Budget 2022 - Indirect Tax
The indirect tax proposal in the budget are briefed hereunder:-
GST: All changes in the GST law will be effective only after the Finance Bill receives the Presidential assent and the state governments also simultaneously notify such changes in their respective SGST laws. Moreover in many places, the amendments will state that the rules will be prescribed. Hence we need to wait for the Rules also to be notified for all such changes.
a. A new clause (ba) has been inserted in Sec 16 of CGST Act, 2017. Henceforth ITC may not be allowed if it is restricted under Sec 38(2)(b) even if the same is appearing in GSTR 2B. As per the newly introduced Sec 38(2)(b), the restrictions are:
- Supplies made by a supplier immediately after taking registration
- Supplies made by a continuous defaulter
- Supplies made by a supplier, who has not paid the taxes exceeding the prescribed limit.
- Supplies made by a supplier, who has availed excess ITC than what is due to him
- By any other supplier as may be prescribed
Most of these conditions will not be known to the recipient, but in order to overcome the judicial pronouncements the amendments were carried out. The legality of these changes will be tested in due course.
b. The two way communication proposed in the original design of GST is filing of GSTR 2 and GSTR 3 in order to confirm the tax payment details for availing the ITC. These returns could not be notified till date. Hence Sec 42, 43 and 43A were omitted to permanently omit the two way communication. Now the procedure for filing returns would be GSTR1-GSTR2B-GSTR3B-GSTR9.
c. Many time lines coinciding with 30th September of the subsequent financial year were shifted to 30th November of the subsequent financial year. The important to note are:
- Issuance of credit notes
- Availing ITC on the missing invoices/credit notes
- Rectification of returns filed
d. Registration cancellation can be made by the Proper officer for not filing the statutory returns. The period of such default is to be prescribed. The earlier position is continuous default for a period of six months.
e. Sec 37 has been amended to prescribe conditions/restrictions for filing GSTR1. We need to wait for the rules for such prescription of conditions/restrictions.
f. Option has been made to impose conditions for filing of GSTR1 by certain class of suppliers even if they did not file the outward return for earlier periods. The conditions will be notified by way of rules.
g. No GSTR3B can be filed without filing of GSTR1 for the month. No GSTR1 can be filed without filing the GSTR3B for the previous month.
h. Sec 39 has been amended to permit filing of GSTR3B as per the tax amount determined by the authorities subject to conditions/restrictions to be prescribed under the Rules.
i. Now the option to avail ITC on provisional basis in excess of what is shown in GSTR2B has been done away with.
j. Transfer of amounts available in electronic cash ledgers between distinct persons of the same PAN is being allowed subject to conditions. This will be treated on par with refund.
k. Authorities will have power to prescribe the maximum amount of ITC which can be put to use by a tax payer.
l. The highest interest payable under Sec 50(3) is 24% and now they prescribed interest rate of 18% retrospectively w.e.f 01.07.2017. Any excess interest paid can be refunded now.
- Proper officer definition has been amended to include DRI, appeal, preventive officers. The authorities can prescribe one or more officers as proper officers subject to conditions.
- In case of re-assessment or subsequent audit/investigation on a settled matter, the original authority will only be the proper officer.
- In case of undervaluation of goods, the authorities now will have power to prescribe additional obligations on the importer.
- Changes were made in case of advance ruling. Now the ruling will be valid for a period of three years unless there is any change in law or the facts leading to the said decision. The application can be withdrawn any time before the pronouncement of the order, unlike within a time limit of 30 days from the date of filing. All the rulings obtained prior to this amendment will be valid till three years from the date of the Finance Bill being assented by the President of India.
- Publishing of import/export data without the authority has been made punishable.
- All changes made in the Customs Tariff will be effective from 02nd February, 2022 as per the Provisional Collection of Taxes. However some changes will take effect from 01st May, 2022 wherever prescribed.
- The customs notifications have been revamped in order to align the entries with the new HSN made effective from 01st January, 2022. The unconditional concessional rates prescribed under several notifications have now been incorporated in the First schedule to the Customs Tariff Act. Many expired/redundant notifications were either rescinded/omitted.
- Customs (Import of Goods at Concessional rate of Duty) Rules, 2017 (IGCR, 2017) were revamped by standardizing and digitizing the procedures.
- Notifications were issued exempting health Cess/AIDC/RIC on many items.
- Sun set dates were announced in case of certain exemptions/concessions given.
- Import duties on project imports and capital goods were increased in order to boost the Atma Nirbhar Bharat and Made in India initiatives.
- Clarification has been issued that the amount of SWS payable would be NIL in cases where the aggregate import duties is zero, even though SWS has not been specifically exempted.
SEZ: SEZ Act will be replaced with a new legislation, where States will also become partners in development of enterprise and service hub. Simultaneous reforms in Customs administration will also be announced which shall be fully IT driven. This will be implemented by end of September, 2022. The customs will adopt risk based checks for such units.