MM TAX CLUB

With an aim to promote exports, boost domestic manufacturing, enhance domestic value addition and encourage green energy and mobility, the Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman presented the Union Budget 2023-24 in Parliament today. She emphasised, “A simplified tax structure with fewer tax rates helps in reducing compliance burden and improving tax administration.”

The Finance Minister proposed to reduce the number of Basic Custom Duty (BCD) rates on goods, other than textiles and agriculture, from 21 to 13. This has necessitated minor changes in the basic custom duties, cesses and surcharges on some items including toys, bicycles, automobiles and naphtha.

Green Mobility

In order to avoid cascading of taxes on blended compressed natural gas, the Finance Minister proposed to exempt excise duty on GST-paid compressed bio gas contained in it. To further provide impetus to green mobility, she announced to extend the customs duty exemption to import of capital goods and machinery required for manufacture of lithium-ion cells for batteries used in electric vehicles.

IT & Electronics

Smt. Sitharaman proposed to provide relief in customs duty on import of certain parts and inputs like camera lens and continue the concessional duty on lithium-ion cells for batteries for another year in order to further deepen domestic value addition in manufacture of mobile phones. The Minister stated that the mobile phone production in India had increased from 5.8 crore units valued at about Rs. 18,900 crore in 2014-15 to 31 crore units valued at over Rs. 2,75,000 crore in the last financial year as a result of various initiatives of the Government, including the Phased Manufacturing programme.

She also proposed to reduce the BCD on parts of open cells of TV panels to 2.5% to promote value addition in manufacture of televisions.

Electrical

The Finance Minister proposed an increase in the BCD on electric kitchen chimney from 7.5% to 15% and a reduction on heat coils from 20% to 15%. This change would rectify inversion of duty structure and encourage manufacturing of electric kitchen chimneys.

Chemicals and Petrochemicals

To support the Ethanol Blending Programme and facilitate India’s endeavour for energy transition, the Minister proposed to exempt BCD on denatured ethyl alcohol. She also announced to reduce BCD on acid grade fluorspar from 5 % to 2.5% to make the domestic fluorochemicals industry competitive. The BCD on crude glycerin for use in manufacture of epicholorhydrin was also proposed to be reduced from 7.5% to 2.5%.

Marine Products

The Finance Minister proposed to reduce the BCD on key inputs for domestic manufacture of shrimp feed to enhance the export competitiveness of marine products. She stated that the marine products recorded the highest export growth in the last financial year, benefitting farmers in the coastal states of the country.

Lab Grown Diamonds

The Budget proposed to nullify the BCD on seeds used in the manufacturing of Lab Grown Diamonds from the current 5%.  The Finance Minister stated that India contributed about three-fourths of the global turnover by value in cutting and polishing of natural diamonds industry. With the depletion in deposits of natural diamonds, the industry is moving towards Lab Grown Diamonds.

Precious Metals

The Minister proposed to increase the duties on articles made from dore and bars of gold and platinum to enhance the duty differential. The customs duties on dore and bars of gold and platinum were increased earlier this fiscal. She also proposed to increase the import duty on silver dore, bars and articles to align them with that on gold and platinum.

Metals

To facilitate the availability of raw materials for the steel sector, the Finance Minister proposed to continue the exemption from BCD on raw materials for manufacture of CRGO Steel, ferrous scrap and nickel cathode. She also proposed to continue the concessional BCD of 2.5% on copper scrap to ensure the availability of raw materials for secondary copper producers who are mainly in the MSME sector.

Compounded Rubber

Smt. Sitharaman proposed to increase BCD rate on compounded rubber from 10% to ‘25 per cent or Rs. 30/kg whichever is lower’, at par with that on natural rubber other than latex, to curb circumvention of duty.

Cigarettes

The Finance Minister proposed to revise upwards the National Calamity Contingent Duty (NCCD) on specified cigarettes by about 16%. It was last revised 3 years ago.

Legislative Changes in GST Laws

Amendments to Sections 132 and 138 of CGST Act are proposed to

• Raise the minimum threshold of tax amount for launching prosecution under GST from Rs. 1 crore to Rs. 2 crore, except for the offence of issuance of invoices without supply of goods or services or both;
• reduce the compounding amount from the present range of 50% to 150% of tax amount to the range of 25% to 100%;
• decriminalize certain offences specified under clause (g), (j) and (k) of sub-section (1) of section 132 of CGST Act, 2017, viz.-
  • obstruction or preventing any officer in discharge of his duties;
  • deliberate tempering of material evidence;
  • failure to supply the information.

Smt. Sitharaman also proposed to amend Sections 37, 39, 44 and 52 of CGST Act, 2017 to restrict filing of returns/ statements to a maximum period of three years from the due date of filing of the relevant return / statement.

The Union Minister for Finance and Corporate Affairs, Smt Nirmala Sitharaman announced several Direct Tax proposals with an aim to maintain continuity and stability of taxation, further simplify and rationalize various provisions to reduce the compliance burden, promote the entrepreneurial spirit and provide tax relief to citizens. While presenting the Union Budget 2023-24 in Parliament today she stated that “It has been the constant endeavour of the Income Tax Department to improve Tax Payers Services by making compliance easy and smooth”.

Roll Out Of Common IT Return Form

The Finance Minister announced rolling out of a next-generation Common IT Return Form for tax payer convenience and strengthening of grievance redressal mechanism to further improve Tax Payers Services. She said that the constant endeavour of the Income Tax Department to make tax compliance easy and smooth. “Our tax payers’ portal received a maximum of 72 lakh returns in a day; processed more than 6.5 crore returns this year; average processing period reduced from 93 days in financial year 13-14 to 16 days now; and 45 per cent of the returns were processed within 24 hours”, she said.

MSMEs and Professionals

Smt Sitharaman said that micro enterprises with turnover up to Rs 2 crore and certain professionals with turnover of up to Rs 50 lakh can avail the benefit of presumptive taxation. She proposed to provide enhanced limits of Rs 3 crore and Rs 75 lakh respectively, to the tax payers whose cash receipts are no more than 5%. She also proposed to allow deduction for expenditure incurred on payments made to MSMEs so as to support them in timely receipt of payments. She proposed to include payments made to such enterprises within the ambit of section 43B of the Micro, Small and Medium Enterprises Development Act. It will be allowed on accrual basis only if the payment is within the time mandated under the Act.

Co-operative Sector

The Finance Minister announced that the new co-operatives that commence manufacturing activities till 31.3.2024 shall get the benefit of a lower tax rate of 15%, as is presently available to new manufacturing companies. She further proposed to provide an opportunity to sugar co-operatives to claim payments made to sugarcane farmers for the period prior to assessment year 2016-17 as expenditure. “This is expected to provide them with a relief of almost Rs 10,000 crore”, she said. 

Smt Sitharaman also announced providing a higher limit of Rs 2 lakh per member for cash deposits to and loans in cash by Primary Agricultural Co-operative Societies (PACS) and Primary Co-operative Agriculture and Rural Development Banks (PCARDBs). “Similarly, a higher limit of Rs 3 crore for TDS on cash withdrawal is being provided to co-operative societies”, she said. These proposals aim at realizing Prime Minister’s goal of “Sahkar se Samriddhi”, and his resolve to “connect the spirit of cooperation with the spirit of Amrit Kaal”.

Start-Ups

The Finance Minister proposed to extend the date of incorporation for income tax benefits to start-ups from 31.03.23 to 31.3.24. She further proposed to provide the benefit of carry forward of losses on change of shareholding of start-ups from seven years of incorporation to ten years. “Entrepreneurship is vital for a country’s economic development. We have taken a number of measures for start-ups and they have borne results”, she said and added that India is now the third largest ecosystem for start-ups globally, and ranks second in innovation quality among middle-income countries.

Appeals

Smt Nirmala Sitharaman proposed to deploy about 100 Joint Commissioners for disposal of small appeals so as to reduce the pendency of appeals at Commissioner level. “We shall also be more selective in taking up cases for scrutiny of returns already received this year”, she said.

Better Targeting Of Tax Concessions

For better targeting of tax concessions and exemptions, Smt Sitharaman proposed to cap deduction from capital gains on investment in residential house under sections 54 and 54F to Rs 10 crore. “Another proposal with similar intent is to limit income tax exemption from proceeds of insurance policies with very high value”, she said.

Improving Compliance And Tax Administration

The Finance Minister proposed to reduce the minimum time period required to be provided by the transfer pricing officer to assessee for production of documents and information from 30 days to 10 days. She also proposed to amend the time period for filing of appeal against the order of the Adjudicating authority under Benami Act within a period of 45 days from the date when such order is received by the Initiating Officer or the aggrieved person. “The definition of ‘High Court’ is also proposed to be modified to allow determination of jurisdiction for filing appeal in the case of non-residents”, she said.

Rationalization

The Finance Minister announced a number of proposals relating to rationalization and simplification. She stated that Income of authorities, boards and commissions set up by statutes of the Union or State for the purpose of housing, development of cities, towns and villages, and regulating, or regulating and developing an activity or matter, was proposed to be exempted from income tax.

Other major measures proposed by the Union Minister in this direction were:  Removing the minimum threshold of Rs 10,000/- for TDS & clarifying taxability relating to online gaming; Not treating conversion of gold into electronic gold receipt and vice versa as capital gain;  Reducing the TDS rate from 30% to 20% on taxable portion of EPF withdrawal in non-PAN cases; and  Taxation on income from Market Linked Debentures.

Others

Smt Sitharaman also announced other major proposals in the Finance Bill which related to:  Extension of period of tax benefits to funds relocating to IFSC, GIFT City till 31.03.2025;  Decriminalization under section 276A of the Income Tax Act; Allowing carry forward of losses on strategic disinvestment including that of IDBI Bank; and  Providing EEE status to Agniveer Fund. “The payment received from the Agniveer Corpus Fund by the Agniveers enrolled in Agnipath Scheme, 2022 is proposed to be exempt from taxes”, she said.

Updates in validations

Release date: 30.01.2023

1. With reference to the circular https://cbic-gst.gov.in/pdf/circular184.pdf a new validation has been incorporated. For all B2B transactions, selection of PoS State Code as ‘96- Other Country’ is enabled for HSN related to the Services by way of transportation of goods, including by mail or courier . The list of items should have only the items with HSNs belonging to 9965 and 9968
2. For all transactions, the document date 01/10/2021 onwards only will be accepted.
3. With reference to integration of GST Look Up System, a new Error code 2295 is added for Duplicate requests apart from 2150. If an IRN is already generated with other IRP and the same request is again sent to NIC-IRP, error code 2295 will be responded with description as “IRN is already generated and registered with GSTN Lookup Portal by other IRP”.