February 5 2021

Union Budget 2021 – Indirect Taxes

Source: IBFD Tax Research Platform News

The Finance Minister presented the Union Budget 2021 before Parliament on 1 February 2021. In addition to the tax measures reported previously, the Finance Bill 2021 proposes the following indirect tax measures, including changes in the scope of taxable supply, tariff rates and reporting requirements.

Goods and services tax (GST)

  • The scope of the term "supply" will be enhanced to include transactions involving supply of goods or services by any person (other than an individual) to its members or constituents and vice-versa for cash, deferred payment or other valuable consideration. Further, the person and its members shall be deemed to be separate entities and transactions between them shall be deemed to take place from one person to another.
  • Input tax credit shall be available to the recipient once the tax invoice or debit note has been reported and reflected on the Goods and Services Tax Network portal by the supplier.
  • The supply of goods or services to a special economic zone (SEZ) developer or unit will be considered as a zero-rated supply only where the same is used for authorized operations of the SEZ.
  • In case of non-realization of sale proceeds within 9 months from the date of export, a registered person shall be liable to deposit the refund so received along with interest at 18% within 30 days after the expiry of 9 months.
  • Payment of interest on tax liabilities in cash will be applicable retrospectively with effect from 1 July 2017.
  • The government may restrict zero-rated supply on payment of integrated GST to a notified class of exporter/ notified class of supplies of goods and services.
  • The requirement for furnishing of audited annual accounts and reconciliation statements will be removed.
  • Every registered person will be required to furnish an annual return, which may include a self-certified reconciliation statement reconciling the value of supplies declared in the return furnished for the financial year with the audited annual financial statements for every financial year, as may be prescribed.
  • The Commissioner may exempt a class of registered person from filing annual return, by notification.

Customs duty and tariff

  • The general Basic Customs Duty (BCD) rate will remain unchanged.
  • Tariff rates of a few key products will be amended with effect from 2 February 2021 and 1 April 2021.
  • Countervailing/anti-dumping duty will be levied only from the date of initiation of an inquiry on circumvention. The Central Government may modify the countervailing/anti-dumping duty to counter the effect of absorption of such anti-dumping duty from the date of initiation of an inquiry.
  • The countervailing/anti-dumping duty shall not apply to a 100% export-oriented undertaking or unit in an SEZ unless:
    • it is specifically made applicable in such notification or to such undertaking or unit; or
    • such article is cleared as such or goods manufactured out of it are cleared into the domestic tariff area.
  • The creation of a "Common Customs Electronic Portal" is proposed for the filing of bills of entry, shipping bills and other documents and forms under the Customs Act. Notices, orders, etc. will be made available in the common portal.
  • All new conditional exemptions under the Customs Act shall be valid up to 31 March falling immediately after the 2 years from the date of grant of such exemption or variation, unless otherwise specified. Furthermore, existing conditional exemptions shall be valid up to 31 March 2023, until specifically provided otherwise.
  • Bills of entry shall be filed 1 day (including holidays) prior to the arrival of goods in India. The timeline may be extended by the Board until the end of the day of the arrival of such goods.
  • Goods entered for export for which any wrongful claim of remission or refund of any tax/duty/levy under Customs Act or any other law is made shall be liable for confiscation.
  • Proper officers will be able to amend documents electronically through the customs automated system subject to specific safeguards. Importers and exporters will also be permitted to make the specified amendments on the common portal.