Indirect Tax refers to the tax collected by one entity in the supply chain, being a manufacturer or a retailer and who pays such tax to the credit of the Government but the tax burden is ultimately passed on the consumer buying such product or availing the services of such entity. Some of the common examples of Indirect Taxes or consumption taxes are Goods and Services Tax, Value Added Tax, Excise Duty, Customs Duty where the incidence of tax is on the supply or sales of goods or services or both by specified class of persons.
The honorable Finance Minister Ms. Nirmala Sitharaman has announced the Union Budget for the Financial year 2023-2024 on February 1, 2023. The Finance Bill, 2023 received the assent of the President on March 31, 2023 and subsequently the Finance Act, 2023 was notified by the Government of India notifying the detailed amendments in various laws pertaining to Direct/ Indirect Taxes.
Let’s look into the eminent modifications notified in these Indirect Tax laws vide the Finance Act, 2023:
Customs Act, 1962
- The validity period of 2 years in respect of any exemption granted, shall not apply to exemption notifications issued in relation to:
- Multilateral or Bilateral Trade Agreements
- Obligations under International Agreements, Treaties, Conventions including with respect to UN Agencies, Diplomats, International Organizations
- Privileges of Constitutional Authorities
- Schemes under Foreign Trade Policy
- Central Government Schemes having a validity of more than 2 years
- Re-imports, temporary imports, goods imported as gifts or personal baggage
- Any duty of customs under any law for the time being in force including integrated tax, other than duty of customs leviable on dutiable goods.
- Insertion of a new Section 65A, wherein goods brought for operations in the warehouse shall be such goods on which Integrated Tax, GST and compensation cess have been paid. Such dutiable goods shall be permitted to be removed for the purpose of deposit in the warehouse subject to the following:
- an entry thereof has been made by presenting electronically on the customs automated system, a bill of entry for home consumption and the goods have been assessed to duty
- integrated tax, GST and compensation cess have been paid
- in case of removal of the goods from another warehouse, a bill of entry for home consumption has been presented and the integrated tax, GST and compensation cess have been paid prior to such removal.
- The time limit for disposal of the application filed before the Settlement Commission has been specified i.e., 9 months from the date of application.
Integrated Goods and Services Tax Act, 2017
- Any unregistered person receiving online information, database access, or retrieval services for a purpose other than commerce, industry, or any other profession or business while residing in the taxable territory as defined by section 2(16) of the Act now falls under the expanded definition of “Non-Taxable Online Receipt.”
- Omission of the following provisions relating to Place of Supply of Service:
- place of supply of services by way of transportation of goods, including by mail or courier, where the transportation of goods is to a place outside India, and the place of supply shall be the place of destination of such goods
- place of supply of services by way of transportation of goods, other than by way of mail or courier, shall be the place of destination of such goods.
Central Goods and Services Tax Act
- The restriction imposed on the registered persons engaged in supplying goods through electronic commerce operators from opting to pay tax under the Composition Levy has been removed.
- Changes pertaining to Input Tax Credit (ITC):
- In case of failure to make payment towards the value of supply along with tax payable thereon within prescribed time lines by the recipients, an amount equal to the ITC availed and interest in accordance with Section 50 i.e., Interest on Delayed Payment of Tax shall be levied
- Non-availability of ITC pertaining to goods or services or both received by a taxable person, which are used or intended to be used for activities relating to his obligations under corporate social responsibility (CSR).
- As compared to within 30 days after the date of service of the cancellation order mentioned previously, applications for revocation of cancellation of registration may be made during the timeframe and subject to the requirements and restrictions that may be set by the authority.
- Electronic commerce operators who permit the interstate supply of products or services or both through their platform by an unregistered person, a person who is not qualified to make such an interstate supply, or a person who fails to submit returns are subject to a fine of Rs. 10,000 or a sum equal to the amount of tax involved.
- Increase in the monetary threshold for launching prosecution for the offences under the Act from one hundred lakh rupees to two hundred lakh rupees, except for the offences related to issuance of invoices without supply of goods or services or both.
- Introduction of consent-based sharing of information furnished by taxable person in his return or in his application of registration or in his statement of outward supplies, or the details uploaded by him for generation of electronic invoice or E-way bill or any other details.