February 2021 / India

NEW DELHI: India's exports marginally declined 0.25 per cent to $27.67 billion in February while imports grew by 6.98 per cent to $40.55 billion during the month, according to provisional data released by the commerce ministry on Tuesday. The trade deficit widened to $12.88 billion in February as compared to $10.16 billion in the year-ago period, the ministry said in a statement. The exports during April-February 2020-21 period stood at $255.92 billion. In the same period a year ago, it was at $291.87 billion, showing a negative growth of 12.32 per cent. Imports during April-February period too dipped 23 per cent to $340.88 billion.

In February, oil imports declined 16.63 per cent to $8.99 billion. It was down 40.18 per cent to $72.08 billion during the 11-month period of the current fiscal.

Major commodities of export which recorded positive growth in February include oil meals, iron ore, rice, meat, dairy and poultry products, carpet, spices, pharmaceuticals and chemicals. Many export commodities recorded negative growth during the same period. They are petroleum products (-27.13 per cent), leather (-21.62 per cent), cashew (-18.6 per cent), gems and jewellery (-11.18 per cent), engineering goods (-2.56 per cent), tea (-2.49 per cent) and coffee (-0.73 per cent).

  The Times of India

The government has proposed to retain the current corporate and personal tax rates, extend incentives for start-ups and provide exemptions for financial services to assist taxpayers in view of the COVID-19 pandemic, among other measures in the Finance Bill 2021. Relevant measures in the Bill include:

• clarifying the scope of the equalization levy;
• exempting certain transfers of assets and shares from capital gains tax for certain financial service companies;
• extending the incentive period for start-ups;
• clarifying the tax treatment of certain income earned by individuals;
• clarifying the definition of "liable to tax";
• increasing the safe harbour limit for transfers of residential units, subject to conditions;
• amending the provisions to rationalize the minimum alternative tax;
• enhancing the scope of "supply" for goods and services tax purposes;
• amending tax audit, assessment and appellate proceedings; and
• changing reporting requirements and statutory due dates.

The Bill can be downloaded here

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 direct tax measures, including the non-application of the equalization levy on royalties or fees for technical services, incentives for start-up and financial service companies and amendments to the tax treatment of certain income earned by individuals.

Equalization levy (EL)

• The tax on royalties or fees for technical services (FTS) and the EL will be mutually exclusive effective from 1 April 2020. Accordingly, the EL shall not be charged on the consideration which is taxable as royalties or FTS.
• For purposes of defining e-commerce supply or service, online sale of goods and online provision of services shall include one or more of the following activities taking place online:
  • accepting offers for sale;
  • placing purchase orders;
  • acceptance of purchase orders;
  • payment of consideration; or
  • supply of goods or provision of services, partly or wholly.
• Consequently, provisions referring to income arising from the afore-mentioned activities that would have been exempt under section 10(50) of the Income Tax Act (ITA) and chargeable to the EL will be amended to give effect to the afore-mentioned amendments.
• Consideration received or receivable from e-commerce supply or services will include:
  • consideration for sale of goods irrespective of whether the e-commerce operator owns the goods; and
  • consideration for provision of services irrespective of whether the service is provided or facilitated by the e-commerce operator.

Financial services

• There will be no capital gains tax on transfer of capital assets by a primary co-operative bank to a banking company and on issuance of shares by the banking company to the shareholders of the primary co-operative bank.
• Income on transfers of non-deliverable forward contracts entered into by non-residents with offshore banking units will be exempt from income tax.
• Transfers of assets from offshore funds to a resultant Alternative Investment Fund in any International Financial Services Centre will not be treated as taxable transfers. Further, the exchange of units by share and/or unit holders will not be considered as transfers.
• Capital gains on transfer of shares of an Indian company acquired or relocated from offshore funds will be exempt if such capital gains on such shares were not chargeable to tax had that relocation not taken place.

Start-ups

• Available tax deductions will be extended to eligible start-ups incorporated before 1 April 2022.
• The time limit for exemption from capital gains tax on the investment of net consideration from the transfer of residential properties in start-ups will be extended from 31 March 2021 to 31 March 2022.

Personal tax

• Maturity proceeds from unit-linked insurance policies issued on or after 1 February 2021 will be taxable, if the aggregate annual premium exceeds INR 250,000 in any of the financial years during the term of these policies.
• The income of a resident in India who has opened a specified account in a notified country while being a non-resident in India and a resident in the other country from a specified account for retirement benefits shall be taxed in the manner and in the year as prescribed by the Central Government.
• The tax deducted at source under section 196D of the ITA in respect of income from securities held by Foreign Portfolio Investors can be deducted at the rate provided under tax treaties if such rate is lower than the existing rate of 20% and if a tax residence certificate has been obtained.
• Exemption under the Leave Travel Concession (LTC) cash scheme:
  • In view of the COVID-19 pandemic, the cash allowance in lieu of the LTC will be exempt, subject to fulfilment of certain conditions to be notified subsequently.
• Taxability of interest on various funds where income is exempt:
  • Employees contributing substantial amounts to provident funds benefit from the tax exemption on the entire interest accrued and/or received from such contribution under section 10 of the ITA.
  • The Finance Bill proposes to remove the exemption for interest accrued during the previous year on the recognized provident fund to the extent it relates to the amount or aggregate of amounts of employee contribution in excess of INR 250,000 in a previous year, on or after 1 April 2021.

Note: Income from such account is not taxable on accrual basis and is taxable by such country at the time of withdrawal or redemption.

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.