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Budget 2021: Key Indirect Tax Proposals (Part 8)

04 Mar 2021

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The Finance Bill, 2021 proposes to amend indirect tax laws with an aim to provide impetus to domestic production, rationalize Customs duty and safeguard measures, and reduce the compliance burden on the taxpayer.

The Finance Bill, 2021 (Bill) was a fully digital budget in the backdrop of COVID-19. It proposes several changes to strengthen the foundation of indirect tax laws such as the introduction of an online customs portal. The Budget also proposes several changes to emphasise building production capabilities in India, such as increasing customs duty rates on certain goods. Several proposals have also been made to reduce compliance burden for taxpayers under the GST framework such as the removal of requirement of GST audit by a chartered/cost accountant. We discuss some of the key changes below.

  • Customs Act, 1962
    • Customs Online Portal

      The Bill seeks to introduce an online portal for Customs similar to the GSTN portal under the Goods and Services Tax laws. This portal would be a single point solution for facilitating registration, filing bills of entry, shipping bills, other documents and forms, and payment of duties of Customs. An amendment is also proposed to Section 153 to allow service of order, decision, summons, notice or any other communication to the taxpayer through the common portal.

      This portal is expected to be a positive step towards streamlining Customs related compliances. It is also likely to assist in seamless integration of Customs clearance process with the faceless Customs assessment program known as ‘Turant Customs’ which was introduced in year 2020.

    • Automatic expiration of exemptions

      Under the provisions of Customs Act, 1962 (Customs Act), certain conditional exemptions have been granted from the payment of customs duty on certain products. The Bill proposes to now expire these conditional exemptions in a time-bound manner. It is proposed that all conditional exemptions will expire on the 31 March of the year which follows after the exemption has been in place for two years (i.e. on the 31 March falling immediately after two years from the date of grant of such exemption). This period may also be varied or rescinded by the Government. The validity of all existing exemption i.e. the exemption which is in force as on the date on which the Bill receives the President’s assent, will be calculated from 1 February 2021 and therefore will expire on 31 March 2023.

    • Time limit for completion of inquiry/investigations

      The Bill proposes to insert Section 28BB to provide a time limit of 2 years for completion of inquiry or investigation under the Customs Act which would result in issuance of show cause notice. The time limit would be applicable to all cases, including those involving fraud, collusion, wilful suppression etc. The time limit of 2 years may be extended by the Principal Commissioner for an additional 1 year on sufficient cause being shown and for reasons to be recorded in writing.

      Notably this amendment, if adopted, will come into effect prospectively and would not cover any on-going enquiry/ investigation.

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