The proposed amendment to Section 65A of the Customs Tariff Act 1962, as outlined in the Finance Bill, 2023, posed a risk of withdrawal of the IGST exemptions on inputs imported by duty-free bonded warehouses meant for export production. This amendment could have far-reaching negative consequences, increasing the cost of doing business, impacting competitiveness, and discouraging manufacturers from scaling their operations in India. The electronics sector, in particular, ¬†faced the risk of increased output costs and complicated refund mechanisms. Industry stakeholders urgently requested the continuation of IGST exemptions to support India’s manufacturing efforts and ensure ease of doing business.
On 11 Sept 2023, the Ministry of Electronics and Information Technology communicated that the Electronics and Semiconductor Manufacturing sector will be exempt from the application of section 65A of the customs Act as and when its subsection (1) is notified. This is as per decision taken by CBIC.