Budget 2022: pivotal areas to propel India’s growth
In the budget speech, after two years of pandemic battering the economy, Union Finance Minister Nirmala Sitharaman was visibly delighted to announce the highest monthly GST collection in January , and also forecast that the Indian economy will grow by 9.2% in the current fiscal year. .
There is no doubt that the overall performance and rapid rebound of the economy indeed reflects the country’s strong resilience and strong fundamentals.
The 2022 budget aims to promote the digital economy and fintech, development facilitated by technology, energy transition, climate action with a broad vision of inclusive development.
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In a bid to further strengthen “Make in India” and “Atmanirbhar Bharat”, the 2022 budget focuses on ways to equip domestic manufacturers.
This includes the abolition of customs exemption on items likely to be produced by national manufacturers on the one hand and the granting of preferential rights on raw materials used in the manufacture of intermediate products on the other.
Customs duty rates have been streamlined to stimulate domestic manufacture of wearable and hearing aids and smart electronic meters. Transformer parts of mobile phone chargers and camera lens of mobile camera module and some other items will also enjoy the tariff advantages. This will enable high-growth domestic manufacturing of electronic items.
In addition to the changes introduced in the tariff, other amendments have been introduced in the customs legislation to strengthen the powers of DRI, challenged by the courts in a recent judgment.
Furthermore, to contribute to Atmanirbhar Bharat, the government has acknowledged that the Production Linked Incentive Scheme (“PLI”) has the potential to create additional 60 lakh jobs, adding that the PLI scheme has been approved for 14 sectors to stimulate domestic manufacturing.
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The allocation was made for the manufacture of high-efficiency solar modules and to give new impetus to sectors such as “telecommunications and networking products”, among others. This will facilitate the implementation of 5G in India.
With the vision of allowing states to become partners in the “development of business and service centers”, it is proposed to replace the law on special economic zones (SEZs) with new legislation.
This would ensure optimal use of available infrastructure and enhance export competitiveness. In addition, reforms have been proposed to make compliances IT-driven and run on the National Customs Portal with a focus on greater facilitation and with only risk-based controls.
On the Goods and Services Tax (GST) front, the Minister of Finance applauded taxpayers’ enthusiasm for adapting successfully to the new regime.
Changes have been made to streamline current practices regarding tax reporting and the use of the credit by taxpayers.
With a strong focus on growing and rejuvenating the economy, the budget walks a tightrope to counter COVID-induced externalities and reinforces the theme of self-reliance and ease of doing business.
(The author is Tax Partner – Indirect Tax Services, EY.)