service tax for all cases not involving fraud, suppression of facts etc.
A new Indirect Tax Resolution Scheme is being introduced to facilitate closure of cases pending before Appellate Commissioners on payment of duty, interest and 25% of the penalty. 11 new Benches of Customs, Excise and Service Tax, Appellate Tribunal (CESTAT) are being established to reduce the backlog of cases. The monetary limit for launching prosecution has been increased to `2 crore for service tax evasion and the power to arrest is being restricted only to situations where the taxpayer has collected the tax but not deposited the same with the exchequer above the threshold of `2 crore.
The Finance Bill 2016 has a proposal for giving retrospective effect to amendment of a notification that grants rebate of service tax on services used for exports after clearance of goods from the place of removal. The Bill also proposes to remove from the negative list, services by way of transportation of goods by an aircraft or a vessel from a place outside India up to the customs station of clearance in India. These changes will have implications for the exporters and importers.
The Central Board of Excise and Customs (CBEC) has developed an ‘integrated declaration’ that incorporates all the information required for import clearance by various government agencies into the electronic format of the Bill of Entry to be filed electronically at a single entry point, i.e. the Customs Gateway (ICEGATE). Separate application forms required by different agencies like Drug Controller, Textile Committee, etc. have been dispensed with. This important step to provide the importers a single point interface for clearance of imported goods has gone on-line from April 1, 2006 for consignments to be cleared under the Indian Customs EDI Systems but not for clearance of imported goods in the manual mode.
The Commerce Ministry has imposed Minimum Import Prices (MIP) for iron and steel items falling under 173 entries in Chapter 72 of Indian Trade Classification (Harmonised System) – Schedule 1, for a period of six months. Safeguard duty has also been imposed for two and a half years to enable the steel industry cope with a surge in imports. These protectionist measures will hurt the user industries and make them uncompetitive.
The CBEC has revised the procedures for investigation of related party transactions, royalty or license fees or any other payments in connection with import of goods and flow-back of resale proceeds that may have a bearing on the valuation of imported goods. The practice of renewal of orders of Special Valuation Branch (SVB) has been discontinued and new procedures have been laid down with a view to finalise all pending investigation and renewal cases by end of October this year.
The economy, meanwhile, plods along with hopes of pick up in domestic demand still intact and somewhat boosted by forecast of good monsoons and lower interest rates. However, global economic outlook is still bleak. So, the exporters and domestic manufacturers may still face tough times during the current year.
Author of this article is a consultant for export import matters. The views expressed herein are personal. He can be reached at firstname.lastname@example.org