Cheer for new regime, others kept waiting
Proposal: Multiple changes have been proposed in the rates of basic customs duty (BCD) on import of various items imported from outside India.
Impact: BCD has been exempted on import of certain parts and inputs in mobile manufacturing like camera lens and BCD has been reduced on parts of open cells of TV panels. This will give impetus to domestic mobile phone production in the country. BCD rates has been reduced on aquatic feed and seeds used for manufacturing of lab grown diamond which will boost exports to foreign countries. On the other hand, BCD has been increased on silver bar, silver dore, articles made from precious metals like gold and silver, imitation jewellery, toys etc.
Proposal: Exemption from Customs duty has been proposed on import of certain machineries / capital goods for manufacture of Lithium-ion cell for use in battery of electrically operated vehicles.
Impact: This will provide a level playing field to the domestic manufacturers and will boost domestic manufacturing of Lithium-ion cell in the country
Proposal: Increase in NCCD on cigarettes up to 16 per cent
Impact: From 2nd Feb 2023, the effective taxes on cigarettes will increase which is likely to impact prices.
Proposal: Partial excise duty exemption on Compressed Natural Gas (CNG)
Impact: On industry request, from 2nd Feb 2023, excise duty exemption to the extent of GST paid on bio-gas / compressed bio gas blended with CNG has been provided, subject to procedural compliances. This will nullify the impact of double taxation on blended CNG
Proposal: Input tax credit (ITC) has been restricted in respect of goods / services used or intended to be used for fulfilling Corporate Social responsibility (CSR) obligation under Section 135 of the Companies Act, 2013.
Impact: ITC of GST paid on CSR spend has been contentious and post enactment, ITC will not be available. This will adversely impact companies spending more than 2 per cent of their net profit on CSR purposes since it will be an additional burden for them, if such companies hitherto have been claiming ITC on such expenses.
Proposal: A new Section 158A has been inserted which provides for sharing of information furnished by the taxpayer in his return or application of registration or in his statement of outward supplies, or the details uploaded for generation of e-invoice or e-waybill or any other details on common portal with such other systems as may be notified.
Impact: This will enable multiple agencies to have access to transactional level data furnished by an assesses for GST purposes (though subject to consent from assesses). It thus becomes important for an assesses to use a common data pool (single source of truth) to perform compliances under various statutes.
Proposal: Decriminalisation of certain offences under GST and increase in monetary threshold limit for launching prosecution for certain offences.
Impact: It is a tax-payer friendly amendment in terms of which prosecution, arrest and imprisonment in GST cases would happen only in exceptional cases. This will instill confidence amongst assesees and provide a conducive business environment, another important step towards ease of doing business. Increase in NCCD on cigarettes upto 16 per cent Impact: From 2nd Feb 2023, the effective taxes on cigarettes will increase which is likely to impact prices.
Proposal: A major amendment has been made to the income tax slab rates pertaining to the new tax regime under section 115BAC (1A) wherein the tax exemption limit has been increased along with a change in the slabs.
Impact: The change impacts the vast group of salaried individuals forming part of the middle-class economic group of the country. Since the enactment of New Tax Regime, this is a big step to revise the existing 6 slab rates with an upper exemption limit of Rs 2,50,000. Example: An individual with an annual income of Rs 9,00,000 will now be required to pay only Rs 45,000 against Rs 60,000. Thus, this shall account for only 5 per cent of the individual’s income i.e. nearly a reduction of 25 per cent of tax amount.
Proposal: Under the existing provision in section 87A, with respect to tax rebate, individuals with a total income upto Rs 5,00,000 are not liable to pay any income tax under both the old and new tax regime. An increased relief has now been granted wherein individuals with a total income up to Rs 7,00,000 for individuals who are opting for the New Tax Regime shall be exempt from personal income tax under this section.
Impact: The announced increased tax rebate claim amount shall result in additional tax savings of Rs 32,500 for the individuals who are opting for New Tax Regime
Proposal: Standard deduction under section 16(ia) has now been made available for claim by individual tax- payers opting for New Tax Regime.
Impact: The introduction of standard deduction clause for individuals tax payers opting for New Tax Regime with the specified income shall drive a lot of salaried class individuals to migrate to this regime and hence, result in reduced administrative burden.
Proposal: Boost to the Indian Start-up Ecosystem: 1. Extension of sunset date till 31 March, 2024 2. Extension in the period for carrying forward and setting off of tax losses
Impact: India is now the third largest ecosystem for start-ups globally, it has been proposed to extend sunset date by another year i.e. till 31 March 2024 and also extended period for carry forward and set off of loss to 10 years from 7 years. The proposed amendment would ensure higher coverage as well as adequate time for start-ups to utilise the tax benefits
Dinesh Agarwal & Sidhartha Jain — tax partners, EY India with inputs from Ankur Goel – tax director, EY India