scorecardresearch
Friday, March 29, 2024
Support Our Journalism
HomeDefenceCustoms duty relief offers sole Budget cheer for Army, Navy and IAF

Customs duty relief offers sole Budget cheer for Army, Navy and IAF

In her maiden Budget, Nirmala Sitharaman has exempt the armed forces from paying customs duty on import of defence equipment.

Follow Us :
Text Size:

New Delhi: Finance Minister Nirmala Sitharaman’s maiden Budget Friday exempt defence imports from customs duty, spelling relief for the armed forces that found their buying power diminished by the levy, which they paid along with the goods and services tax (GST).

“Defence has an immediate requirement of modernisation and upgradation. This is a national priority,” Sitharaman’s Budget speech stated. “For this purpose, import of defence equipment that are not being manufactured in India are being exempted from the basic customs duty.”

Till 2016, all defence products were exempt from customs duty. However, their inclusion in the tax regime came to light in May that year, when the customs department stopped the release of spare parts and equipment for the Indian Air Force pending payment. It was only then that the services got into action and asked the defence ministry to intervene.

Infographic by Arindam Mukherjee | ThePrint

Also read: Indian Navy says budget barely meets requirements, wants more funds for modernisation


A longstanding demand

Under the agreements for defence purchases, the country exporting spare parts and equipment takes care of the duties and taxes for their shores, while the importer pays the levies in their nation.

While the GST, introduced in July 2017, subsumed several taxes, it did not cover basic customs duty.

Customs duty on defence equipment can go up to 30 per cent, and together with GST, Army sources told ThePrint, it cut the legroom for purchase by several thousands of crores.

“It was like our purchasing power had decreased by 30 per cent because of the customs duty paid,” a top officer in the defence establishment told ThePrint. Another officer said the Army alone will be saving nearly Rs 800 crore to Rs 1,000 crore on account of the Budget reprieve.

An Army official had earlier pegged the force’s annual GST spend on defence equipment at Rs 7,000-8,000 crore.

Under the late Manohar Parrikar in the first Modi administration, the defence ministry had assured the services that the customs duty they paid would be reimbursed, but that never happened.

ThePrint had reported Thursday that the Army had asked the ministry to factor in both the GST as well as customs duty while planning the defence budget outlay, to ensure they could forge ahead with acquisition and modernisation plans.


Also read: Even after Balakot air strikes, defence budget remains unchanged at Rs 3.18 lakh crore


No change

Overall, the defence budget has stayed the same as laid out in the interim budget this February, at Rs 4.3 lakh crore, including pensions.

The defence budget is categorised under four heads — defence pensions, capital outlay (for arms and other acquisitions), revenue (for salaries and schemes like the ECHS), and miscellaneous (including administrative expenses).

There were no major changes in the allocations against each head, with the capital expenditure earmarked at Rs 1.03 lakh crore and revenue expenditure at Rs 1.98 lakh crore. The outlay for defence pensions stayed the same too, at Rs 1.12 lakh crore.

The Army, being the largest of the three services, was allocated Rs 1.38 lakh crore under the revenue head in the 2019-20 interim budget, against a capital outlay of Rs 0.29 lakh crore.

This report has been updated with additional information

Subscribe to our channels on YouTube, Telegram & WhatsApp

Support Our Journalism

India needs fair, non-hyphenated and questioning journalism, packed with on-ground reporting. ThePrint – with exceptional reporters, columnists and editors – is doing just that.

Sustaining this needs support from wonderful readers like you.

Whether you live in India or overseas, you can take a paid subscription by clicking here.

Support Our Journalism

3 COMMENTS

  1. IPS name itself reads Police Service….How come Govt keep Police Service above Defence Services and Paramilitary forces in its Heirarchy?? Any able bodied person in India would first be approved or Tasked to join Armed Forces, then Paramilitary forces and lastly Police Forces…..This should be d norm…..Remove IPS cadre from UPSC exam schedule…It should be only for IAS and Allied Service….Even IFS exam should be organised separately……. Policing is a state subject, as d personnel/ employees needs to understand local language, psyche, history etc….. ..A good moov nevertheless…ALB to PMF and their cadre…

  2. Nothing will change. As the IPS officers sitting on Adam post will like to change the course of every opportunity on their way, thereby humiliating the Others. Hence an EYE WASH.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Most Popular