The Budget 2024 proposals have several changes in indirect taxes including customs duties and GST. The Union Finance Minister Nirmala Sitharaman presented the budget on July 23, 2024. The budget focused on reduction of customs and excise duties. It also reflected the major changes recommeded by the GST ( Goods and Services Tax) council.
These changes aim to support various industries, increase domestic production, and promote imports and exports, especially benefitting the consumers.
Custom Duties Changes and Their Impacts
Reduced Healthcare Duties
Custom Duties on cancer drugs like Trastuzumab Deruxtecan, Durvalumab, and Osimertinib are fully exempted. This exemption will lead to a reduction in price (10 – 20%) and access to these drugs will be much easier and affordable for consumers. Pharmaceutical companies may face a surge in demand for these drugs so they need to speed up their manufacturing.
Investors may invest in the research and development of these drugs, leading to more innovative cancer treatment. The BCD reduction on X-ray tubes and flat panel detectors is a significant move that will lead to an increase in the manufacturing of medical equipment in India.
Boosting Renewable Energy:
Custom Duties on capital goods required for manufacturing solar cells and panels have been fully exempted from 7.5% to nil. This exemption will support the renewable energy sector, encouraging investments in solar energy projects by lowering production costs. For consumers installing solar energy will be much easier and lead to easy adaptation.
Businesses using minerals like lithium, cobalt, copper, and 25 other rare minerals for nuclear energy, renewable energy, space sectors, etc., will benefit from the reduced raw material costs because of the exemption from customs duties. Consumers might see price reductions on these products such as electronic devices, renewable energy systems, etc.
More Affordable Electronics and Jewelry:
The Basic Custom Duties on Mobile Phones, Mobile Phone Printed Circuit Board Assembly (PCBA), and chargers have been reduced from 20% to 15%. Due to Lower BCD rates, importing smartphones may become more affordable. There may be a price drop for consumers.
Custom duties on gold and silver lowered from 15% to 6% and on platinum reduced from 15.4 to 6.4%. This adjustment will increase the profitability of the metal industry due to lower import costs. Consumers may experience lower prices in jewelry.
Mixed Impact on several sectors
BCD on shrimp and fish feed has been reduced from 15% to 5%. This reduction is to support the aqua industries by lowering feed costs. This will help to increase production and exports. This reduction will not directly impact consumers, there can be a reduced price for seafood due to the increase in supply.
The BCD on the textile and leather export sector has been reduced from 30% to 10%, and the production costs of the leather will be reduced, which can potentially increase the Indian textile in the global market. For Consumers, this will not affect them anyway but in the long term, there can be a reduction in the price of leather.
BCD for the electric kitchen chimney has been increased from 7.5% to 15%, the imports of the chimney will be less attractive due to this high custom tax imposition. However, BCD on heat coils has been reduced from 20% to 15% which is the key component for the chimneys. Consumers can see the price hike for the electric kitchen shortly but there will be stabilization or even price reduction in the long run.
Changes in GST
Section 9 of the CGST Act has been amended so that hereafter the Extra Neutral Alcohol used for human consumption alcohol will no longer be under the purview of the Central Tax.
For liquor manufacturers, the production cost will be lowered but only the central tax is exempted there might still be state tax like VAT or state excise duty which will influence the final price of the products. For consumers, the impact will be minimal as there won’t be any high differences in price.
The insertion of Section 74A in the GST offers greater clarity and reduces ambiguity regarding the timeframe for issuing the notice. The mandated 42-month timeframe for issuing the notices encourages the timely resolution of any tax disputes.
The time limit for the taxpayers to avail of the reduced penalty was extended from 30 to 60 days. The addition of this new section will have a positive impact by reducing the financial burden and improving the cash flow.
Section 128A of the CGST Act offers tax relief for those who received demand notices under section 73 of the CGST Act for the FY 2017-18, 2018-19, and 2019-20. For the business that received the demand notice and paid the full amount before the specified date, the government may waive the interest and penalty that would normally be charged. This provision reduces the financial burden of businesses that have outstanding tax liabilities.
The amendment of section 39 can be quite burdensome for businesses, especially small businesses. Mandating TDS return filing monthly even without deductions will be time-consuming and costly. There is a high risk of penalties for noncompliance.
The amendment of section 54 of the CGST and section 16 of the IGST Act, restricting the refund of unutilized input tax credit or integrated tax on zero-rated supplies subject to export duty will negatively impact exporters. The increased cost of production and disadvantage over the competitors may affect business cash flow.
Businesses expect a reduction in tax for production costs and consumers expect low prices and varieties of products. Budget 2024 proposals aim to reduce production costs and lower prices for consumers. However, businesses and consumers still have mixed feelings about the new Budget 2024.
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