February 6, 2023

Union Budget-2023-24| Amendments in Indirect Tax- GST & Customs

The indirect tax imposed on goods or services forms a significant part of government revenue and it also has a direct impact on inflation as it increases or decreases the cost of products. Therefore, changes in indirect tax form a significant part of the Union budget, and the entire industry keeps a close watch on the same.

First Union Budget of “Amrit Kal” has been a box of plus and minus, wherein the government raised the price of certain products and made some products economical. Further, among multiple GST council meetings, hundreds of notifications, and circulars, the Union budget bought certain changes in Goods and Service tax as well.

Here is a summary of amendments proposed by the Union Budget in GST and customs:

A. Goods and Service Tax (GST)

1. Extension of Composition Scheme to taxpayer selling through e-commerce operator

As per Section 10(2) and (2A) of CGST Act, a registered person engaged in making supply of goods through e-commerce operators is not entitled to opt for composition scheme.
Union budget has proposed to extend the facility of composition scheme to such dealers as well.

2. Maximum time limit specified to file GST Returns

Till date, a registered person is allowed to file pending GST returns (GSTR-1, GSTR-3B, GSTR-9, GSTR-9C or any other GST returns) with applicable interest and penalties without any limit of period.
Union budget has proposed to impose time limit of 3 years from due date for filing of following returns:
- GSTR-1: Return of outward supplies
- GSTR-3B: Return of summary of outward and inward supplies and corresponding tax payable
- GSTR-9: Annual return
- GSTR-9C: ITC Reconciliation
- GSTR-8: TCS Return

Such a period of 3 years can be further extended by the government.

3. ITC Denied on goods or services procured for Corporate Social Responsibility (CSR)

Union budget, 2023-24 has proposed to restrict the ITC on goods and services procured for Corporate Social Responsibility.
However, so far, companies are entitled to take such ITC unless the same is restricted under any other clause.

4. Penalties on e-commerce operators (Section 122 of CGST Act)

Specific penalty provisions has been incorporated for e-commerce operator if it:
- Allows supply of goods or services by unregistered person through it, other than persons who are specially exempted, or
- Allows inter-State supply of goods or services or both by a person who is not eligible to make such supply; or
- Fails to furnish correct information in TCS return

Defaulting e-commerce operator shall be liable to pay penalty of higher of following amounts:
- INR 10,000; or
- Amount of tax involved

5. Amendments on offenses and Compounding provisions

Following offenses has been decriminalized under section 132 of CGST Act:
- obstructs or prevents any officer in the discharge of his duties under this Act;
- tampers with or destroys any material evidence or documents;
- fails to supply any information which he is required to supply under this Act

The minimum and maximum amounts for compounding of offences reduced to 25 per cent and 100 per cent of tax involved, respectively.

6. Other Amendments:

It has been clarified that Entry No. 7, High seas sales, and Entry No. 8, supply of goods from bonded warehouses before clearance for home consumption, are effective from 01.07. 2017 itself. Further, no refund shall be granted of tax collected in pursuance of such entries so far.
In definition of “online information and database access or retrieval services’ (‘OIDAR’), condition of “essentially automated and involving minimal human intervention” has been removed.
Where both supplier and recipients are located in India, place of supply In case of transportation of goods to outside India was “designation of goods”. Such provision has been omitted and now in such case, place of supply will be:
1. B2B Supplies: Location of Recipient of service
2. B2C Supplies: Place where goods are handed over for transportation

Power granted to prescribe the manner and conditions for computation of interest in case of delayed refunds.
Power is granted to the GST portal to share information provided by taxpayers with other systems notified by the Government. Such details to be shared post obtaining consent of supplier/recipient as applicable.

B. CUSTOMS ACT

Finance Bill, 2023 has provided for increase/decrease in Basic Custom Duty rate of many products resulting in making goods costlier or economicals. Revised rates were made effective from 02.02.2023.

To encourage the ‘Make in India’ campaign and give a boost to domestic manufacturing and enhance exports, the government has proposed changes in the rate of import duties. Some products are made costlier like artificial jewelry, Toys, rubbers, electric chimney etc. and on the contrary tax rate was reduced on some products such as automobiles.

1. Key changes in Tariff Rate (effective from 02.02.2023):

S. No.	Heading, sub- heading tariff item	Commodity	Earlier Rate	Proposed Rate
		Chemicals
1	2902 50 00	Styrene	25	2.5%
2	2903 21 00	Vinyl Chloride Monomer	25	2.5%
		Rubber
3	4005	Compounded Rubber	10%	25% or Rs. 30 per kg., whichever is lower
		Gems and Jewellery Sector
4	7113, 7114	Articles of precious metals	20%	25%
5	7117	Imitation Jewellery	20% or Rs. 400 per kg., whichever is higher	25% or Rs. 600 per kg., whichever is higher
		Electrical Goods
6	8414 60 00	Electric Kitchen Chimney	7.5%	15%
		Automobiles and Toys
7	8712 00 10	Bicycles	30%	35%
8	9503	Toys and parts of toys (other than parts of electronic toys)	60%	70%

2. Changes in Basic Customs Duty (to be effective from 02.02.2023):

S. No.	HSN	Commodity	Earlier Rate	Proposed Rate
		Agricultural Products and By Products
1	0802 99 00	Pecan nuts	100%	30%
2	1504 20	Fish lipid oil for use in manufacture of aquatic feed	30%	15%
3	1520 00 00	Crude glycerin for use in manufacture of Epichlorohydrin	7.5%	2.5%
4	2102 20 00	Algal Prime (flour) for use in manufacture of aquatic feed	30%	15%
5	2207 20 00	Denatured ethyl alcohol for use in manufacture of industrial chemicals	5%	NIL
6	2301 20	Fish meal for use in manufacture of aquatic feed	15%	5%
7	2301 20	Krill meal for use in manufacture of aquatic feed	15%	5%
8	2309 90 90	Mineral and Vitamin Premixes for use in manufacture of aquatic feed	15%	5%
		Minerals
9	2529 22 00	Acid grade fluorspar (containing by weight more than 97% of calcium fluoride)	5%	2.5%
		Petrochemicals
10	2710 12 21, 2710 12 22, 2710 12 29	Naphtha	1%	2.5%
		Gems and Jewellery Sector
11	7102, 7104	Seeds for use in manufacturing of rough lab-grown diamonds	5%	Nil
12	7106	Silver (including silver plated with gold or platinum), unwrought or in semimanufactured forms, or in powder form	7.5%	10%
13	7106	Silver Dore	6.1%	10%
		IT, Electronics
14	25, 28, 32, 39, 40, 69, 73, 85	Specified chemicals/items for manufacture of Pre-calcined Ferrite Powder	7.5%	Nil
15	3824 99 00	Palladium Tetra Amine Sulphate for manufacture of parts of connectors	7.5%	Nil
16	Any Chapter	Camera lens and its inputs/parts for use in manufacture of camera module of cellular mobile phone	2.5%	Nil
17	8529	Specified parts for manufacture of open cell of TV panel	5%	2.5%
		Electronic appliances
18	8516 80 00	Heat Coil for use in the manufacture of Electric Kitchen Chimneys	20%	15%
		Automobiles
19	8703	Vehicle (including electric vehicles) in Semi-Knocked Down (SKD) form	30%	35%
20	8703	Vehicle in Completely Built Unit (CBU) form , other than with CIF more than USD 40,000 or with engine capacity more than 3000 cc for petrolrun vehicle and more than 2500 cc for diesel-run vehicles, or with both	60%	70%
21	8703	Electrically operated Vehicle in Completely Built Unit (CBU) form, other than with CIF value more than USD 40,000	60%	70%
22	39,40,58,70, 72 73,83,84,85, 87,90	Vehicles, specified automobile parts/components, sub-systems and tyres when imported by notified testing agencies for the purpose of testing and/ or certification , subject to conditions	As Applicable	Nil
		Capital Goods
23	84,85	Specific capital goods/machinery for manufacture of Lithium ion cell for use in battery of electrically operated vehicle (EVs)	As Applicable	Nil

DISCLAIMER: The views expressed are strictly of the author and VJM & Associates LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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