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NEW DELHI : The Union budget for FY23 may introduce a raft of changes to customs duties as the government leans on tariff rationalization to promote local manufacturing, a person aware of the discussions said.

The Centre held public consultations on the culling of obsolete duty exemptions and has received representations from the industry about high input costs in several sectors.

Promoting local value addition and improving cost-competitiveness will get special attention in the FY23 budget, the person cited above said on condition of anonymity.

The budget may reduce the duty on basic raw materials, including metals, which have seen prices soar in recent months while withdrawing concessions for an identified list of products, including various intermediates used in manufacturing where domestic capability has improved over the years, the person cited above added.

Duty concessions given in the past for items like fasteners and buckles used in apparel, upholstery fabrics and various intermediates used in the manufacturing sector may face the axe. An email sent to the finance ministry seeking comments for the story remained unanswered till the time of publishing.

Experts said the budget needs to rationalize duties across the value chain, from raw materials and intermediates to finished products, while industry representatives called for customs duty relief for supplies and equipment used in covid-affected sectors such as hospitality.

The budget may simplify import procedures, especially on rules of origin, and certain schemes like manufacturing and other operations in warehouse regulations, said Bipin Sapra, a tax partner at EY India. “The industry has been hoping for a dispute resolution scheme, and there is a need to further digitize import processes on lines similar to GSTN for ease of doing business," Sapra said.

“During the first two waves of covid-19, tourism was one of the hard-hit sectors. It is a strategically important sector as it provides opportunities to skilled as well as unskilled job seekers, thereby providing employment to all sections of society. To revamp growth, it is important to rationalize customs duties on procurements by the hotel industry," said Pradeep Multani, president of industry lobby group PHDCCI.

Multani said items such as air-conditioning equipment, beds and mattresses and furniture, which are key items of capital spending by the hotel industry, are subject to 20-25% customs duty, which will need to be reduced to around 10%.

India also needs to rationalize basic customs duties on specialized transport vehicles such as ambulances, which stand at more than 100%, he said.

Businesses are also asking for integrated GST relief on imports of covid-related medical supplies, which was given during the second wave of the pandemic, till the end of next year.

The Narendra Modi administration is currently wooing investments into specified sectors such as textiles, electronics and IT hardware by offering production-linked incentives and to the infrastructure sector through tax incentives.

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