Newsletter

The Hon’ble Finance Minister, Ms. Nirmala Sitharaman, presented her second Union Budget for the Fiscal Year 2020-21. The Union Budget has been split into three major themes viz. Aspirational India, Economic Development and a Caring Society. The Key Highlights have been summarized in ensuing paragraphs. 

• Aspirational India
  • Kisan Rail and Krishi Udaan schemes to be launched by Indian Railways and Ministry of Civil Aviation respectively for a seamless national cold supply chain for perishables;
  • PM KUSUM scheme to cover 20 lacs farmers for stand-alone solar pumps and further 15 lacs for grid connected pumps;
  • Ayushman Bharat scheme will be introduced to provide health assurance cover of up to Rs. 5 lacs per family with a target to cover over 10 crore poor and vulnerable families;
  • More than 20,000 empanelled hospitals to be developed under the PM Jan Arogya Yojana.
• Economic Development
• New personal Income Tax regime is proposed to be to be introduced wherein income tax rates will be significantly reduced for the individual taxpayers who forgo certain deductions and exemptions. The new regime shall be optional for the taxpayers. In other words, an individual who is currently availing more deductions & exemption under the Income Tax Act may choose to avail them and continue to pay tax in the old regime;
• Under the new regime, the following tax rates have been proposed to be implemented:
  • 5% tax rate for income between Rs. 2.5 lacs to 5 lacs;
  • 10% for income between Rs. 5 lacs to 7.5 lacs;
  • 15% for income between Rs. 7.5 lacs to 10 lacs;
  • 20% for income between Rs. 10 lacs to 12.5 lacs;
  • 25% for income between Rs. 12.5 lacs to 15 lacs;
  • 30% for income above Rs. 15 lacs;
• Currently, there are more than one hundred exemptions and deductions of different nature provided in the Income-tax Act. it has been proposed to remvove around 70 of them in the new simplified regime;
• In line with the Sabka Vishwas Legacy Dispute Resolution Scheme for the disposal of the erstwhile indirect tax litigations, the current Union Budget has announced a similar scheme called Vivaad se Vishwas scheme i.e. No Dispute but Trust Scheme, for the pending Income Tax litigation cases. Under this scheme, the taxpayer would be required to pay 100% of the disputed tax amount and the penalty and interest would be waived off if the disputed tax amount is paid by March 2020. Scheme is likely to remain open till June 2020. However, the taxpayers may opt for the scheme after March 2020 on payment of an additional amount;
• It is proposed to abolish the Dividend Distribution Tax and adopt the classical system of dividend taxation. This bold move has been made to  make India an attractive destination for investment as non-availability of credit of DDT to most of the foreign investors in their home country resulted in reduction of rate of return on equity capital for them in the old regime;
• It is proposed to make amendments in the Income Tax Act to enable faceless appeals in line with faceless assessment scheme already introduced;
• To ease the burden of taxation on the employees of start-ups, it is proposed to defer the tax payment by five years or till they leave the company or when they sell their shares, whichever is earliest;
• Concessional corporate tax rate of 15 % to new domestic companies in manufacturing and power sector;
• It is proposed to provide an option to cooperative societies to be taxed at 22% plus 10% surcharge and 4% cess with no exemption/deductions;
• It is also proposed to exempt these co-operative societies from Alternative Minimum Tax (AMT) just like companies under the new tax regime are exempted from the Minimum Alternate Tax (MAT);
• The turnover threshold for audit has been proposed to be increased from the existing Rs 1 crore to Rs 5 crore; 
• In order to promote the affordable housing projects, the date of approval of affordable housing projects for availing the tax holiday has been extended by one more year. Similarly in repsect of income from capital gains, business profits and other sources in respect of transactions in real estate, the difference between consideration value and circle value is proposed to be increased to 10%.
• At the GST Front, the new return system has been proposed to be implemented with effect from April 2020;
• New scheme NIRVIK announced for fewer duties and taxes on exported products. This scheme is proposed to be launched in F.Y. 2020-2021;
• Customs Laws and Tariff Rates has been extensively reviewed and rates on various products has been increased or exemptions have been withdrawn;
• Caring Society
  • A task force is proposed to be appointed to recommend regarding improvement of nutrition levels;
  • It has been proposed to establish Indian Institute of Heritage and conservations which is likely to boost culture and tourism sector in India.

Overall, the budget has met various pre-budget expectations of the industry as far as the abolistion of DDT, relief in individual Income tax rates, Amnesty Schemes under Income tax etc. are concerned. However, the proposed divestments in the insurance sector and implications of other Direct Tax amendments have to be analyzed to term the instant budget as pro assessee or otherwise. 

The GLS Budget booklet with a detailed analysis of the amendments would follow in couple of hours.   

CBIC vide their tweet dated 31 January 2020 extends the due date for filing Annual Return and Reconciliation Statement for the F.Y. 2017-18 in staggered manner as follows. Notification / Order to this effect will follow soon.

Due date for states under Group 1: Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, Puducherry, Telangana, Andhra Pradesh, Other Territory - 3rd February 2020;

Due date for states under Group 2: Jammu and Kashmir, Himachal Pradesh, Punjab, Chandigarh, Uttarakhand, Haryana, Delhi, Rajasthan, Gujarat- 5th February 2020; and

Due date for states under Group 3: Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Andaman & Nicobar Islands, Jharkhand, Odisha, Chhattisgarh, Dadra and Nagar Haveli and Daman and Diu, Lakshadweep, Madhya Pradesh, Uttar Pradesh- 7th February 2020.

In a landmark judgment by the Hon'ble Gujarat HC in the case of Mohit Minerals Private Limited vs. Union of India, the notifications levying IGST on ocean freight have been struck down owing to the lack of legislative competency. The decision inter alia holds that the importer cannot be said to be the recipient of services where the entire transaction takes place outside the territorial jurisdiction of India.

Under the Service Tax regime, the Hon'ble Gujarat HC in the case of Sal Steel Limited had struck down similar notifications which levied Service Tax on ocean freight. The rationale for the said judgment was similar to the present ruling that the levy of Service Tax on ocean freight for import of goods is ultra vires to the provisions of the Finance Act in as much as the transactions are being carried out beyond the territories of India.

In light of the present judgment, it would be interesting to see whether the Government would be made liable to refund the IGST paid on ocean freight by importers. Moreover, it would be interesting to see the fate of Input Tax Credit already collected by importers who had abided by the now 'struck down notifications'.

Acknowledging the difficulties faced by trade and industry in filing of returns, the government has decided to introduce several measures to ease the process, by allowing filing of GSTR-3B in staggered manner as follows. The Finance Ministry further said that it has also taken a note of difficulties and concerns expressed by the taxpayers regarding filing of GSTR-3B and other returns. The matter has been discussed by the GSTN with Infosys, the Managed Service Provider, which has come out with above solution to destress the process as a temporary but immediate measure.  

The key highlights of the Press Release are as follows:

• The last date for filing of GSTR-3B for the taxpayers having annual turnover of Rs 5 crore and above in the previous financial year would be 20th of the subsequent month 
• The due date for the taxpayers having turnover below Rs. 5 crores in the previous financial year and falling under the specified 15 States/Union Territories would be 22nd of the subsequent month
• The due date for the remaining taxpayers having turnover below Rs. 5 crores in the previous financial year and falling under the other 22 States/Union Territories would be 24th of the subsequent month

List of 15 states having deadline as 22nd of subsequent month

• Chhattisgarh, Madhya Pradesh, Gujarat, Daman and Diu, Dadra and Nagar Haveli, Maharashtra, Karnataka, Goa, Lakshadweep, Kerala, Tamil Nadu, Puducherry, Andaman and Nicobar Islands, Telangana and Andhra Pradesh

List of 22 states having deadline as 22nd of subsequent month

• Jammu and Kashmir, Ladakh, Himachal Pradesh, Punjab, Chandigarh, Uttarakhand, Haryana, Delhi, Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand and Odisha 

For further improving the performance of GSTN filing portal on permanent basis, several technological measures are being worked out with Infosys and will be in place by April 2020.

BIS Hallmarking for Jewelry Industry

The Union Minister of Consumer Affairs, Food and Public Distribution had held a press conference on 14 January 2020, to discuss matters relating to hall marking of Gold jewelry and Artefacts. Some of the key points are mentioned below:

• Hall marking of Gold jewelry and Artefacts will be made mandatory in India vide a notification, which will be issued by the Consumer Affairs, wherein a period of one year will be provided i.e. till January, 2021 for its implementation. Accordingly, the Central Government, will enable through amendment in provisions u/s.14 and 16 of Bureau of Indian Standards Act 2016 for mandatory hallmarking of Gold Jewelry & Artefacts to jewelers. This will lead to compulsory BIS registration for all jewelers selling Gold jewelry and Artefacts;
• For convenience of consumers, caratage will be marked on jewelry, as for 22 carat jewelry, 22K will be marked in addition to 916, for 18 carat jewelry, 18K will be marked in addition to 750 and for 14 carat jewelry, 14K will be marked in addition to 585.

BIS Requirement for Renewable Energy

• Vide Notification dated 13 January 2020, the Ministry of New and Renewable Energy has extended the time limit for compliance and self-certification of ‘Solar Photovoltaics, Systems, Devices and Components Goods (Requirements for Compulsory Registration) Order, 2017’ S.O 2920(E) dated 05 September 2017, from 31 December 2019 to 30 June 2020

Acting upon the decisions of the Union Minister of Commerce & Industry and Railways taken in the 6th National Standards Conclave on the subject of Standards for Trade Facilitation held in New Delhi on 15 and 16 January 2020, the DGFT issued a Trade Notice to that effect

Trade Notice No. 46/2019-20 dated 17 January 2020

It has been clarified that all importers should file their Bills of Entry under specific ITC (HS) Codes at 8-digit level, wherever possible and to avoid ‘others’ category. It has also been clarified that in case of continued non-compliance and mis-classification, the Government may consider bringing a licensing regime for all items imported under the ‘others’ category by shifting these items from ‘free’ to ‘restricted’ category.

It has been further advised to the members of the Trade and Industry are of the view that existing HS Code are not sufficient to cover the imported goods, they shall immediately suggest appropriate 8 digit HS Code to the competent authorities.

Standardization of products and processes is a touchstone today for the globalized world. It indicates the existence of accepted product standards and a claim that the manufactured products and its underlying processes adhere to the prescribed standards. International Standards Organization (“ISO”), with a membership of 162 countries, publishes guidelines which form the backbone for standards issued by national standards bodies in their respective domestic jurisdictions.

With the world witnessing ever increasing non-tariff barriers to trade and with the phenomenal pace with which technology is advancing, need for standardization of products is important today more than ever to maintain competitiveness in an international marketplace. Consequently, the role of national standards bodies has become all the more vital. In view of the intensity of the current regulated business environment, it is of paramount importance for businesses to gain a comprehensive knowledge of relevant Indian regulations mandating compliances including the BIS Certification.

The BIS has recently increased the fold of mandatory certification to include a number of categories under its ambit.

CBIC vide Notification No. 05/2020 – Central Tax dated 13 January 2020 notifies the appointment of Revisional Authorities under the CGST Act, 2017 as follows:

• The Principal Commissioner or Commissioner of Central Tax for decisions or orders passed by the Additional or Joint Commissioner of Central Tax; and
• The Additional or Joint Commissioner of Central Tax for decisions or orders passed by the Deputy Commissioner or Assistant Commissioner or Superintendent of Central Tax

Circular No. 02/2020 – Customs dated 10 January 2020

Key Highlights:

• Social Welfare Surcharge ('SWS') is to  be paid in cash and not through utilisation of credit scrips such as Merchandise Exports from India Scheme ('MIES'), Service Exports from India Scheme ('SEIS'), etc.;
• Foreign Trade Policy ('FTP') only allows utilisation of duty credit scrips for payment of Customs duties and not cesses or surcharge;
• The debit of SWS through the scrips is not envisaged in the FTP and any exemption notifications;
• CBIC referred to the judgment of the Hon’ble Supreme Court in the case of Unicorn Industries vs. Union of India & Ors. [Civil Appeal No. 9237 & 9238 of 2019] wherein it was inter alia held that levy of additional duties including cesses cannot be said to be exempted unless a notification has been issued to that effect;
• Basis the above, it emerges that SWS cannot be debited through duty credit scrips and therefore has to be paid in cash by importers. The relevant authorities have been requested to make suitable system level changes in this regard;
• As far as the past cases of debits of SWS already made in the duty credit scrips are concerned, it has been clarified that for ensuring ease of doing business, such past cases should not be disturbed and such payment of SWS through scrips shall be accepted.

CBIC vide Notification No. 04/2020 - Central Tax dated 10 January 2020 extends the amnesty scheme for late fee waiver of GSTR-1 for the period July 2017 to November 2019 upto 17 January 2020