Budget 2023 Related Updates In GST

According to Economic Survey 2023-24, India is back to pre-pandemic growth with broad based recovery. Indian services sector continues to the source of strength with 9% growth in current year. Tax buoyancy is now being witnessed under GST regime.

India is likely to witness GDP growth of 6.0 per cent to 6.8 per cent in 2023-24, depending on the trajectory of economic and political developments globally. Economic survey 2022-23 projects a baseline GDP growth of 6.5 per cent in real terms in FY24. Economy is expected to grow at 7 per cent (in real terms) for the year ending march 2023, this follows an 8.7 per cent growth in the previous financial year. The optimistic growth forecasts stem from a number of positives like the rebound of private consumption given a boost to production activity, higher Capital Expenditure (Capex), near-universal vaccination coverage enabling people to spend on contact-based services, such as restaurants, hotels, shopping malls, and cinemas, as well as the return of migrant workers to cities to work in construction sites leading to a significant decline in housing market inventory, the strengthening of the balance sheets of the Corporates, a well-capitalised public sector banks ready to increase the credit supply and the credit growth to the Micro, Small, and Medium Enterprises (MSME) sector etc.

Union Budget 2023-24 has been presented by the Finance Minister in the Parliament. It has been built on the foundation in place and blueprint for India@100. It states that our current year’s economic growth is estimated to be at 7 per cent. It is notable that this is the highest among all the major economies. This is in spite of the massive slowdown globally caused by Covid-19 and a war. The Indian economy is therefore, on the right track, and despite times of challenges, it is heading towards a bright future. Indian economy has become a lot more formalised as reflected in the EPFO membership more than doubling to 27 crore, and 7,400 crore digital payments of Rs. 126 lakh crore through UPI in 2022.

Its vision for the Amrit Kaal includes technology-driven and knowledge-based economy with strong public finances, and a robust financial sector. The economic agenda for achieving this vision focuses on three things: first, facilitating ample opportunities for citizens, especially the youth, to fulfil their aspirations; second, providing strong impetus to growth and job creation; and third, strengthening macro-economic stability.

The Budget adopts the following seven priorities. They complement each other and act as the ‘Saptarishi’- Inclusive Development, Reaching the Last Mile, Infrastructure and Investment, Unleashing the Potential, Green Growth, Youth Power and Financial Sector.

The direct and indirect tax proposals are aimed at simplification and rationalization in this last full budget before general elections in 2024. However, many expectations have not been met in the Budget, particularly in relation to personal taxation, exemptions etc. Nothing major has been done in GST as it requires recommendations of the GST Council while customs duties have been rationalized. Provisions in relation to GST on input tax credit, returns etc have been amended. Information sharing among other departments has also been provided for.

Rs 1,55,922 crore gross GST revenue has been collected in the month of January 2023. This is the 2nd highest Gross GST collection, breaching earlier 2nd highest record in the month of October 2022. This is second highest collection ever, next only to the Rs 1.68 lakh crore gross collection in April, 2022. This is also Directorate General of Systems & Data Management (DGSDM) has launched new GST reports in ADVAIT to promote data-driven action by officers. These relate to performance of top taxpayers as per returns, amount of input tax credit availed after the time limit under section 16(4) of CGST Act, 2017, amount of input tax credit availed after time limit under section 16(4), tax payment by DRC-03 and GSTR 9 – difference between tax paid and payable.

India: Economic Survey 2023-24

Following are the highlights of Economic Survey tabled in Parliament on 31.01.2023 :

• Economy likely to grow slow @ 6.5% in financial year 2023-24 as compared to 7% in financial year 2022-23 and 8.7% in the year 2021-22
• India may remain the fastest growing major economy in the world
• GDP growth expected to be 11% in financial year 2024 in nominal terms. Real GDP growth expected to be 6-6.8% in financial year 2024; growth of Indian economy driven by higher capex, private consumption, stronger corporate balance sheets, credit growth etc.
• Current account deficit may widen inflation and may continue. Challenge to rupee depreciating further
• Slower world growth expected
• India faced extra ordinary set of challenges better than other economies
• GST paid by small businesses has risen and crossed pre-pandemic levels
• Buoyancy in direct and indirect taxes GST has stabilized as a major revenue source for Central and State Governments with gross collection rising by 24.8% on YoY basis from April – December, 2022.
• Inflation and borrowing costs may remain higher and longer
• Revenue has fared better during financial year 2023 facilitated by recovery in economic activities.
• Gross NPA ratio of banks has fallen to a low of 5, lowest in last 7 years
• Services sector expected to grow over 9% in financial year 2023
• India’s e-commence market is projected to grow @ 18% p.a.

(Source: Economic Survey 2023-24)

Highlights of Union Budget 2023-24

A. General & Economy

• Seven priorities of Budget emphasizes inclusive development, youth power, financial sector, green growth, unleashing potential, infrastructure & investment, inclusive development and reaching the last rule
• Vision for Amrit kaal to include opportunities for citizens with focus on youth, growth and job creation and strong & stable macro –economic environment.
• Increase in expenditure on health and education
• Incentives to boost investment in infrastructure and production capacity will lead to growth and create employment
• Targeted fiscal deficit to be below 4.5% by FY 2025-26
• Setting up of central data processing centre for faster handling of administrative work under the Companies Act, 2013.
• Improved asset quality on banks with lower NPA’s
• Focus on enhancing opportunity for private investment in infrastructure
• Special saving schemes for women and senior citizens

B. Direct Taxes

• Simplification in personal income tax
• Reduction in compliance burden, promote entrepreneurial spirit and tax relief to citizens
• Income tax limit for tax rebate of income tax increased from Rs. 5 lakh to Rs. 7 lakh on new regime
• Highest surcharge, rate on income above Rs. 5 crore to be reduced from 37% to 25% under new regime
• Extending benefit of standard deduction to new tax regime for salaried class and pensioners
• Increasing tax exemption limit to Rs. 25 lakh on leave encashment on retirement for non-government salaried employees
• Enhanced limits for micro enterprises and professionals to avail benefits of presumptive taxation ; 95% of receipts to be non cash
• Deduction on payments made to MSMEs to be allowed only when payment is actually made
• Extending 15% corporate tax benefits to new cooperatives, commencing manufacturing till 31st March,2024
• Extension of period of tax benefits to funds relocating to IFSC, GIFT City till 31.03.2025;
• Decriminalisation 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
• Income tax contributes 15% and corporate tax 15% to total revenue
• More personnel to be deputed for reducing pendency of appeals

C. Indirect Taxes (including GST)

• Simplification in indirect taxes to deliver higher exports, higher domestic manufacturing more value addition in the economy, green energy and mobility
• Rationalization in customs duty
• GST contributes 17% and Customs 4% to total revenue
• Sections of CGST Act, 2017 amended / substituted :

Section	Relating to
10	Composition levy
16	Eligibility and conditions for taking input tax credit
17	Apportionment of credit and blocked credits
23	Persons not liable for registration (substituted)
37	Furnishing details of outward supplies
39	Furnishing of returns
44	Annual return
52	Collection of tax at source
54	Refund of tax
56	Interest on delayed refunds
122	Penalty for certain offences
132	Punishment for certain offences
138	Compounding of offences
158A (new)	Consent based sharing of information furnished by taxpayers
142	Retrospective exemption w.e.f. 01.07.2017 to certain activities and transaction in Schedule-III to CGST Act, 2017 but without refund

• Sections of IGST Act, 2017:

Section	Relating to
2(16)	Definition of non taxable online recipient
12	Place of supply of services where location of supplier and recipient is in India

D. Major Budget proposals in relation to Goods and Services Tax

1. Removal of the restriction imposed on registered persons engaged in supplying goods through electronic commerce operators from opting to pay tax under the Composition Levy.

2. Second and third provisos to sub-section (2) of section 16 of the CGST Act are being amended to align the said sub-section with the return filing system provided in the said Act.

3. Restriction on availment of input tax credit in respect of certain transactions specified in para 8(a) of Schedule III of the said Act, by including the value of such transactions in the value of exempt supply.

4. Input tax credit shall not be available in respect of goods or services or both received by a taxable person, which are used or intended to be used for activities relating to his obligations under corporate social responsibility referred to in section 135 of the Companies Act, 2013.

5. Retrospective effect from 01st July, 2017, so as to provide that persons for compulsory registration in terms of sub section (1) of section and section 22 of the Act need not register if exempt under sub section (1) of section 23.

6. Time limit upto which GSTR-1/GSTR-3B/Annual return/GSTR-8 for a tax period can be furnished by a registered person is three years from the due date. Further, it also seeks to provide an enabling provision for extension of the said time limit, subject to certain conditions and restrictions, for a registered person or a class of registered persons.

7. Sub-section (6) of section 54 of the CGST Act is being amended so as to remove the reference to the provisionally accepted input tax credit to align the same with the present scheme of availment of self assessed input tax credit as per sub-section (1) of section 41 of the said Act.

8. Section 56 of the CGST Act is being amended so as to provide for an enabling provision to prescribe manner of computation of period of delay for calculation of interest on delayed refunds.

9. Penal provisions inserted amounting to Rs. 10,000 or amount of tax evasion, whichever is higher, applicable to Electronic Commerce Operators in case of contravention of provisions relating to supplies of goods made through them by unregistered persons or composition taxpayers.

10. Monetary threshold for launching prosecution for the offences increased from one hundred lakh rupees to two hundred lakh rupees, except for the offences related to issuance of invoices without supply of goods or services or both.

11. Data sharing between income tax and GST Departments on an automatic and regular basis.

12. Schedule III of the CGST Act is being amended to give retrospective applicability to Para 7, 8 (a) and 8 (b) of the said Schedule, with effect from 01st July, 2017, so as to treat the activities/ transactions mentioned in the said paragraphs as neither supply of goods nor supply of services. It is also being clarified that where the tax has already been paid in respect of such transactions/ activities during the period from 01st July, 2017 to 31st January, 2019, no refund of such tax paid shall be available.

GST collection in January, 2023

• Rs 1,55,922 crore gross GST revenue has been collected in the month of January 2023.
• GST collection has crossed Rs 1.50 lakh crore mark for the third time in FY2022-23
• The gross GST revenue collected in the month of January 2023 till 5:00 PMon 31.01.2023 is Rs 1,55,922 crore of which CGST is Rs 28,963 crore, SGST is Rs. 36,730 crore, IGST is Rs 79,599 crore (including Rs 37,118 crore collected on import of goods) and cess is Rs 10,630 crore (including Rs  768 crore collected on import of goods).
• The revenues in the current financial year upto the month of January2023 are 24% higher than the GST revenues during the same period last year. The revenues for this period from import of goods are 29% higher and from domestic transaction (including import of services) are 22% higher than the revenues from these sources for the same period last year.