Budget 2020: Indirect tax announcements and their impact

Updated: Feb 01, 2020 7:31 PM

Budget 2020 India: In this budget, the Government has introduced high penalties on assessee where cases of tax evasion or incorrect availment of credits are detected.

The same seems to be linked with the proposed introduction of e-Invoicing, another big bang change from April 2020.Budget 2020-21: The same seems to be linked with the proposed introduction of e-Invoicing, another big bang change from April 2020.

By Kunal Chaudhary

Union Budget 2020 India: The Union Budget 2020-21 was largely based on a three-pronged approach of the Government, revenue augmentation by better compliance, ease of doing business and building a competent manufacturing base. Government’s focus on implementing various tools such as deep data analytics and artificial intelligence to crack down on frauds coupled with strengthening its internal systems by introducing Aadhar based verification, linking of various government portals, e-invoicing clearly demonstrate the intention for plugging revenue leakage. In this budget, the Government has introduced high penalties on assessee where cases of tax evasion or incorrect availment of credits are detected. Further, fraudulent availment of credit without an invoice has been made a non-bailable offence. Stricter provisions have been inserted in Customs Act to administer the preferential tariff treatment regime under Free Trade Agreement to plug misuse of the same. There are certain specific amendments to enable provisions for prescribing time and manner of issuance of tax invoice, in case of supply of certain category of services. The same seems to be linked with the proposed introduction of e-Invoicing, another big bang change from April 2020.

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The Government continued its focus on Make in India initiative for the Electronic manufacturing and Electric Vehicle industry and added medical equipment to the list of sectors where Government intends to increase domestic production. The current budget finally increased the duty rates on display screens for mobile phones which has been on the anvil for the last one year along with increasing duty on majority of the mobile phone components. Similarly, on the electric vehicles side, duty has been increased on the import of electric vehicles and some specified parts. Government has also introduced a new cess called the health cess on import of medical equipment’s. The proposed incentives for manufacturing of mobile phones, electronic equipment and semiconductor packaging will be a big push toward establishing India as a global manufacturing hub, not only to serve local consumption, but to export world-wide given the cost benefits. This has potential to create significant job opportunities and attract large investments in the electronic value chain.

Another change in the fine print which was worth noting was earlier restaurants were eligible to opt for composition scheme even when they were supplying services through an electronic commerce operator. The said benefit will now be taken away and tax will need to be discharged under the normal mechanism. Considering the said, restaurants now need to realign their processes.

On the ease of doing business front, the biggest announcement in the current budget was on creating Electronic Duty Credit Ledger in the customs system for granting duty credits, remission, incentives etc. When implemented, this would certainly reduce a huge amount of paperwork and interface with the authorities and would certainly help the exporters.

The Government has clearly maintained a status-quo in terms of the announcements / amendments providing various measures to benefit the taxpayers at large and promote the ‘Make in India’ Policy, however, it fell short of concrete proposals on building infrastructural base which is the need of the hour.

(The author is Tax Partner at EY India. Views expressed are personal.)

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