July 2023 / India

On 11 July 2023, the Goods and Services Tax Council (GST Council), in its 50th meeting, made certain recommendations relating to changes in GST tax rates, measures for facilitation of trade and measures for streamlining GST compliance. These recommendations will be implemented through circulars/notifications amending the law.

The recommendations are set out below.

Tax rates

• Online gaming and horse racing will be included in schedule III as taxable actionable claims and will be taxed at the uniform rate of 28%. Tax will be imposed on the face value of chips purchased in casinos, on the full value of bets placed with bookmakers/totalizators in the case of horse racing and on the full value of bets placed at online gaming.
• The GST rate is reduced from 18% to 5% for specified products like uncooked/unfried snack pellets, imitation zari thread or yarn, fish soluble paste and Linz-Donawitz (LD) slag.

Exemptions

• Specific medicines imported for personal use as well as medicines/food items imported for treatment of rare diseases will be exempt from GST.
• GST exemption for satellite launch services supplied by the Indian Space Research Organization (ISRO), Antrix Corporation Limited and New Space India Limited (NSIL) will be extended to include services supplied by organizations in the private sector to encourage start-ups.

Trade facilitation

• Services supplied by a director of a company to the company in his personal capacity, such as supplying services by way of renting of immovable property to the company or body corporate, are not taxable under the reverse charge mechanism (RCM). Only those services supplied by a director as, or in the capacity of, director of that company or body corporate will be taxable under the RCM in the hands of the company or body corporate.
• The goods transport agency (GTA), paying GST under forward charge, will not be required to furnish a declaration every year. A declaration once furnished will remain valid until it is cancelled.
• The value of supplies of goods from duty free shops at arrival terminals in international airports must be included in the value of exempt supplies for the purpose of the reversal of input tax credit.
• Relevant circulars will be issued to provide clarity on issues such as (i) liability for tax collection at source (TCS) in cases where multiple e-commerce operators (ECOs) are involved in a single transaction for the supply of goods or services or both; and (ii) merely holding securities of a subsidiary company by a holding company cannot be treated as a supply of services and taxed under GST.

Compliance/administration

• E-way bill generation will be mandatory for intra-state movement of gold and precious stones.
• Rules on GST registration will be amended to provide that:
  • bank account details are furnished within 30 days of the grant of registration or before filing of Form GSTR-1/ IFF, whichever is earlier;
  • suspension of GST registration and restriction on filing GST returns on failure to furnish valid bank account details; and
  • physical verification of business premises in the presence of the applicant may not be required except in high risk cases.
• Exemption from filing the GSTR-9/9A for small taxpayers (with an aggregate annual turnover up to INR 20 million) continues for FY 2022-23.

Production Linked Incentive scheme (PLI) has become a crucial part of Hon’ble Prime Minister’s vision of making India a $ 5 trillion economy. In the post-pandemic scenario, PLI is proving to be a huge catalyst in creating ‘AatmaNirbhar Bharat’.

Sector-specific Focus:  

PLI scheme is strengthening India’s manufacturing sector by incentivising domestic and foreign investments and by developing global champions in the manufacturing industry.

The scheme currently targets 14 sectors of strategic and economic importance for India’s economic growth. By providing targeted incentives and support to sectors like electronics, automobiles, pharmaceuticals and MedTech devices, food, telecom, solar, textiles, drones, the scheme encourages companies to invest in areas where India has the potential to become a global leader.

Through the PLI scheme, the government is encouraging companies to increase their manufacturing capabilities by spending on plant, machinery, equipment and associated utilities, R&D, and transfer of technology. The government, in turn, is providing incentives for a period up to five years on the increased manufacturing. The percentage of incentives varies for various sectors keeping in mind the specific needs of the industry.

As a result of the policies, early estimates of the impact of PLI scheme show encouraging trends in some sectors. As per the Economic Survey, the PLI scheme for large-scale electronics manufacturing has attracted an investment of INR 4,784 crore and contributed to a total production of INR 2.04 lakh crore, including exports of INR 80,769 crore (as of September 2022). As per the data released by the Ministry of Electronics and Information Technology, PLI scheme for large scale electronics has emerged as the most successful scheme while generating an employment of 28,636 and leading to a 139 per cent increase in exports of smartphones over the last three years. Similarly, under the scheme, the automobile and auto component industry has attracted proposed investment of INR 74,850 crore over a period of five years.

According to the Indian Staffing Federation, this massive boost in production due to the PLI scheme has the potential to double the existing workforce across sectors.

PLI scheme has also been applauded by the industry as Mr Sandip Patani, Director, Microtex Processors Pvt Ltd, in interaction with Invest India, called it “a major boost for the manmade and technical textile sector manufacturing in India” whereas Ms Shuba Nagesh, India Head Supply Chain, Wipro GE Healthcare, termed it “a huge shot in the arm of the medical industry.”

Future Prospects

As many other beneficiaries have emphasised, the PLI scheme is emerging as a game-changer for many critical and emerging industries. Hon’ble Prime Minister also highlighted, “Not only is it benefiting the PLI sector for which the scheme is meant, it will greatly benefit the entire ecosystem associated with that sector.”

The schemes are likely to demonstrate positive results in increasing manufacturing, job creation, and export. For instance, the PLI scheme is likely to facilitate the expansion of food processing capacity by nearly INR 30,000 crores and create additional direct and indirect employment opportunities for about 2.5 lakh persons by the year 2026-27.Similarly, in the pharmaceutical sector, the PLI scheme aims to boost domestic production of critical drugs and reduce dependence on imports.

The government is actively monitoring the progress of the PLI schemes and making necessary adjustments to enhance its effectiveness. Continuous engagement with industry stakeholders, streamlining of processes, and ensuring ease of doing business are some of the measures taken to facilitate the smooth implementation of the schemes.

Source: Investindia.gov.in

Embarking on a journey of flavours and economic cooperation, the India-Middle East food corridor emerges as a transformative initiative that holds the power to revolutionize trade and economic ties between India and the Middle East.

Bilateral Relations between India and the UAE

The India-UAE diplomatic ties have strengthened in recent years. Bilateral trade hit record levels in FY 22-23, surging from $ 72.9 Bn (FY 21-22) to $ 84.5 Bn (FY 22-23), with a remarkable 16% year-on-year growth rate. Key sectors include mineral fuels, electrical machinery, gems and jewellery and automobiles.

UAE is the 7th largest investor in India in terms of FDI, amounting to $ 3.35 Bn in FY 22-23. The Comprehensive Economic Partnership Agreement (CEPA) signed in Feb 2022 is acting as a growth engine for India-UAE bilateral trade and aims to boost trade further, targeting over $ 100 Bn in goods and over $ 15 Bn in services within five years.

India-Middle East food corridor: Origin 

UAE has made significant investments in India in past years to build a food corridor and guarantee food security of the Emirates and other Middle Eastern countries. Multiple UAE-based companies including Emaar Group and DP World have been carrying out substantial investments for the construction of food parks and providing supply chain solutions in India.

On July 14, 2022, the inaugural “I2U2” summit witnessed the coming together of the heads of government from India, Israel, the UAE and the US. This historic event highlighted the concept of food corridor, indicating the formation of a US-sponsored "Middle-East squad." During the summit, the UAE made a significant announcement of $ 2 Bn investment towards the construction of food parks in India that will leverage advanced agritech, clean tech, and renewable energy technologies from Israel and the US.

Alongside India's collaboration with the UAE, Israel's agritech and clean tech partnerships are playing a pivotal role in supporting India's efforts to achieve its objectives. India has gained from Israeli expertise and technologies in horticulture mechanization, micro-irrigation and post-harvest management. Israeli drip irrigation technologies are now widely utilized in India. Additionally, Israeli companies and experts are contributing their knowledge to enhance dairy farming in India.

India-Middle East Food Corridor: The Vital Role of India

During the FY 2022-23, the UAE emerged as the second-largest importer of agricultural products from India, amounting to $ 1.9 Bn (6.9% of India's total agricultural exports during that period). Rice and wheat being the top items amounting to $ 486 Mn and $ 150 Mn respectively.

The UAE, which is heavily reliant on import of staple food items, has set the objective of achieving food access and supply chain crisis readiness. India, being the second-largest producer of food in the world, is a crucial ally in the UAE's attempts to improve food security. Moreover, given its advantageous location in the Gulf region, the UAE has the potential to serve as the logistical and distribution hub for the corridor.

By forging a strong alliance with India through this corridor, the UAE can mitigate the risks associated with food supply disruptions. This collaboration not only strengthens bilateral ties but also reinforces the shared commitment towards fostering regional stability and prosperity.

India’s Agricultural Advancements for Enhanced Food Production

Alongside the UAE's substantial investment of $ 2 Bn in the development of food parks in India, the Indian government has undertaken proactive measures to establish food parks and enhance trade relations with various nations. The Union Budget 2023-24 announced a substantial investment in Agriculture Accelerator Fund to encourage agri startups.

• The Ministry of Food Processing Industries has implemented the Mega Food Park Scheme (MFPS) to establish modern infrastructure along the entire value chain from farm to market in the food processing sector. As a part of this initiative, the Ministry granted approval to 41 Mega Food Park projects, out of which 24 are currently operational.
• Under the PMKSY (Pradhan Mantri Kisan Sampada Yojana), a comprehensive range of initiatives has been implemented across the country including the approval of 41 Mega Food Parks, 376 Cold Chain projects, 79 Agro-Processing Clusters, 482 proposals for the Creation/Expansion of Food Processing & Preservation Capacities (CEFPPC), 61 projects for the Creation of Backward and Forward Linkages, 46 Operation Green projects and 183 approved projects under Food Testing Laboratories out of which 140 projects are completed.
• In 2022, the Indian Government implemented a range of innovative initiatives like 558 unique identification systems, Kisan drones for crop evaluation, digitisation of land records and nutrient pesticide spraying.

The Indian agriculture and food processing sector hold immense potential for growth and development. With substantial government support and abundant arable land, the India-Middle East food corridor presents a remarkable opportunity for India to realize its goal of augmenting the value of food production.

UAE’s agritech sector has shown remarkable growth in recent years. Investments from venture capital firms in AgriTech startups in UAE were expected to exceed $ 500M by 2023. Fostering partnerships with UAE-based agritech startups like RightFarm, Madar Farms etc can also open new avenues for Indian startups to access advanced technologies and investment opportunities.

In conclusion, the India-Middle East food corridor represents a pivotal alliance between India and the UAE, driven by the shared goal of ensuring food security and fostering economic prosperity. With a rich history of bilateral relations and a pressing need to reduce dependence on food imports, the corridor has emerged as a promising solution. As India continues to invest in infrastructure development and the UAE commits substantial funding for food parks, the stage is set for a transformative collaboration.

The food corridor not only addresses the immediate challenges of food security but also paves the way for stronger regional ties, sustainable agriculture and a resilient future for both nations. Together, India and the UAE are poised to embark on a remarkable journey of shared growth, mutual prosperity, and a more secure food landscape for generations to come.

Source: Investindia.gov.in