February

February 2021

Ministry

Date

Subject

M.O.F

01 Feb 2021

Union Finance Minister says Every Possible Measure shall be taken to smoothen the GST

M.O.F

03 Feb 2021

14th Instalment of Rs. 6,000 crore released to the States to meet the GST compensation shortfall

 

Ministry of Finance

Union Finance Minister says Every Possible Measure shall be taken to smoothen the GST

Custom duty structure to be overhauled, over 400 old exemptions to be reviewed

Customs duty hiked proposed on some mobile parts, auto parts and cotton

Phased manufacturing plan for Solar Cells / Panels to be notified

AIDC Cess proposed in the Union Budget to improve Agricultural Infrastructure

Taxation changes proposed to benefit MSMEs

Posted On: 01 FEB 2021 1:36PM by PIB Delhi

With an aim to rationalize custom duty structure, ease compliance and give impetus to domestic manufacturing, the Union Budget 2021-22 has several indirect tax proposals. The Union Minister for Finance and Corporate Affairs Smt. Nirmala Sitharaman tabled the Union Budget 2021-22 in Parliament today. 

 

FURTHER SIMPLIFICATION OF GST

Smt. Sitharaman, in her budget speech, said that record GST collections have been made in the last few months. She said several measures have been taken to further simplify the GST. The capacity of GSTN system has been announced.  Deep analytics and Artificial Intelligence have been deployed to identify tax evaders and fake billers, launching special drives against them.  The Finance Minister assured the House that every possible measure shall be taken to smoothen the GST further and remove anomalies such as the inverted duty structure.

 

CUSTOM DUTY RATIONALISATION

On the issue of custom duty policy, the Finance Minister said that it has the twin objectives of promoting domestic manufacturing and helping India get on to global value chain and export better.  She said that the thrust now has to be on easy access to raw materials and exports of value added products.   In this regard, she proposed to review 400 old exemptions in the custom duty structure this year.  She announced that extensive consultation will be conducted and from 1st October, 2021, a revised custom duty structure free of distortions will be put in place. She also proposed that any new custom duty exemptions henceforth will have validity upto to the 31st March following 2 years of the date of its issue. 

 

ELECTRONIC AND MOBILE PHONE INDUSTRY

The Finance Minister announced withdrawal of a few exemptions on parts of chargers and sub-parts of mobiles. Further, some parts of mobiles will move from “NIL” rate to a moderate 2.5 per cent. She announced reducing custom duty uniformly to 7.5 per cent on semis, flat, and long products of non-alloy, alloy and stainless steel.  The Minister proposed exempting duty on steel scrap for a period upto 31st March 2022. Smt. Sitharaman also revoked ADD and CVD on certain steel products. She announced deduction in duty on copper scrap from 5 per cent to 2.5 per cent. 

 

TEXTILE / CHEMICALS / GOLD AND SILVER

Mentioning about the need to rationalize duty on raw material inputs to man-made textile, the Finance Minister announced bringing nylon chain on par with polyester and other man-made fibers. Announcing uniform deduction of the BCD rates on caprolactam, nylon chips and nylon fiber and yarn to 5 per cent, the Minister said this will help the textile industry, MSMEs and exports too.  She also announced calibration of customs duty rate on Chemicals to encourage domestic value addition and to remove inversions.  The Minister also announced rationalization of custom duty on gold and silver.

 

RENEWABLE ENERGY

The Finance Minister said that a phased manufacturing plan for solar cells and solar panels will be notified to build up domestic capacity.  She announced raising duty on solar inverters from 5 per cent to 20 percent and on solar lanterns from 5 per cent to 15 per cent. 

 

CAPITAL EQUIPMENT

The Finance Minister, in her Budget speech, said that there is immense potential in manufacturing heavy capital equipment domestically. She said that the rate structure will be comprehensively reviewed in due course. She proposed to withdraw exemptions on tunnel boring machine. It will attract a customs duty of 7.5%; and its parts a duty of 2.5% while raising customs duty on certain auto parts to 15% to bring them on par with general rate on auto parts.

 

MSME PRODUCTS

The Budget proposes certain changes to benefit MSMEs which include increasing duty on steel screws, plastic builder wares and prawn feed to 15%.  It also provides for rationalizing exemption on import of duty free items as an incentive to exporters of garments, leather and handicraft items.  It also provides for withdrawing exemption on imports of certain kind of leathers and raising custom duty on finished synthetic gem stones.

 

AGRICULTURE PRODUCTS

To benefit farmers, the Finance Minister announced raising custom duty on cotton to 10% and on raw silk and silk yarn to 15%. She also announced withdrawing end-used based concessions on denatured ethyl alcohol. 

 

AGRICULTURE INFRASTRUCTURE AND DEVELOPMENT CESS

The Minister proposed an Agriculture Infrastructure and Development Cess (AIDC) on a small number of items. She said “While applying the cess, we have taken care not to put additional burden on consumers on most items”. On customs side the items covered under AIDC are gold, silver, alcohol beverages, crude palm oil, crude soyabean and sunflower oil, apples, coal, lignite and peat specified fertilizers, peas, kabuli chana, bengal gram, lentil and cotton over all there would be no additional burden on the consumer on most of these items.

On the excise side, AIDC of Rs. 2.5 per litre has been imposed on petrol and Rs. 4 per litre on diesel. However, Basic Excise Duty (BED) and Special Additional Excise Duty (SAED) rates on petrol and diesel have been reduced in the budget so that overall consumer does not bear any additional burden. Unbranded petrol and diesel will attract BED of Rs. 1.4 and Rs. 1.8 per litre respectively while SAED on them will be Rs. 11 and Rs. 8 per litre respectively.

Regarding rationalization of procedures and easing of compliance, the Finance Minister proposed certain changes in the provisions relating to ADD and CVD levies.  She also said that to complete customs investigation, definite time-lines are being prescribed.  The Minister said that the Turant Custom Initiative rolled out in 2020 has helped in putting a check on misuse of FTAs.          

 

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Ministry of Finance

14th Instalment of Rs. 6,000 crore released to the States to meet the GST compensation shortfall

A total amount of Rs. 84,000 crore released so far to all States and UTs with legislature

This is in addition to additional borrowing permission of Rs. 1,06,830 crore granted to the States

Posted On: 03 FEB 2021 1:14PM by PIB Delhi

The Ministry of Finance, Department of Expenditure has released the 14th weekly instalment of Rs. 6,000 crore to the States today to meet the GST compensation shortfall. Out of this, an amount of Rs. 5,516.60 crore has been released to 23 States and an amount of Rs. 483.40 crore has been released to the 3 Union Territories (UT) with Legislative Assembly (Delhi, Jammu & Kashmir & Puducherry) who are members of the GST Council. The remaining 5 States, Arunachal Pradesh, Manipur, Mizoram, Nagaland and Sikkim do not have a gap in revenue on account of GST implementation.

Till now, 76 per cent of the total estimated GST compensation shortfall has been released to the States & UTs with Legislative Assembly. Out of this, an amount of Rs. 76,616.16 crore has been released to the States and an amount of Rs. 7,383.84 crore has been released to the 3 UTs with Legislative Assembly.

The Government of India had set up a special borrowing window in October, 2020 to meet the estimated shortfall of Rs. 1.10 lakh crore in revenue arising on account of implementation of GST. The borrowings are being done through this window by the Government of India on behalf of the States and UTs. 14 rounds of borrowings have been completed so far starting from 23rd October, 2020.

The amount released this week was the 14th instalment of such funds provided to the States. The amount has been borrowed this week at an interest rate of 4.6144%. So far, an amount of Rs. 84,000 crore has been borrowed by the Central Government through the special borrowing window at an average interest rate of 4.7395%. 

In addition to providing funds through the special borrowing window to meet the shortfall in revenue on account of GST implementation, the Government of India has also granted additional borrowing permission equivalent to 0.50 % of Gross States Domestic Product (GSDP) to the states choosing Option-I to meet GST compensation shortfall to help them in mobilising additional financial resources. All the States have given their preference for Option-I. Permission for borrowing the entire additional amount of Rs. 1,06,830 crore (0.50 % of GSDP) has been granted to 28 States under this provision.

The amount of additional borrowing permission granted to 28 States and the amount of funds raised through special window and released to the States and Union Territories so far is annexed.

           

State wise additional borrowing of 0.50 percent of GSDP allowed and amount of funds raised through special window passed on to the States/UTs till 01.02.2021

(Rs. in Crore)

S. No.

Name of State / UT

Additional borrowing of 0.50 percent allowed to States

Amount of fund raised through special window passed on to the States/ UTs

1

Andhra Pradesh

5051

1936.53

2

Arunachal Pradesh*

143

0.00

3

Assam

1869

833.20

4

Bihar

3231

3271.94

5

Chhattisgarh

1792

1523.34

6

Goa

446

703.77

7

Gujarat 

8704

7727.43

8

Haryana

4293

3646.77

9

Himachal Pradesh 

877

1438.79

10

Jharkhand

1765

827.55

11

Karnataka

9018

10396.53

12

Kerala

4,522

3153.48

13

Madhya Pradesh

4746

3806.03

14

Maharashtra

15394

10036.53

15

Manipur*

151

0.00

16

Meghalaya

194

93.79

17

Mizoram*

132

0.00

18

Nagaland*

157

0.00

19

Odisha

2858

3202.69

20

Punjab

3033

4571.52

21

Rajasthan

5462

3162.97

22

Sikkim*

156

0.00

23

Tamil Nadu

9627

5229.92

24

Telangana

5017

1466.01

25

Tripura

297

189.60

26

Uttar Pradesh

9703

5033.57

27

Uttarakhand

1405

1940.91

28

West Bengal

6787

2423.29

 

Total (A):

106830

76616.16

1

Delhi

Not applicable

4914.56

2

Jammu & Kashmir

Not applicable

1903.74

3

Puducherry

Not applicable

565.54

 

Total (B):

Not applicable

7383.84

 

Grand Total (A+B)

106830

84000.00

* These States have ‘NIL’ GST compensation gap

 

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