Union Buget 2021 And GST Impact

Honourable F.M. Mrs. Nirmala Sitharaman unveiled the budget 2021-22 and also issued Finance Bill covering various tax proposals.  Overall, our view is that it is a balanced and a progressive budget presented by the government which will go a long way in the overall development especially the physical and the health infrastructure of our country. However, in so far as the tax provisions are concerned, we have noticed excessive regulatory control by the government. More and more powers are being given to the administrative authorities tightening things too much. Power to attach bank accounts at the drop of the hat is making businesses highly vulnerable.

Here is a brief overview of tax proposals pertaining to GST, Customs and CST Act as enumerated in the Finance Bill, 2021 as introduced in Lok Sabha.

Here are the government’s direct and indirect tax proposals announced in this year’s budget and special attention to GST:

Direct tax proposals:

1. For senior citizens above 75 years who only have an interest and pension income are exempt from filing income tax.

2. Banks and agencies will deduct the necessary income tax directly.

3. Reopening of assessments reduced to 3 years from 6 years other than cases of serious tax evasion. In serious tax evasion cases of concealment of 50 lakh or more in a year, reopening can be done up to 10 years as at present.

4. Tax audit limit increased from Rs 5 crore to Rs 10 crore.

5. Budget Proposes to increase the threshold for tax audit to Rs 10 cr as against Rs 5 cr for those transacting 95% digitally.

6. Advance tax liability on dividend income shall arrive only after the declaration of payment of dividends.

7. Startups get one more year of the tax holiday. Capital Gain exemption for investment in Start-ups gets increased by one more year.

8. Propose to constitute a dispute resolution committee for small taxpayers. Anyone with a taxable income of up to Rs 50 lakh, disputed income of up to Rs 10 lakh eligible to approach dispute resolution committee.

9. Govt to extend eligibility of erstwhile tax sop on home loan up to the year 2022.

10. Finance Minister Sitharaman proposes policies to make it easy for foreign investors to invest in India’s infrastructure projects.

11. Propose to make dividend payments to REIT (estate investment trusts) and Invit’s (Infrastructure investment trusts) exempt from TDS.

To further ease filing of IT returns, details of capital gains and interest from banks, post offices, etc will be pre-filled.

12. Details of capital gains from listed securities, dividend income, and interest income to also be pre-filled in tax forms.

13. To extend the eligibility of provision for an additional deduction of Rs 1.5 lakh for loans taken to purchase affordable housing by one more year.

14. To ensure employees’ contribution to retirement schemes is done on time, late payment of such contributions by employers will not be allowed.

Indirect Tax proposals

1. Reducing customs duty uniformly to 7.5% on semi, flat and products of non-alloy, alloy and stainless steel.

2. Exempting duty on steel scrap till March 2022.

3. To provide relief to copper recyclers, reducing duty on copper scrap from 5% to 2.5%.

4. To rationalise customs duty gold and silver Raising customs duty on some auto parts to 15%.

5. To raise customs duty on cotton from 0% to 10%, on raw silk and silk yarn from 10% to 15%.

6. Agri Infrastructure Development Cess on a small number of items, to not put additional burden on consumers on most items.

AMENDMENTS PROPOSED IN GST

1. Members clubs & mutual associations

• Mutual associations taxed retrospectively e.f. 1.7.17
• Entry No. 7 in Schedule II is omitted e.f. 1.7.17
• Government promised no retrospective taxation

2. ITC

1. Uploading of invoices by the supplier made mandatory for claiming ITC

2. Businesses would feel it more difficult because the recipient can have no control over the supplier

3. Availing ITC is be becoming more difficult in the hands of recipients even after paying tax

3. Audit under GST

• Provision for Audit under GST deleted

4. Annual Return

• Self certified reconciliation statement: reconciling the value of supplies declared in returns furnished with the audited financial statement
• Govt has power to exempt from these provisions
• Self-Certification Scheme

5. Interest

• Retrospective operation to the proviso [S. 50(1)]
• No interest on tax   paid  using  ITC even if return filed belatedly

6. Closure of cases against co-noticees

• Section 73/ 74 allowed closure of cases by main noticee to be closure for all
• Now cases of detention and confiscation under section 129/ 130 would continue even if the main noticee admits and pays tax with interest and penalty
• Unnecessary litigation would continue

7 . Recovery of tax reflected in GSTR-1

• Tax shown as payable in GSTR-1 can also be straightaway recovered in terms of Section 79
• Thus GSTR-1 is also treated at par with GSTR-3B for this purpose

8. Widest powers to executive: tax terrorism

• “During the pendency” has been substituted by “after the initiation”,
• Proceedings under 62, 63, 64, 67, 73 and 74 substituted by “chapters XII, XIV and XV”
  • XII: assessment
  • XIV: inspection, search, seizure and arrest
  • XV: demand and recovery
• Even in  respect of  inspection of goods  in transit, attachment can be done
• Indiscriminate powers of bank attachment ruins whole business
• Nothing short of tax terrorism
• No guideline to ensure fair use

Bank accounts becoming the easiest target

• Even bank accounts ofdirectors can be  attached   [S. 122(1A) r/w 83]

8.  Pre-deposit in appeals

• For appeals under  section 129(3),  penalty=25%  to be deposited for filing appeal

9.   Penalty in cases of detention

• Quantum of penalty for release of goods
  • Where owner comes forward: 200% of tax as penalty
  • Where owner does not come forward: 50% of value of goods or 200% of tax whichever is higher
• Now no need/ reference to payment of tax
• Road side penalties increased – increase in corruption and tax terrorism

9.  Fine print of section 129

• No provision for provisional release on bond/ security
• Now officer shall issue notice (within 7 days), adjudicate (within 7 days) and then alone, the assessee may file appeal – Min. 15 days materials stuck
• For appeal – pre deposit 25% penalty
• Then automatic stay of the impugned order
• Officer can sell after 15 days from date of order
• Time period for filing appeal is 3 months
• Case may be closed by paying full penalty

10. Redemption fine

• Minimum amount of redemption fine is 100% of tax [S. 130]
• Delinked from S. 129

10. Power to call for information

• Previous law:
  • Power to collect statistics:
  • Commissioner was to “by notification” direct for collection of statistics
• Proposed new law:
  • Commissioner or any officer authorised by him
  • May direct any person to  furnish any information relating to any matter

S. 16 IGST Act

• Supply of goods or services to SEZ shall be zero rated only if for “authorised operations”
• Rule 96B now provided sanctity by proviso to S. 16(3)
  • Proviso says that refund is liable to be recovered with interest if proceeds not received within time limit as provided in FEMA
• Refund of output tax on exports shall be available to –
  • Notified class of persons
  • Notified class of goods or services

• Grave hardship  to  the exporters  those having accumulated ITC, and
• Procedurally claiming of refund  on output  tax  was far easier