Union Budget 2021: Cess on import of over dozen items not to burden consumers

Hard-pressed to boost infrastructure in the agriculture sector, the Budget has imposed a new cess on the import of over a dozen items while reducing the basic customs duty on them to ensure no additional burden on consumers. The new impost will be effective from February 2.

The total amount to be raised through the Agriculture Infrastructure and Development Cess is estimated at `30,000 crore, finance secretary secretary A B Pandey said.

The Budget also slapped higher import duty on electronic items, including mobile charger and certain auto parts to promote domestic manufacturing, especially by small industries.

The government also introduced cess on petroleum products while reducing basic excise duty and special additional excise duty rates on the the petrol and diesel. This means that the cess proceeds are a carve-out from the existing excise duty burden on these products.

“There is an immediate need to improve agricultural infrastructure so that we produce more, while also conserving and processing agricultural output efficiently,” finance minister Nirmala Sitharaman said in her speech. While applying this cess, the government has ensured that no additional burden is put on consumers on most items, she added.

Decoding Finance Minister Nirmala Sitharaman’s Union Budget 2021

The import of items now attracting AIDC include apples, kabuli chana, masur dal, imported alcohol on which cess would be 100%, gold and silver among others.

Rajat Bose, partner at Shardul Amarchand Mangaldas & Co said: “On expected lines, customs duties have been increased on certain auto parts, parts of mobile phones and solar panels in order to provide impetus to domestic manufacturing.”

He added that reduction in customs duties on gold and silver would bring some relief to the consumers while higher duty on certain iron and steel products may adversely affect the real estate and infrastructure sector.

The Budget also announced that customs exemptions on 400 items would be reviewed while any new exemption would have an automatic validity of two starting from the next fiscal.

M S Mani, senior director at Deloitte India said: “The policy on rationalisation of customs rates and procedures started a few years back has been further moved ahead this year with a plan to review over 400 customs exemptions and a policy of having future exemptions with a validity period of two years making the review of customs exemptions an ongoing process in future.”