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Budget 2022: Key Indirect Tax Proposals

14 Feb 2022

The Union Budget 2022-23 seeks to make various changes to the indirect tax regime through the proposed amendments to the Central Goods and Services Tax Act, 2017, the Customs Act, 1962, the Customs Tariff Act, 1975 and the Central Excise Act, 1944.

The Finance Bill, 2022 (Bill) presented by the Finance Minister on 1 February 2022, proposes changes to various aspects of the indirect tax regime in India.

Under the Central Goods and Services Tax Act, 2017 (CGST Act), the two-way communication between supplier and recipient in filing returns will be done away with. Instead an auto-generated form providing information regarding available Input Tax Credit (ITC) will be implemented. This is likely to impact the eligibility of a recipient to avail ITC and may affect recipients who are dependent on the information provided solely by supplier. This is also likely to have a negative impact on the working capital of the recipient. Consequently, taxpayers will have to be more diligent while transacting with suppliers in order to avoid loss of ITC.

Further, with the concept of provisional claim of ITC also proposed to be removed, recipients will be unable to claim ITC provisionally if the supplier has not reported the necessary information.

On a positive note, there has been an extension in certain time limits which will provide taxpayers more time for availing ITC, rectifying errors in their returns, etc.

Under the Customs Act, 1962 (Customs Act), the definition of ‘proper officer’ will now be amended to empower the Central Board of Indirect Taxes and Customs (Board) to appoint officers of the Directorate of Revenue Intelligence (DRI) as ‘proper officer’ to issue show cause notices and also adjudicate upon them. This overcomes a decision of the Supreme Court which held that DRI officers, not being ‘proper officers’, lack the jurisdiction to issue show cause notices.

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