Exploring the Indirect Tax Highlights of Budget 2023

Overview

On February 1, 2023, Finance Minister Nirmala Sitharaman released the Union Budget for the forthcoming fiscal year. Since this is her fifth full budget before the NDA government led by the BJP ends its term, the presentation of the budget was closely watched. In her speech, the Finance Minister outlined the major changes to the income tax and GST as well as the government’s vision for Amritkaal. Changes in tax rates, lower customs duties, and lower corporate tax rates are just a few of the tax proposals that have been announced.

The highlights of the Union Budget 2023’s indirect tax provisions will be examined in more detail in this article.

GST Reforms

• Filing of GST Returns and statements shall not be permitted after three years from the relevant due dates.
• The goods or services used in CSR-related activities are not eligible for input tax credits (ITCs) under Section 17(5)(fa) of the CGST Act, 2017.
• The CGST Act, 2017, Section 17(3), has been amended to include the value of the supply of warehoused goods to any person prior to clearance for home consumption as “exempt supply” for the purpose of reversing specific and common ITC.
• Taxpayers supplying goods through e-commerce operators will be eligible to opt composition scheme.
• Amended proposed to Section 16(2) that in case of non-payment of consideration by the recipient to the supplier, instead of adding tax amount to the output tax liability of the supplier, the recipient shall be held liable for the payment of tax along with interest u/s 50 of the CGST Act.
• Imposition of Penalty on e-commerce operators of Rs. 10000 or tax amount whichever is higher in the following cases:
  • Accepted supply from the unregistered dealer unless exempted.
  • Accepted inter-state supplies from the supplier who is not eligible for such inter-state supplies.
  • Fails to furnish correct details in GSTR-8
• Following offences under section 132 are decriminalized:
  • Prevents any officer in the discharge of his duties under this Act
  • Tampers with or destroys any material evidence and documents
  • Fails to supply any information required to supply or supplies false information.

Custom Duty Reforms

• Exemptions granted u/s25 of the Customs Act, have a validity of 2 years, which shall not apply to exemptions under:
  • Multilateral or Bilateral Trade Agreements
  • Obligations under international agreements, treaties, conventions,
  • Privileges of constitutional authorities
  • Scheme under Foreign Trade Policy
  • Central Government Schemes having a validity of more than two years;
  • Re-imports, temporary imports, goods imported as gifts or personal baggage;
  • Any duty of customs under any law for the time being in force, including IGST leviable under Section 3(7) of the CTA, other than BCD leviable under Section 12 of the Customs Act.
• Proposal to add subsection 8(A) to Section 127C of the Customs Act to provide a time limit of 9 months, which can be extended up to 3 months, for the Settlement Commission to dispose of the case.
• To encourage domestic manufacturing and exports from India, structural changes in basic custom duty rates are proposed.
• Following Tariff changes are made under Custom Tariff Act,1975:

Conclusion

In a nutshell, the Union Budget for 2023 is a mixed bag for indirect taxes. While some steps have been taken to simplify the tax system and make it more taxpayer-friendly, a few measures could have been taken better.

At the end of the day, it will be interesting to see how these changes play out and what effect they have on the overall economy.