Budget 2022-2023 comes at a time when work from either home/ office continues to be in vogue. The economy must keep running and taxes always roll-on. In the last few years, the legislature has taken device steps to make the tax system faceless by electronic means and automation. As all things in life, technological tools can become bane or a boon depending upon their execution and implementation. While the intention appears laudable, the execution has faced some hiccups along the way.
In this light, quotation of Dr. B.R. Ambedkar while addressing the Constituent Assembly on 25.11.1949 are relevant which stand recorded by the Supreme Court in Rojer Mathew v. South Indian Bank Ltd, 2020(6) SCC 1:
“……. Because I feel, however good a Constitution may be, it is sure to turn out bad because those who are called to work it, happen to be a bad lot. However bad a Constitution maybe, it may turn out to be good if those who are called to work it, happen to be a good lot. The working of a Constitution does not depend wholly upon the nature of the Constitution. The Constitution can provide only the organs of the State such as the legislature, the executive, and the judiciary. The factors on which the working of those organs of the State depend are the people and the political parties they will set up as their instruments to carry out their wishes and their politics.”
Though these golden words are in the context of the Constitution; they appear to resonate across legislations, let alone working of tax legislations. Consequently, it is imperative that tax laws are implemented as envisaged. Some of the key Indirect tax proposals under Customs, Excise and GST laws are being discussed.
Customs laws
The Finance Bill 2022 and its proposals on Indirect tax legislations inculcates the electronic and automation theme. Amendments are proposed in The Customs (Import of goods at concessional rate of duty) Rules, 2017 to introduce end-to-end automation. There are significant amendments made in these Rules which are to take effect from 01 March 2022 to ensure the electronic working of the entire process of submitting details, standardized forms, filing of monthly statements to be submitted by the importer in relation to the usage of the goods for the intended purposes, the option of making payment of duties and interest by the importer through a common portal.
Valuation of goods under Customs laws is based on transaction value. The valuation is also subject to Customs Valuation (Determination of Price of Imported Goods) Rules, 2007. These Rules provide various circumstances and deeming fiction in valuing the goods. The Finance Bill 2022 has proposed an additional obligation on the importer in respect of any class of imported goods and the checks to be exercised, as the Board may specify, where the Board has reason to believe that value of such goods may not be declared truthfully or accurately. Thus, substantive power has been made in the Customs Act to provide the Board with the requisite power to put additional obligations on an importer in respect of the class of imported goods whose value has not been declared correctly and the criteria of selection of such goods. Thus, the Rule which will be enacted by the Board by this amendment will have to be seen as and when the same is brought in force.
The Customs laws have provisions for audit and provisions for search and seizures, amongst others. The Finance Bill 2022 has proposed to insert a new section 110AA in the Customs Act to draw clear lines of distinction between an investigative officer from an adjudicating officer. Given this, if an officer during the course of the audit, search, or seizure has reason to believe that duty has been short-levied, not levied, short paid in a case where assessment stands made, any duty has been erroneously refunded, drawback erroneously allowed or interest short levied, not levied then after the necessary inquiry/investigation/ audit the relevant records with a report in writing is required to be sent to the officer who has the jurisdiction to undertake the assessment and it is this jurisdictional officer who is empowered to undertake the necessary adjudication in the matter. In the case of multiple jurisdictions, the records are required to be transferred to an officer of Customs to whom the matter is assigned by the Board. This appears to be a beneficial amendment proposed in the law. This amendment ensures that a different Customs officer from the investigative officer will adjudicate the matter and hence, may not have pre-conceived notions while adjudicating on the case. One of the basic tenants of law is that justice should not only be done but also seen to be done.
The Board for Advance Rulings is now common for Customs, Excise, and Income tax laws. For Customs laws, one of the substitutions made in section 28J(2) of the Customs Act is that advance ruling is to be valid for a period of three years or till there is a change in law or facts based on which the advance ruling was pronounced. It has also been provided that for advance rulings in force, the period of three years shall be reckoned from the date on which the Finance Bill 2022 receives the assent of the President. Given this, a cap of three years on advance ruling stands made even if there were to be no change in law/facts for Customs law purposes.
The Hon’ble Supreme Court recently held that a DRI officer is not the proper officer for issuing a show-cause notice. The Finance Bill 2022 has proposed various amendments in the law to overcome this judgment of the Hon’ble Supreme Court. The intention of the legislature appears to be to continue to validate such Show cause notices and litigate such matters.
Lastly, it is seen that there has been the withdrawal of various customs exemptions. The duty changes appear to have been made to provide impetus on domestic manufacturing. In addition, anti-dumping duties imposed on the following imports have been rescinded:
Excise
Blending of petrol and diesel has been gaining significance in India and the Government of India has been emphasizing the same. Blending serves a dual purpose, helps the environment to some extent, and from an economic paradigm curtails the import bill of the country. To promote blending in the country, necessary notification has been issued to increase basic excise duty on unblended petrol and diesel.
GST laws
The proposals in the present budget appear to be towards the working mechanism of the law. There has not been any re-alignment of the tax slabs. It is also seen that there does not appear to have been any particular change to cater to any specific sector.
The important change that has been proposed is doing away with cross-communication between the supplier and the receiver through the GSTN in the return filing process. Substantial amendments are proposed in various sections of Chapter IX – Returns in CGST Act. An insertion has been proposed in Section 37 (1) which deals with furnishing details of outward supplies with certain conditionalities and restrictions. However, such conditionalities and restrictions have not come into the public domain as of now. Sequential filing of returns has been expressly enshrined in law. Section 38 of the CGST Act has seen a major make-over. The amended mechanism proposes that an auto-generated statement containing details of the input tax credit would be made available electronically to the recipient in a form and manner and within the time and subject to conditionalities and restrictions as may be prescribed. The auto-generated statement is said to consist of details of inward supplies in respect of which credit may be available to the recipient and details of supplies in respect of which such credit cannot be availed whether wholly or partly by the recipient. The conditionalities and restrictions of working of this auto-generated statement as is prescribed are not in the public domain as of now. Thus, one would have to review the Rules as and when shared in the public domain to get a better understanding of this proposed mechanism. Since GST is a self-assessment mechanism it is imperative that availment/ utilization of credit is in control of the assessee itself. Consequently, the fine print of the working of this entire proposal would be seen during the framing of the delegated legislation which outlines the conditionalities/ restrictions of this auto-generated statement.
In the erstwhile Indirect tax laws, there has been significant litigation on the words ‘and’/ ‘or’ with respect to availment vis a vis utilization of credit and interest implications thereon. The proposed change now expressly provides that interest will only apply on an input tax credit that has been wrongly availed and utilized and this amendment is to retrospectively apply from 01 July 2017. This amendment is a positive development. The rate of interest has also been changed from 24% to 18% with retrospective effect. Lastly, the date of 30 November of the next financial year has been inserted in various sections of the law to set the timeline as the last date up to which the necessary change(s) can be made by an assessee for a particular financial year.
In conclusion
The Hon’ble Finance Minister during the course of her speech made an exception by discussing the figures of the GST collection for the month of January 2022 as the same were not part of her speech. The figures for January 2022 reflect a buoyance in the economic trajectory. This Budget unlike Rafal Nadal at this year’s Australian Open has not attempted to pull a surprise. However, like Ash Barty emphasise appears to be on being consistent for achieving winnability. Given that the budget provides a fiscal road map for the year ahead, it is imperative that laws are implemented with the envisioned objectives set out in Finance Bill, 2022.
Vivek Sharma is an Advocate at the Supreme Court of India.
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