02.02.2023: Budget 2023: Top Five Indirect Tax Changes

The first Union Budget of ‘Amrit Kaal' and the first time when the indirect tax proposals were presented before the direct tax proposals—the Union Budget 2023. With seven focus areas identified, India is now set to follow the Saptarishi for directions towards its ‘Amrit kaal'. Saptarishi, the Indian constellation which has been there to guide the human race since ages, is an apt name that the Honourable Finance Minister has chosen for the focus areas, as these focus areas shall steer India towards becoming one of the greatest economies of all times.

The much-awaited event, as it is said, the Union Budget is here and how! While the honourable FM had small surprises in her kitty on personal taxation, from a GST perspective, the Budget was lacklustre–and rightly so. Multiple GST Council meetings, countless notifications and circulars take the load of GST amendments throughout the year, not depending on the Union Budget any more.

  1. Customs Perspective: While the import of electric kitchen chimneys and cigarettes will now be expensive, import of gold, silver, platinum, coin, etc., will be cheaper. The FM has proposed to exempt specific capital goods/machinery for manufacture of Lithium-ion cell for use in battery of electrically operated vehicle, specified automobile parts/components, sub-systems and tyres when imported by notified testing agencies for the purpose of testing and/or certification.
  2. ITC On CSR Expenditure: Clarifying an important aspect, the Budget proposes to restrict ITC on CSR expenditure incurred by corporates as required under Section 135 of the Companies Act. While there are multiple litigations and rulings on the subject, the industry was divided on whether such ITC would be available or not. However, now, the government has clarified that such ITC is not admissible. Multiple corporates incurred huge sums on CSR during Covid-19 period and might have claimed ITC of the same. Though the provision is not mentioned to be retrospectively applicable, another litigation on past ITC could unfold.
  3. GST Returns To Be Filed Within Three Years: GSTR 1, GSTR 3B and GSTR 9/9C would now be restricted for filing, post expiry of three years from the due date of filing of the relevant return. Till date, there was no time threshold for filing GST return. Any taxpayer could file belated returns along with interest and late fees. However, going forward, these dates have been locked so as to have clarity on the timelines for litigation.
  4. Widening Of Scope Of OIDAR: The Online Information and Database Access and Retrieval services are of utmost importance in today’s age. With this thought in mind, the OIDAR services were brought under the tax net in the service tax regime and subsequently, in the GST regime. However, due to the exceptions carved out in the definitions of OIDAR and non-taxable online recipient, services were escaping tax. Hence, to curb this loophole, the Budget proposes to amend both the definitions and make OIDAR a wider segment for taxability purpose.
  5. Clarity On Taxability Of High Sea Sales And Out-And-Out Sales: Out-and-out sales and high-sea sales were inserted in schedule III of the CGST Act, 2017 with effect from Feb. 1, 2019. However, the GST authorities were demanding GST on such transactions for the period from July 1, 2017 to Jan. 31, 2019. To clarify this ambiguity, the budget has stated that such insertion will be with retrospective effect from July 1, 2017. This is a respite for taxpayers who are undergoing a litigation on these aspects. However, if the taxpayer has paid taxes for such period on the specified sales, the Budget has clarified that no refund of such tax can be claimed.

Source: https://www.bqprime.com/business/budget-2023-top-five-indirect-tax-changes

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