INDIRECT TAX PROPOSALS IN UNION BUDGET 2024-25

[Dr. Sanjiv Agarwal]

The Union Budget for the Financial Year 2024-25 [including Finance Bill (No. 2), 2024] has made substantial proposals in relation to indirect taxes, mainly Goods and Services Tax (GST) and Customs duty.

The Budget speech stated that GST has decreased the tax incidence on common man, reduced compliance burden and logistics cost for trade and industry. GST has been stated to be successful.

In order to facilitate trade, several amendments have been made to the GST Laws. Extra Neutral Alcohol used in manufacture of liquor will be kept out of the purview of the central tax. Similar amendments are proposed in IGST and UTGST Act. Section 11A will empower the government to regularize non-levy or short levy of central tax due to any general practice prevalent in trade. The time limit to avail input tax credit has been relaxed by amending Section 16 of CGST. The amended Act will also provide a common time limit for issuance of demand notices and orders. Also, the time limit for tax payers to avail the benefit of reduced penalty, by paying demanded tax alongwith interest is increased from 30 days to 60 days.

Few changes have been proposed in the Customs Act, 1962 and Customs Tariff Act, 1975.Customs duty has been reduced or rationalized in relation to medicines and medical equipment, mobile phones, select minerals, solar energy, marine products, leather & textile, precious and other metals, electronics, chemicals etc.    

Following are the Highlights relating to Indirect Taxes covering Central Excise duty, Customs and Goods and Services Tax:

Customs Duty

• Changes in Basic Customs Duty to be effective from 24.07.2024 on the following items notified:

S. No.	Heading, sub-heading, tariff item	Commodity	From	To
1	30	(i) Trastuzumab Deruxtecan, (ii) Osimertinib, (iii) Durvalumab	10%	Nil
2	39	All types of polyethylene for use in manufacture of orthopaedic implants falling under sub-heading9021 10	As applicable	Nil
3	39, 72, 81	Special grade stainless steel, Titanium alloys, Cobalt-chrome alloys, and All types of polyethylene for use in manufacture of other artificial parts of the body falling under sub-heading 9021 31 or 9021 39	As applicable	Nil
4	9022 30 00	X-ray tubes for use in manufacture of X-ray machines for medical, surgical, dental or veterinary use	15%	5% (till 31st March, 2025) 7.5% (w.e.f. 1st April, 2025 to 31st  March, 2026) 10% (w.e.f. 1st April, 2026)
5	9022 90 90	Flat panel detectors (including scintillators) for use in manufacture of X-ray machines for medical, surgical, dental or veterinary use	15%	5% (till 31st March, 2025) 7.5% (w.e.f. 1st April, 2025 to 31st  March, 2026) 10% (w.e.f. 1st April, 2026)

• The conditional exemption rates of BCD prescribed in Notification no. 50/2017-Customs dated 30.6.2017 has been extended upto 31^st March, 2026 unless specified otherwise –

S. No.	S N of 50/17-Cus	Brief Description
12	183	Medical use fission Molybdenum-99 (Mo-99) for use in manufacture of radio pharmaceuticals
13	184	Pharmaceutical Reference Standard
14	188	Goods for manufacture of ELISA Kits
15	191	Maltol for manufacture of defer prone
25	260	Goods for the manufacture of specified orthopedic implants (902110)
26	261	Raw material for manufacture of Copper-T Contraceptive (i) Alatheon (ii) Copper Wire
28	269	Super absorbent polymer for manufacture of adult diapers and specified goods
37	326	Hydrophilic /Hydrophobic Non- Woven, imported for use in the manufacture of Adult Diapers
110	570	Medical and surgical instruments, apparatus and appliances including spare parts and accessories thereof
111	575	Specified Hospital Equipment for use in specified hospitals
112	578A	Raw materials, for the manufacture of Cochlear Implants
113	580	X-Ray Baggage Inspection Systems and parts thereof
114	581	Portable X-ray machine / system

• In following cases, the BCD exemption for the goods covered under the Notification No 50/2017-Customs has been extended upto 31^st March 2029 unless specified otherwise –

S. No.	S N of 50/17-Cus	Brief Description
1	212A	Medicines/drugs/vaccines supplied free by United Nations International Children's Emergency Fund(UNICEF), Red Cross etc
2	213	Drugs and materials
7	577	Lifesaving medical equipment for personal use
8	607	Life Saving drugs like Keytruda etc
9	607A	Lifesaving drugs/medicines for personal use

• Further, the BCD exemption for the goods covered under the following notifications has been extended upto 31^st March, 2029.

S. No.	Notification No.	Brief Description
6	152/94-Customs dated 13 July 1994	Appliance/aids for blind/handicapped imported by institution for blind & deaf; and other specified teaching aids imported by Govt. Universities
11	51/96-Customs	Scientific and technical instruments, apparatus, equipment, accessories etc when imported by publicly funded research institution

• GST Compensation Cess has been exempted with effect from 1st July, 2017 on imports in SEZ by SEZ units or developers for authorized operations.

 

Central Excise Duty

The Clean Environment Cess has been exempted on excisable goods lying on stock as on 30^th June, 2017 subject to payment of appropriate GST Compensation Cess on supply of such goods on or after 1^st July, 2017. [w.e.f. enactment of Finance (No.2) Bill, 2024]

Goods and Services Tax

1. Levy and Collection- Amendment in Section 9 to exclude Extra Neutral Alcohol used in manufacture of alcoholic liquor for human consumption out of purview of GST.

2. Insertion of Section 11A to empower the government to regularize non-levy or short levy of GST due to any general practice prevalent in trade.

3. Time of Supply -Amendment in Section 13(3) of CGST Act, 2017 to provide for time of supply of services where the invoice is required to be issued by the recipient of services in cases of reverse charge supplies.

4. Input Tax Credit - Insertion of Sub-section (5) and (6) in section 16 of the CGST Act, 2017 to relax the time limit to avail input tax credit as per section 16(4) of the CGST Act, retrospectively from 01.07.2017, as follows:

1. In respect of initial years of implementation of GST, i.e., financial years 2017- 18, 2018-19, 2019-20 and 2020-21: In respect of an invoice or debit note for the Financial Years 2017-18, 2018-19, 2019-20 and 2020-21, the registered person shall be entitled to take input tax credit in any return under section 39 which is filed upto the 30th day of November, 2021
2. with respect to cases where returns have been filed after revocation: The time limit to avail input tax credit in respect of an invoice or debit note, in cases where returns for the period from the date of cancellation of registration/ effective date of cancellation of registration till the date of revocation of cancellation of the registration, will be extended till the date of filing the said GSTR-3B return, subject to certain conditions, if the said return is filed by the registered person within thirty days of the order of revocation of cancellation of registration.

5. Blocked ITC - Amendment in section 17(5) of the CGST Act, 2017 so as to restrict the non-availability of input tax credit in respect of tax paid under section 74 of the said Act only for demands upto Financial Year 2023-24. It also removes reference to sections 129 and 130 in the said sub-section.

6. Registration - Insertion of a new proviso in section 30(2) of the CGST Act, 2017 so as to provide for an enabling clause to prescribe conditions and restrictions for revocation of cancellation of registration.

7. Tax invoice - Amendment in Clause (f) of section 31(3) of the CGST Act so as to incorporate an enabling provision for prescribing the time period for issuance of invoice by the recipient in case of reverse charge mechanism supplies.

Insertion of an explanation in section 31 (3) so as to specify that a supplier registered solely for the purposes of tax deduction at source under section 51 of the said Act shall not be considered as a registered person for the purpose of clause (f) of sub-section (3) of section 31 of the said Act.

8. Returns - Substitution of section 39(3) of the CGST Act, 2017 so as to mandate the electronic furnishing of return for each month by the registered person required to deduct tax at source, irrespective of whether any deduction has been made in the said month or not. It also empowers the Government to prescribe by rules, the form, manner and the time within which such return shall be filed.

9. Refund of Tax - Amendment in Sub-section (3) and insertion of a new sub-section (15) in section 54 of the CGST Act, so as to provide that no refund of unutilised input tax credit or integrated tax shall be allowed in cases of zero rated supply of goods where such goods are subjected to export duty.

10. Summons - Insertion of section 70(1A) of the CGST Act, to enable an authorised representative to appear on behalf of the summoned person before the proper officer in compliance of summons issued by the said officer.

11. Determination of Tax under Section 73 - Insertion of section 73(12) of the CGST Act, so as to restrict the applicability of the said section for determination of tax pertaining to the period upto Financial Year 2023-24.

12. Determination of Tax under Section 74 - Insertion of section 74(12) of the CGST Act, so as to restrict the applicability of the said section for determination of tax pertaining to the period upto Financial Year 2023-24.

13. Common new section for tax determination - Insertion of  Section 74A so as to provide for determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason pertaining to the Financial Year 2024-25 onwards. It also provides for the same limitation period for issuing demand notices and orders in respect of demands from the Financial Year 2024-25 onwards, irrespective of whether the charges of fraud, wilful misstatement, or suppression of facts are invoked or not, while keeping a higher penalty, for cases involving fraud, wilful misstatement, or suppression of facts.

Accordingly following sections of the CGST Act, 2017 have been amended so as to incorporate a reference to the proposed new Section 74A in the said sub-section

• Section 10(5)
• Section 21
• Section 35 (6)
• Section 49 (8)
• Section 50 (1)
• Section 51 (7)
• Section 61(3) 
• Section 62 (1)
• Section 63
• Section 64 (2)
• Section 65 (7) 
• Section 66 (6) 
• Section 104 (1)

14. Determination of Tax (Penalty) - Insertion in section 75(2A) in the CGST Act, so as to provide for redetermination of penalty demanded in a notice invoking penal provisions under clause (ii) of sub-section (5) of the proposed section 74A of the said Act to re-determine the penalty as per clause (i) of the sub-section (5) of the said section, in cases where the charges of fraud, wilful misstatement, or suppression of facts are not established. It also amend section 75 of the said Act, so as to incorporate a reference to the sub-sections (2) and (7) of section 74A or the sub-sections thereof, in the relevant sub-sections of this section.

15. Appeal before First Authority - Amendment in section 107(6) of the CGST Act, so as to reduce the maximum amount of pre-deposit for filing appeal before the Appellate Authority from rupees twenty five crores to rupees twenty crores in GST. It also amends sub-section (11) of the said section, so as to incorporate a reference to the proposed new section 74A in the said section.

16. Pre-deposit for appeals - Amendment in the section 112(8) so as to reduce the maximum amount of pre-deposit for filing appeals before the Appellate Tribunal from the existing twenty percent to ten percent of the tax in dispute and also reduce the maximum amount payable as pre-deposit from rupees fifty crores to rupees twenty crores in GST.

Appeal to	Existing	Revised
First Appellate Authority	The maximum of Rs. 25 Crores CGST and Rs. 25 Crores SGST (Total Rs. 50 crore)	The maximum of Rs. 20 Crores CGST and Rs. 20 Crores SGST (Total Rs. 40 crore)
Appellate Tribunal	20% of the disputed tax amount with a maximum amount of Rs. 50 crore CGST and Rs. 50 Crores SGST (Total Rs. 100 crore)	10% of the disputed tax amount with a maximum of Rs. 20 Crores CGST and Rs. 20 Crores SGST. (Total Rs. 40 crore)

17. Appeal before GSTAT - Amendment in Sub-sections (1) and (3) of section 112 of the CGST Act, 2017 so as to empower the Government to notify the date for filing appeal before the Appellate Tribunal and provide a revised time limit for filing appeals or application before the Appellate Tribunal applicable w.e.f. 01.08.2024. Amendment in Sub-section (6) of the said section so as to enable the Appellate Tribunal to admit appeals filed by the department within three months after the expiry of the specified time limit of six months.

18. Appeals before GSTAT principle bench - Amendment in Section 109 of the CGST Act so as to empower the Government to notify types of cases that shall be heard only by the Principal Bench of the Appellate Tribunal.

19. Penal provisions - Amendment in section 122(1B)  of the CGST Act, 2017 so as to restrict the applicability of the said sub-section to electronic commerce operators, who are required to collect tax at source under section 52 of the said Act. The said amendment is made effective from the 1^st day of October, 2023 when the said sub-section had come into force.

20. Waiver of interest / penalty for demand under section 73- Insertion of Section 128A in the CGST Act so as to provide for a conditional waiver of interest and penalty in respect of demand notices issued under section 73 of the said Act for the Financial Years 2017-18, 2018-19 and 2019-20, except the demands notices in respect of erroneous refund. In cases where interest and penalty have already been paid in respect of any demand for the said financial years, no refund shall be admissible for the same.

21. Transitional credit - Amendment in section 140(7) of the CGST Act so as to enable availment of the transitional credit of eligible CENVAT credit on account of input services received by an Input Services Distributor prior to the appointed day, for which invoices were also received prior to the appointed date. The said amendment is made effective from 1st day of July, 2017.

22. Sunset clause for Anti-profiteering - Insertion of Proviso and Explanation in sub-section (2) of section 171 of the CGST Act, so as to empower the Government to notify the date from which the Authority under the said section will not accept any application for anti-profiteering cases. Explanation in the sub-section (3A) of the said section is being inserted, so as to include the reference of Appellate Tribunal in the Authority under the said section so that the Appellate Tribunal may be notified by the Government to act as an Authority under the said section.

23. Insurance related exclusions - Insertion of Paragraph 8 in Schedule III to the CGST Act, so as to provide that the activity of apportionment of co-insurance premium by the lead insurer to the co-insurer for the insurance services jointly supplied by the lead insurer and the co-insurer to the insured in coinsurance agreements shall be treated as neither supply of goods nor supply of services, provided that the lead insurer pays the tax liability on the entire amount of premium paid by the insured. Insertion of Paragraph 9 in Schedule III to the CGST Act, so as to provide that the services by the insurer to the re-insurer, for which the ceding commission or the reinsurance commission is deducted from reinsurance premium paid by the insurer to the reinsurer, shall be treated as neither supply of goods nor supply of services, provided that tax liability on the gross reinsurance premium inclusive of reinsurance commission or the ceding commission is paid by the reinsurer.

24. No refund shall be made of all the tax paid or the input tax credit reversed, which would not have been so paid, or not reversed had the said clause 114 been in force at all material times.

GST Compensation Cess

• Exemption from GST Compensation Cess has been proposed on imports in SEZ by SEZ units/Developers for authorized operations w.e.f 1.7.2017
• Exemption from Clean Environment Cess has been proposed on excisable goods lying in stock as on 30.6.2017 on which appropriate GST Compensation Cess has been paid on supply of such goods or after 1.7.2017.
• Insertion of Section 8A in the GST (Compensation) Act, so as to empower the Government to regularize non -levy or short levy of cess where it is found that such non levy or short levy was a result of general practice.

(Note: With contributions from CA Neha Somani and CA Saurabh Agarwal)

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