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Customs duty exemption on capital goods for manufacture of EV batteries

New Delhi, Feb 1 (IANS) Customs duty exemption has been provided for capital goods for the manufacture of lithium–ion cells for batteries used in EVs in the Union Budget 2023-24.

This would help the automobile sector maintain its global competitiveness.

Reduction of Customs duty on components of mobile phones, lithium-based batteries, open cells for TV panels etc. would go a long way in integrating into global value chain and enhancing India’s exports of these products.

Abhishek Jain, Partner, Indirect Tax, KPMG In India, said this year’s Budget has been largely Customs centric, and a perusal of the fine print of the Budget documents clearly exemplifies the government’s intent to promote domestic manufacturing, with special focus on green mobility.

This is evident from Nil rate of Customs duty being introduced for capital goods/machinery for manufacture of lithium-ion cell for use in EV batteries, reduction in Customs duty for import of denatured ethyl alcohol to promote petroleum blending and increase in import tariff rates for petrol/diesel run vehicles along with EVs manufactured outside India.

Solar power projects being excluded from project import benefits, while creating some cost-related hardship for these projects, will promote in-house solar module manufacturing and reduce dependance on other nations, Jain said.

Other sectors where some advantages have been extended to domestic manufactures are bicycle and toy manufacturing, where tariff rates have been increased.

This change comes at an opportune time when PLI for these sectors seems to be on the cards. Impetus has also been provided to consumer electronics sector with major exemptions being continued for parts used in mobile manufacturing for another year, and Customs duty cut for import of parts used in manufacturing open cell for TV panels.

Gunjan Prabhakaran, Partner and Leader – Indirect Tax, BDO India, said the indirect tax proposals focus on reduction of duties on raw materials like seeds for lab-grown diamonds, parts of mobile phones, TV panel parts, steel sector etc., and propose to impose duties on import of final products like compounded rubbers etc., in a bid to create a level-playing field for domestic manufacturers.