“I propose to fully exempt customs duties on 25 critical minerals and reduce BCD (basic customs duty) on two of them. This will provide a major fillip to the processing and refining of such minerals and help secure their availability for these strategic and important sectors,” the finance minister said. The move will also help in easing the supply chain for the industry amid continuous geopolitical uncertainties.

Inverted duty structure – a situation when tax rate on inputs is higher compared to finished goods—has been plaguing the Indian manufacturers for years now. 

Earlier in February, Rajeev Chandrasekhar, former Minister of State at Ministry of Electronics and Information Technology in a letter to Sitharaman expressed concerns “about losing out due to the uncompetitive tariffs.” He also added that India needs to “act fact” or else it may lose out to China and Vietnam. The commerce ministry has also been concerned over the issue.

Manufacturers in the country have been complaining of the inverted duty structure, which has increased overall costs.

The GST Council is also looking into the issue. Goods and services tax (GST) comprises a chunk of the indirect tax bouquet.

“The changes proposed in customs duties on critical minerals, parts of telecom equipment and medical devices, capital goods for solar cell and module manufacturing, etc align with its ‘Make in India’ initiative. These changes aim to boost domestic manufacturing in sectors like medical devices, solar energy, battery energy storage, electric vehicles and defense, reducing reliance on imports and promoting self-sufficiency,” Saurabh Agarwal, Tax Partner, EY India, said.

In addition, the finance minister announced full exemptions to three more medicines used by cancer patients.

The reduction in customs duties on gold and silver to 6 per cent from 10 per cent will spur demand for the precious metal.

“This is a welcome move as the announcement will boost private consumption. The price of gold and silver will come down and gold based savings instruments will find many takers,” Nirupama Soundararajan, Founder and Partner, Policy Consensus Centre told The Secretariat.

Sitharaman's proposal of a comprehensive review of the customs rate structure over the next six months --  to rationalise and simplify it for ease of trade, removal of duty inversion and reduction of disputes is also being seen as a positive step by the manufacturers.

“The fact that the minister is planning to do a comprehensive review of the customs tax structure indicates that there could be further rejigging of this and removing discrepancies,” an analyst told The Secretariat.

The Finance Minister has proposed to undertake a comprehensive review of the Income Tax Act, 1961 as well.

Meanwhile, Sitharaman provided relief to individual income taxpayers as well by increasing the standard deduction by from Rs 50,000 to Rs 75,000 while rejigging the tax slabs under the new tax structure, leaving more money in their hands.

Under the new tax regime, individuals earning up to Rs 3 lakh will continue to be exempt from paying any tax—similar to the previous year's structure.

Those with an income between Rs 3 lakh and Rs 7 lakh will now have to pay 5 per cent tax. Income levels between Rs 7 lakh and Rs 10 lakh will attract 10 per cent tax while those earning Rs 10 lakh to Rs 12 lakh will be levied 15 per cent tax. Individuals with incomes between Rs 12 lakh and Rs 15 lakh will now be taxed at 20 per cent and those earning above Rs 15 lakh will continue to be taxed at 30 per cent.

“Clearly, the government is incentivising people to opt for the new tax regime—this is aimed at making the overall tax structure simpler,” Soundararajan said.  

Noting that two-thirds of the individual tax payers have switched to the new regime, Sitharaman proposed to undertake a comprehensive review of the Income Tax Act, 1961 as well. She reiterated the need to widen the tax net even more.

"It is not just because we have mentioned it in this budget, but the attempt to widen the tax net is something which we have been repeatedly saying, that India's tax net will have to be widened—whether it is in direct taxation or indirect," Sitharaman said to the media after presenting the budget.