On December 28, 2023, the Government of India officially announced the Provisional Collection of Taxes Act, 2023 (“Provisional Collection of Taxes Act”), granting significant authority to the Central Government, by the Gazette Notification.
This legislation enables the immediate legal implementation of provisions related to customs or excise duties outlined in a Bill. Once a provision is declared, it gains legal status upon the introduction of the Bill and ceases under specific circumstances: upon enactment, government directives, or after a 75-day period from introduction.
Should an amended provision attain legal status before the 75-day timeframe, reimbursements are issued for any excess duties collected.
Notably, the Act also repeals the outdated Provisional Collection of Taxes Act, 1931.
With regard to the bill, presenting the same in parliament, the Union Finance Minister Nirmala Sitharaman stated that, “The Provisional Collection of Taxes Bill, 2023 which is before us proposes to replace the erstwhile Provisional Collection of Taxes Act, 1931 with just minor changes which are technical in nature. This law is in existence from 1931. We have just made minor changes and we are here, therefore, not with a new law but with a mildly amended existing law.
As it existed since 1931, we carry it forward. But then, why are we bringing it here? It is a part of the larger relook at all the Bills and if any colonial past residues are there in the Acts, we want to remove them and make them reflective of the modern India, the new India that we are trying to build.
In the case of GST, all the rate changes are first of all carried out only based on recommendations of the GST Council. So, it gets decided in the Council, and then it comes here for the Central Government to pass it as a part of either Finance Bill or otherwise. On the recommendations of the GST Council the effective date of change of rate is also decided, and then it is synchronized between the Centre and the States. That is the case for the GST. Hence, the power to collect tax provisionally is not required for the GST. It is only, therefore, for the Customs and Excise Duties that we need it.”
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