Union Budget 2021 : Part 1 – Customs Related

I am not in a hurry to write on the Budget w.r.t the Income Tax Proposals as they are not going to change overnight. All the income tax related provisions are applicable for the next financial year starting 1st April 2021and some changes may happen before it is passed by the Parliament.

Issues which have immediate Impact – 3 Points

The Government has introduced a new Cess called ‘Agriculture Infrastructure and Development Cess (AIDC). This is levied on (a) Specified Imported Goods (b) Petrol and Diesel. In the case of Imported Goods, the impact of additional Cess is passed on to the consumer, whereas there won’t be any additional impact on the prices of Petrol and diesel.

Why is this Cess introduced?

Government wants its citizens to eat home-grown fruits, oils and other food produce. Those who still want to consume imported items can pay more as Cess. Such additional taxes will be used for the betterment of agricultural infrastructure.

Point # 1 AIDC on Customs Duty

  • This new Cess is on Customs Duty (Customs Duty is a tax on imported goods) and
  • Not on GST or Income Tax (No changes in the tax rates of GST or Income Tax, all remains same)
  • AIDC is not applied on all imported goods, it’s only on specified goods.
  • Which are the specified goods?
    • Apples (Cess Rate – 35%) – means imported apples sold in fancy fruit shops will cost more. Prices of Ooty apple, Shimla/Kashmir apple will not have any impact.
    • Crude Palm Oil (17.5%)
    • Crude Soya-bean oil (20%)
    • Imported Wine (100%)
    • Gold 2.5% (Basic Customs Duty on Gold is reduced from 12.50% to 7.50%; AIDC is added by 2.50%, thus, the Gold rate will not go up)

Like these, there is a list of items that will suffer AIDC. The prices of such items will go up. 

Point # 2 AIDC  on Petrol and Diesel

  • 2.50 on Petrol
  • 4.00 on Diesel

Will this impact the consumers? No. They have calibrated the taxes, such that there is no additional burden on the consumer.  (No price increase from midnight on account of this change!)

Petrol and diesel have 4 types of duties, namely (in Rs. Per litre)

ProductBasic Excise Duty (BED)Special Additional Excise DutyRoad and Infrastructure CessAgriculture Infrastructure and Development CessTotal Duties
Petrol (unbranded)1.4011182.532.90
Petrol (branded)2.6011182.534.10
Diesel (unbranded)1.808184.031.80
Diesel (branded)4.208184.034.10

 

Point # 3 Customs Duty

As expected, there is an increase in the Customs Duty on certain items such as

  • Electric Motors (Increased from 10% to 15%)
  • Parts of automobiles such as Safety glass, consisting of toughened (tempered) or laminated glass (10% to 15%)
  • Carbon Black (5% to 7.50%)
  • Cut and Polished Synthetic stones, including Cut and Polished Cubic Zirconia (10% to 15%)
  • Compressors of a kind used in refrigerating equipment (12.50% to 15%)

Why are the duties increased?

To encourage buying local stuff instead of importing them. However, wherever the increase is effected, the final goods, say Cars, Electrical Machineries, etc., will cost more in the coming days (if the manufacturers decide to pass on the burden to the end consumer)

These are the 2 changes (Point # 1 and # 3) that will have an immediate impact from to-night.

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About B E Kumar Prasad

B E Kumar Prasad
He is a Practicing Chartered Accountant in Bengaluru, India. He has 25+ years of experience in income tax, business setup, and NRI matters. He is also an Insolvency Professional and Registered Valuer (F&SA).Prasad welcomes your comments and questions. Please email him at [email protected]

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Rabindra sahu
Rabindra sahu
8 months ago

Thank you for writing the article briefly and posting only those points what have a immediate effect.

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