Taxmann’s Highlights of the Finance Bill, 2021 (Indirect Tax Laws)

The Finance Minister, Smt. Nirmala Sitharaman, has presented the Union Budget 2021 in the Parliament. It was the first-ever digital Union Budget as Govt. had decided not to print the budget documents.

This newsletter summarizes all the relevant Indirect-tax announcements made by the Finance Bill 2021.

AMENDMENTS PROPOSED UNDER THE CUSTOMS LAW

1. A new cess, Agriculture Infrastructure and Development Cess (‘AIDC’) has been introduced with effect from February 2, 2021, on the import of goods specified in First Schedule (such as apples, various types of coals, silver/gold dore, cotton, etc.). Simultaneously, BCD has been reduced on some of these items, so as to avoid any additional burden on the consumer. The rate of cess varies from 1.5% to 100%.
2. Customs Common Portal is proposed to be introduced which would provide the following facilities:
   1. Facilitation of Registration,
   2. Filing of Bill of Entry (‘BOE’), Shipping Bills(‘SB’),
   3. Payment of Duties
      The service of Notices, Order, Summons, etc. would also be available through the Common Portal.
3. FM proposed to review more than 400 old exemptions under the Custom Laws. Further, with effect from October 1, 2021, revised Custom tariff structure would be introduced.
4. Conditional Exemptions under the Customs laws are proposed to be valid for a period of 2 years from the date of grant or variation (unless otherwise specified/varied/rescinded). Further, all existing conditional exemptions would be valid upto March 31, 2023.
5. Provisions relating to Bill of entry (‘BOE’) are amended to provide that it would now be required to be filed before the day of arrival of goods at Customs stations. Further, the CBIC, in few specified cases as it may deem fit, may notify time period for filing BOE.
6. To ensure timely completion of inquiries/investigations, law has been proposed to be amended to provide that Show Cause Notices for inquiries/investigations is be issued within 2 years from the date of initiation of such inquiry/investigation. However, such time limit of 2 years can be further extended by 1 year by the Commissioner. Notably, provision would apply to fresh proceedings only.
7. Provisions relating to confiscation of goods are proposed to be amended to include wrongful claim of any remission/refund of any tax or duty within its scope
8. Penalty provision would be included in the Customs Act where refund has been claimed by way of fraudulent utilization of Input Tax Credit through fake invoices, against any duty or tax on goods exported out of India. In this case penalty would be levied maximum up to 5 times of the refund claimed.

AMENDMENTS PROPOSED UNDER GOODS & SERVICES TAX

1. Definition of Zero-rated supply has been proposed to be amended. As per this, only notified class of persons and notified class of goods or services can make zero rated supply with payment of IGST.
2. Foreign exchange realization would be mandatory for refund of unutilized ITC for zero rated supply of goods. In case of non-realisation, benefit of refund would be deposited along with interest
3. Condition that supply of goods or services to SEZ developer and SEZ unit only must be for ‘authorised operations’ has been included in the CGST Act
4. Mandatory requirement of getting annual accounts audited and furnishing of Reconciliation Statement has been done away with. Further, furnishing of annual return with self-certified reconciliation statement has been facilitated. The Commissioner has been empowered to exempt a class of taxpayers from the requirement to file annual return
5. Definition of ‘self-assessed tax’ has been amended to provide that it shall include the tax payable in respect of outward supplies furnished in Form GSTR-1, but not included in Form GSTR-3B
6. With the insertion of new clause under section 7 of CGST Act 2017, the scope of supply has now been extended to the activities or transactions which involves supply of goods or services or both by any person such as clubs to its members or vice-versa for cash, deferred payments or other valuable consideration
7. Retrospective amendment (with effect from July 01, 2017) under proviso to Section 50(1) of the CGST Act has proposed  to provide that Interest under GST to be charged on ‘Net Cash Liability’ component retrospectively
8. A new condition has been proposed to be inserted for availment of Input tax credit. Input tax credit on invoice or debit note can be availed only when the details of such invoices/debit notes has been furnished by the supplier in Form GSTR 1.
9. Provisions for filing appeal against order of detention of goods or conveyance by proper officer has been proposed to be amended to provide that 25% of the penalty is required to be paid before filing of any appeal