The Finance Minister Nirmala Sitharaman has presented the Union Budget of 2023, by delivering the budget speech. The budget proposed minor changes to tax policies, allocation of government spending, income tax, GST and Customs Duty changes and initiatives aimed at boosting the economy and addressing social issues.
This union budget is also one of the major milestones to the central government, being the last full budget before the elections.
Income Tax Changes
The changes made to the Income Tax Regime of India and the direct tax system has far reaching implications in the lives of the middle-income earners.
The finance bill of 2023 had proposed a major rework on the new income tax regime along with the tax structure.
The structural and rate revisions in tax slabs, along with the increase in rebate limits under Section 87A from Rs. 5 Lakhs to Rs. 7 Lakhs help ease the tax payment and compliance burden on the middle class.
A new standard deduction Rs. 52,500/- for taxpayers having taxable income of up to Rs. 5 Lakhs was also proposed in the union budget of 2023.
Pensioners also benefit from not having to pay tax, as per the latest proposed changes, if the pension draws does not exceed Rs. 7.5 Lakhs in a financial year. The reduction of the TDS rate from 30 per cent to 20 per cent on the taxable portion of EPF withdrawals in non-PAN cases also favour the middle income earners.
The conversion of Gold to electronic gold, to promote the dematerialisation of assets is no longer taxed as capital gains. This clarification will also contribute towards higher traceability of capital investments, while ensuring peace of mind of investors.
Various amendments in terms of taxation of capital gains were also proposed, such as, when the aggregate premium for life insurance policies (other than ULIP) issued on or after 1st April, 2023 is above Rs. 5 lakhs, income from those policies with aggregate premium up to Rs. 5 Lakh shall be exempt, as per the proposals laid down in the budget. This is a favorable motion towards those who are in the lower taxpaying slabs, expecting to invest in life insurance policies.
In a major tax relief to the brave soldiers, a deduction in the computation of total income was also proposed to be allowed to the agniveer on the contribution made by him or the Central Government to his Seva Nidhi account.
Extending benefits of standard deduction as proposed, to the new tax regime for salaried class and pensioners Increasing tax exemption limit to Rs. 25 lakhs on leave encashment on retirement for non-government salaried employees are also favorable to the middle-income earners.
Extension of the date of incorporation by one year for income tax benefits to start-ups and the tax benefit of carry forward of losses on change of shareholding of start-ups from seven years of
incorporation to ten years also paves the way for increased ease of doing business.
From the perspective of procedural changes, implementation of a common Income Tax Returns (ITR) form for easy and smooth return filing and the decision to make the New Regime default foreshadow steps to abolish the old regime in the coming years.
Simpler tax slabs in the new regime, easier return filing and implementation of 16 day processing of Income Tax Returns also aid easier adherence to the tax laws by the common-men.
For the business establishments required to have a Permanent Account Number (PAN), the PAN will be used as the common identifier for all digital systems of specified government agencies. This will bring ease of doing business; and it will be facilitated through a legal mandate. The implementation of PAN as a conclusive proof of identity was also hinted at in the budget.
From the significantly more attractive new income tax regime slowly making way for the demise of the old one, easier and faster filing and processing of ITRs, higher income tax slabs, introduction of standard deduction to the new income tax regime, some tweaks in the capital gains taxation and minor benefits to pensioners on leave encashment as the cherry on top, it is obvious that there has been a major attempt from the central government to please the middle class of the country.
Customs Duty Changes
Even though not many customs duty changes were brought about in the budget, the changes proposed will have far reaching effects on the price of many day-to-day items.
Duty exemptions to compressed biogas and to import of capital goods and machinery required for manufacture of lithium-ion cells for batteries used in E-Vehicles point towards more affordable electric vehicles, is a welcome step in popularization of green transport and green energy.
Import duties on compounded rubber have been hiked, in a move to support Indian Rubber plantations
The relief in customs duty on import of certain parts and inputs like camera lens and continued concession on lithium ion batteries can result in significantly lower ‘Made in India’ mobile phone prices, bridging the digital divide.
To rectify the inversion of duty structure and encourage the manufacture of electric kitchen chimneys, the import duty is being raised from 7.5% to 15%, while that on chimneys’ heat coil is also proposed to be reduced from 20% to 15%. This will result in a much lowered price of ‘Made in India’ electric kitchen chimneys.
Reductions in duties on inputs of shrimp feed production will result in much affordable shrimp feeds, promoting the coastal farming sector and marine agriculture.
The attempts to enhance the duty differential, the increase in import duty on silver dore, bars and articles will result in an overall hike in the price of silver.
The National Calamity Contingent Duty (NCCD) on specified cigarettes has been proposed to be hiked by 16%. This will result in a higher cost of cigarettes.
In short, silver diamond, textiles, electric kitchen chimneys, cigarettes and imported compounded rubber will see a hike in market price whereas mobile phones, camera lenses, Compressed Natural Gas, blenders and electric vehicles in general will see a reduction in price.
Goods and Services Tax Changes
Among many measures in favour of salaried employees and the middle-class in the Direct tax-verse, the proposed procedural changes in the Goods and Services Tax regime are of significant impact to the lives of middle class businessmen who are obliged to have a GST registration.
Clause 128 of the Finance Bill, 2023 sought to amend clause (d) of sub-section (2) and clause (c) of sub-section (2A) in section 10 of the Central Goods and Services Tax Act [Section 10(2A)(c) and Section 10(2)(d) of the CGST Act] so as to remove the restriction imposed on registered persons engaged in supplying goods through electronic commerce operators from opting to pay tax under the composition levy.
Additionally, Clause 138 of the Bill sought to insert a new sub-section (1B) in section 122 of the Central Goods and Services Tax Act so as to provide for penal provisions applicable to electronic commerce operators in case of contravention of provisions relating to supplies of goods or services made through them by unregistered persons or composition taxpayers.
These are enabling steps towards removing the restriction imposed on registered persons engaged in supplying goods through electronic commerce operators from opting to pay tax under the composition levy.
Sections 37, 39, 44 and 52 of Central Goods and Services Tax Act, 2017 are suggested to be amended to restrict filing of returns/ statements to a maximum period of three years from the due date of filing of the relevant return / statement.
This move has serious implications as the conduct of trade without a GST Registration is illegal and can be penalized and non-filing of returns itself can result in cancellation of the GST registration itself.
Decriminalization of certain offenses specified under clause (g), (j) and (k) of sub-section (1) of section 132 of Central Goods and Services Tax Act, 2017, which are obstruction or preventing any officer in discharge of his duties; deliberate tempering of material evidence;failure to supply the information were also proposed.
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