Customs Outlook For Union Budget 2024: Aligning With Atmanirbhar Bharat And Global Dynamics

The Union budget 2024-25 can be expected to be quite fascinating from the cross-border trade perspective as the government is keen on its Atmanirbhar Bharat Abhiyaan.

The World Bank projects that India's GDP growth will gradually increase, rising from 6.3 percent in 2023–2024 to 6.4 percent in 2024–2025 and 6.5 percent in 2025–2026. The upcoming financial year can be considered as a very crucial year due to important events including elections in the United States and India, possible changes in central bank monetary policies, China's economic downturn, and continuous geopolitical tensions throughout the globe.

From a customs perspective, the incentive schemes, promotion of make in India program are already playing a vital role in globalization of the Indian trade. The thrust of the Government should be to further strength these schemes by way of additional attractive tax incentives, subsidization, concessions etc. complying with the WTO norms for promotion of more exports and enabling India to world’s third largest economy.

From the initiatives and targets set by the government, some of the key expectations from the union budget 2024 from customs perspective can be listed as below:

● In lines with the motto of the present government to enable ease of doing business, the upcoming budget may focus more on working together between the public and business sectors to successfully modernize customs. Further, the involvement of corporates in promoting, development, and administration of trade-related infrastructure can be expected. Cooperative projects with the private sectors can be further strengthened to increase the effectiveness of logistics, provide IT solutions, and to train the officials.

● With increased focus on generating more opportunities in India, utilization of digital platforms, automation, and single window clearing systems to streamline clearance processes can be expected from this union budget. It is also expected that streamlining of laws and bringing them into compliance with global best practices, going paperless and reduction in in person interactions is expected to the focus of the ensuing budget.

● With primary focus on the start-ups in the country it is expected that multiple advantages to the startups that are engaged in import-export operations would be provided in terms of efficient flow of the customs processes and cutting MSMEs expenses associated with the compliance. Further, putting in place special programs to allow MSMEs to import equipment and raw materials duty-free or at concessional rates, the government can further enhance ability of MSMEs and knowledge of international trade laws.

● It can be anticipated that the government will take into consideration providing concessions or waivers from indirect taxes & continuing with the practice of strategies like decreasing duties on raw materials and increasing duties on finished goods for the identified key sectors.   

● Providing targeted incentives and tariff breaks to certain industries and encouraging free trade agreements with significant partners may help in obtaining better access to markets. With stringent laws such as CBAM in place at the European union, further incentives to the Indian industry is expected to compensate for the exports at a competitive prices.

● The Union Budget can further facilitate the development of infrastructure, lending programs, and tax advantages for export-oriented enterprises by reducing reliance on basic material exports and increasing value-added exports. Also, with a great focus on the green energy, the budget can be expected to work on sustainability in trade and environmental aspects such as incorporating environmental standards into the processes used for customs, preventing the import of goods that are not environment friendly or encouraging eco-friendly technology and sustainable practices.

● To ensure smooth functioning of compliances, decrease in physical interventions and strengthening the process of risk assessment models driven by data shall be imperative. Also, putting in place a platform with a single interface for all services pertaining to customs would be a welcome move.  Quicker dispute resolution procedures for complaints along with simplifying import and export processes for short-term use shall be essential.   

● The government has always been keen on settling the prior disputes and long pending litigations by way of timely schemes such Vivad se Vishwas scheme, Sabka Vishwas Legacy Dispute Resolution Scheme. It can be expected that focusing on the drive in bringing the economy to the third largest, it is also necessary that industry starts focusing towards achieving the set targets and not engaged in the past litigations. An amnesty scheme for disputes under the Customs is also expected under the union budget.

● The Special Valuation Branch (SVB) procedures are implemented to reduce the workload for the customs ports. However, it has led to lengthy waiting periods for provisional assessments and show-cause notice notifications from several ports.   Hence, the trade and industry expect that the SVB process can be reviewed, and steps taken to ensure speedy disposal of the investigations.

Conclusion

While the Budget 2024 will be the last Budget of the Government’s current full tenure, it will address the long-term expectation of the trade & proposes policies to further enhance trade facilitation. It would be pertinent to note how the budget would further strengthen India's pursuit of ease of doing business as well as boost the Make in India and Atmanirbhar Bharat’s initiatives.

(The article is written by PS Krishnan, Partner; Neha Jain - Manager and Vaibhav Pathak - Consultant, Grant Thornton Bharat.)

(The opinions presented belong solely to the authors.)