Budget 2022 Indirect Tax: Unexpected Move On SEZs
Budget 2022's indirect tax changes: Unexpected move on SEZs, more Make in India push, and a bunch of sectoral announcements.
With the hints given by the Economic Survey 2021-22 presented by Union Finance Minister Nirmala Sitharaman on Jan. 31, one could foresee substantial economic stimulus being provided to the industry. The survey harped upon a strong economic recovery and promising growth in gross domestic product. This was also confirmed by International Monetary Fund’s latest World Economic Outlook projections which predicted India’s real GDP to grow at 9% in 2021-22 and 2022-23 and at 7.1% in 2023-2024, which would make India the fastest-growing major economy in the world for all three years.
On the indirect tax front, the Finance Minister appreciated the taxpayers’ enthusiasm on not only adapting to the new regime but also actively participating in tax payments. Referring to the January 2022 Goods and Services collections of Rs 1.49 lakh crore as the highest ever GST collections since the inception of the regime, the Finance Minister, inferred the regime to be progressive.
Unexpected Move On SEZs
An interesting announcement was made on the SEZ legislation. The Budget proposed replacement of SEZ Act, 2005, with a newer legislation which “shall cover the existing industrial enclaves and enhance the competitiveness of exports”. The SEZ industry was certainly expecting a stimulus on account of reduced exports during the pandemic. However, new legislation may not be something that was on the cards. The new legislation would bring in ease of compliance and reduce domestic trade restrictions for the reeling sector.
Further ‘Make In India’ Push
On the customs front, the agenda was once again to promote the ‘Make In India’ movement by phasing out exemptions on project imports and import of capital goods so as to provide a level playing field to domestic manufacturers of capital goods. Another step taken in this direction would be exempting inputs used for such domestic production.
A comprehensive review of customs tariffs has been undertaken again to revamp duty rates and exemptions which are decades old now. A positive announcement was made towards implementing a robust information technology system following the faceless scheme. This shall enhance the ease of doing business in the country for the import/ export community. Similarly, risk-based assessments would only be initiated, as against assessing all transactions.
Sectoral announcements were made on textile, electronic, chemical, and agricultural tools and other products. Details are to follow in the fine print.
Jigar Doshi is Founding Partner at Tax Technology Managed Services LLP.
The views expressed here are those of the author, and do not necessarily represent the views of BloombergQuint or its editorial team.