Government walks the tight rope with key indirect tax announcements

During her 'digital' Budget speech on February 1, Union Finance Minister FM Nirmala Sitharaman briefly touched upon the headwinds into GST while lauding the highest-ever revenue collection of Rs 1,400 billion in January 2022. 

However, the details lie in the fine print, and Finance Bill 2022 does leave enough for the tax professionals to put the proposals under the microscope. 

The GST proposals appear to introduce rigorous restrictions on credit availment by linking it to accurate and timely compliance, credit availment and payment of tax liability at the supplier's end, of which the recipient has no control. 

Also Read: Budget 2022: A booster for the digital economy

This may result in disputes between the recipient and supplier as well as with the government. The Union Budget also gives effect to the GST Council recommendations with respect to the applicability of interest only on reversal of credit availed and utilised, transfer of balance in Electronic Cash Ledger within distinct entities.

The extension of the time limit to 30 November of the following financial year for disclosing credit note details, amending invoices, TCS returns, and availing input tax credit appears to align the compliance with due dates for statutory audit and transfer pricing.   
  
The SEZ law is set to receive sweeping reforms, enabling the states to become partners in 'Development of Enterprise and Service Hubs'. The Customs administration of SEZ would be fully IT-driven, focusing on higher facilitation and risk-based checks. 

This reform set to be implemented from September 30, 2022 will certainly impart ease of doing business by SEZ units for promoting exports. It will be interesting to see the developments on this front over the next 8-9 months.  
  
Like the past two years, the Customs tariff proposals align with the government's initiatives of 'Make in India' and 'Atmanirbhar Bharat', seeking to promote domestic sourcing and manufacturing. 

Also Read: Massive capex budget, a bold move in 'Amrit Kaal' for Aatmanirbhar Bharat  

FM Sitharaman has proposed to gradually phase out the concessional rates in capital goods and project imports and instead apply a moderate tariff of 7.5%. 

The customs duty rates would be calibrated to provide a graded rate structure to facilitate the domestic manufacturing of electronics. This could potentially lead to an increase in the prices of various electronics over the coming months.  
  
One of the significant changes proposed on the Customs legislative front is the empowerment of officers of Customs (Preventive), Customs (Audit), and Directorate General of Revenue Intelligence (DGRI) to recover customs duties not levied/short levied vis-à-vis imports. 

This proposal appears to nullify some of the recent Apex Court judgments, for instance, in the cases of Canon India Pvt Ltd. and Sayed Ali where such officers were held to be devoid of powers as they did not qualify as "proper officers." 

Another noteworthy amendment is the applicability of advance ruling obtained under the Customs law. An advance ruling will now remain valid for a period of three years or till there is any change in law or facts of the case. 

This provides an expiry date to the advance ruling even if there is no change in law or facts so that the government and taxpayers do not get bound by the same for eternity. 
  
The government appears to have walked the tightrope by balancing growth support with fiscal consolidation in this year's Union Budget, bolstering and boosting 'Make in India' by taxing imports.  
  
(The author is Executive Director, Indirect Tax - Nexdigm.)