The Union Budget for FY 2023-24 was presented by the Finance Minister. Here are some of the proposals laid down during the session.

Tax Proposals

Direct Tax

• Threshold to avail benefits of presumptive taxation scheme enhanced. Assessees with turnover up to INR 3 Crore from business or turnover of up to INR 75 lakhs from profession provided 95% of the receipts are non-cash.

• Deductions for expenditure incurred on payments to MSMEs allowable only when payment is actually made within time prescribed under the Micro, Small and Medium Enterprises Act, 2006.

• Eligible start-ups incorporated till March 31, 2024 to be eligible for benefit of exemption of tax on 100% of profits and gains from eligible business u/s 80-IAC.

• Benefit of carry forward of losses on change of shareholding of eligible start-ups increased from 7 years from the year of incorporation to 10 years.

• Minimum threshold for deduction of tax on winnings from online gaming done away with.

• Deduction of tax @ 20% instead of 30% on taxable portion of withdrawal from provident fund in non-PAN cases.

• Payment of interest on listed debentures to a resident now subjected to deduction of tax at source.

• In order to preventing permanent deferral of taxes through undervaluation of inventory, Assessing Officer is being empowered to direct an assessee to get the inventory valued by a cost accountant.

• Penalty proposed for furnishing inaccurate statement of financial transaction or reportable account.

• Mechanism for availing credit of tax deducted at source for income already disclosed in the return of income of past year and tax deducted in earlier financial year.

• Non-resident investors brought within the ambit of section 56(2)(viib) to eliminate the possibility of tax avoidance.

• Any benefit or perquisite in cash arising from business or the exercise of a profession chargeable under “Profits and gains of business or profession”.

Indirect Tax

Goods and Service Tax

• Filing of GST returns can be done upto a maximum period of 3 years from the due date of filing of the return.

• Minimum threshold for launching prosecution under GST increased from tax amount of INR 1 crore to INR 2 crore, except for the offence of issuance of invoices without supply of goods or services or both.

• Supply of goods from a place outside the taxable territory to another place outside the taxable territory, high sea sales and supply of warehoused goods before clearance for home consumption, clarified to be outside the purview of GST since inception.

Custom Duty

• Import of Denatured ethyl alcohol used in chemical industry exempt from custom duty.

• Rate of basic customs duty (BCD)on import of compounded rubber increased from 10.00% to “25.00% or INR 30/kg., whichever is lower”.

• Rate of BCD on imports of vehicle (including electric vehicles) in Semi-Knocked Down (SKD) form increased from 30% to 35%. It will be exempted from Social Welfare Surcharge (SWS).

• Rate of BCD on imports of vehicles in Completely-Built Unit (CBU) form increased from 60% to 70%. It will be exempted from SWS.

• Rate of BCD on bicycles is being increased from 30% to 35%. It will be exempted from SWS.

• Rate of BCD on import of electric kitchen chimney increased from 7.50% to 15.00% and that on heat coils for electric kitchen chimney reduced from 20.00% to 15.00%.

Non-Tax Proposals

Ease of Doing Business through Digitization

• Permanent Account Number (PAN), to be used as common identifier for all digital systems of govt agencies.

• ‘Unified Filing Process’ to be set-up for submission of information or return in simplified forms on a common portal with a view to dispense with the need for submission of same information to different Government agencies.

• Central Processing Centre to be setup for faster response to companies through centralized handling of various forms filed with field offices under the Companies Act.

• Integrated IT portal will be established for investors to reclaim unclaimed shares and unpaid dividends from the Investor Education and Protection Fund Authority with ease.

• Entity DigiLocker will be set up for use by MSMEs, large business and charitable trusts for storing and sharing documents online securely with various authorities, regulators, banks and other business entities.

• To encourage trust based governance, a number of compliances will be reduced and some legal provisions will be decriminalized.

• To enable more Fintech innovative services, the scope of documents available in DigiLocker for individuals will be expanded.

Digital Payments and Digital Economy

• Fiscal support for digital payment ecosystem will continue in 2023-24 owing to Digital payments being widely accepted.

• KYC process will be simplified and will adopt a ‘risk-based’ instead of ‘one size fits all’ approach. The financial sector regulators will also be encouraged to have a KYC system fully amenable to meet the needs of Digital India.

Other Key Highlights:

• Pharmaceutical industries are encouraged to invest in research and development in specific priority areas and facilities to be made available in select ICMR Labs for research by private sector R&D teams and public and private medical colleges.

• Coastal shipping will be promoted as the energy efficient and lower cost mode of transport, both for passengers and freight, through PPP mode.

• Measures will be taken to ensure skilled manpower for futuristic medical technologies, high-end manufacturing of medical devices.

• Phase 3 of E-Courts project will be launched for efficient administration of justice.

 

Industry Impact Analysis

General Impact

1. ‘Unified Filing Process’ to be set-up for submission of information or return in simplified forms on a common portal with a view to dispense with the need for submission of same information to different Government agencies;

2. Entity DigiLocker to be set up for use by large business, MSMEs and charitable trusts for storing and sharing documents online securely with various authorities, regulators, banks and other business entities;

3. Central Processing Centre to be set up for faster response to companies through centralized handling of various forms filed with field offices under the Companies Act;

4. A new clause (h) is proposed to be added to Section 43B to provide that any sum payable by an assessee to a micro or small enterprise beyond the time limit of 45 days where there is an agreement and 15 days in case there is no agreement, as specified in Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 shall be allowed as deduction only on actual payment. The proposed amendment will allow the payment as deduction only when actual payment is made. It can be allowed on accrual basis only if the payment is within the time mandated under the said Act from 1st day of April, 2024;

5. For business establishments which are required to have a Permanent Account Number (PAN), the PAN is to be used as common identifier for all digital systems of govt agencies;

6. To encourage trust-based governance, several compliance obligations will be reduced and some legal provisions will be decriminalized under the Jan Vishwas Bill;

7. Input tax credit shall not be available in respect of goods or services or both received by a taxable person, used or intended to be used for activities relating to obligations under Corporate Social Responsibility under the Companies Act;

8. Section 132 and Section 138 of CGST Act are being amended, to:

   1. raise the minimum threshold of tax amount for launching prosecution under GST from one crore to two crore, except for the offence of issuance of invoices without supply of goods or services or both;

   2. reduce the compounding amount from the present range of 50 per cent to 150 per cent of tax amount to the range of 25 per cent to 100 per cent;

   3. decriminalize certain offences under Section 132 of CGST Act, 2017

      1. obstruction or preventing any officer in discharge of his duties;

      2. deliberate tempering of material evidence;

      3. failure to supply the information.

9. Measures for enhancement of business activities in Gujarat International Finance Tech-city, International Financial Services Centre (GIFT IFSC):

   1. Delegating powers under the SEZ Act to International Financial Services Centres Authority (IFSCA) to avoid dual regulation;

   2. Setting up a single window IT system for registration and approval from IFSCA, SEZ authorities, Goods and Service Tax Network (GSTN), Reserve bank of India (RBI), Securities and Exchange Board of India (SEBI) and Insurance Regulatory and Development Authority of India (IRDAI);

   3. Permitting acquisition financing by IFSC Banking Units of foreign banks;

   4. Establishing a subsidiary of EXIM Bank for trade re-financing;

   5. Amending IFSCA Act for statutory provisions for arbitration, ancillary services, and avoiding dual regulation under SEZ Act, and

   6. Recognizing offshore derivative instruments as valid contracts

Manufacturing

1. With a view to provide impetus to domestic manufacturing:

   1. basic customs duty on electric kitchen chimneys increased to 15% from 7.5 %

   2. basic customs duty on toys and parts of toys (other than parts of electronic toys) increased from 60% to 70%

   3. basic customs duty rates for heat coil used in manufacture of kitchen chimneys reduced to 15% from 20%.

2. Specific capital goods / machinery for manufacture of Lithium-ion cell for use in battery of electrically operated vehicle (EVs) reduced to Nil;

3. Existing basic customs duty on solar tempered glass for use in the manufacture of solar cell or solar module is extended till 31st March, 2024;

4. basic customs duty exemption on toughened glass for solar thermal collectors or heaters extended till 31st March, 2024;

5. basic customs duty exemption on flat copper wire for use in the manufacture of photo voltaic ribbon for solar cell / modules extended till 31st March, 2024;

Pharmaceuticals and Healthcare

1. New programme to promote research and innovation in pharmaceuticals will be taken up;

2. Labs to be set up for developing applications using 5G services which will also cover healthcare applications;

3. Existing basic customs duty exemption on specified drugs, medicines, diagnostics kits or equipment, bulk drugs used in manufacture of drugs or medicines is extended till 31st March, 2025;

4. Existing basic customs duty exemption on lifesaving drugs/ medicines and diagnostic test kits, bulk drugs used in manufacture of life-saving drugs or medicines extended till 31st March, 2025;

5. Basic Customs Duty exemption on Goods for the manufacture of orthopaedic implants (falling under 902110) extended till 31st March, 2024

Chemicals and petrochemicals

1. Basic customs duty on denatured ethyl alcohol is being reduced from 5% to Nil for use in the manufacture of industrial chemicals;

2. Basic customs duty on acid grade fluorspar (containing by weight more than 97% of calcium fluoride) is being reduced from 5% to 2.5%;

3. Basic customs duty on crude glycerin is being reduced from 7.5% to 2.5% for use in the manufacture of epichlorohydrin;

4. Basic customs duty on Naphtha is being increased from 1% to 2.5%;

5. Basic customs duty on styrene and Vinyl Chloride monomer is being increased from 2 % to 2.5%.

Automobiles

1. Basic customs duty exemption to import of capital goods and machinery required for manufacture of lithium-ion cells for batteries used in electric vehicles;

2. Basic customs duty exemption on Lithium-ion cell for use in the manufacture of battery or battery pack of electrically operated vehicle (EVs) or hybrid motor vehicle extended till 31st March, 2024;

3. Increase in rates of customs duty to 35 % from 30% for Vehicle (including electric vehicles) in Semi-Knocked Down (SKD) form;

4. Basic customs duty exemption on parts / inputs for manufacture of catalytic convertors or its parts extended till 31st March, 2024;

5. Increase in rates of customs duty to 70% from 60% for vehicles in Completely Built Unit (CBU) form, other than with CIF more than USD 40,000 or with engine capacity more than 3000 cc for petrol-run vehicle and more than 2500 cc for diesel-run vehicles, or with both;

6. Increase in rates of customs duty to 70% from 60% for electrically operated vehicle in Completely Built Unit (CBU) form, other than with CIF value more than USD 40,000;

7. Specific capital goods/machinery for manufacture of Lithium ion cell for use in battery of electrically operated vehicle (EVs) reduced to Nil;

Insurance

Insurance Income from Life Insurance policies issued on or after 1st April, 2023 (except for ULIP), with aggregate premium above five (5) lakhs, shall be exempt from income tax.

(Note: This will not affect the tax exemption provided to the amount received on the death of person insured. It will also not affect insurance policies issued till 31st March, 2023)

Power and energy

1. Existing basic customs duty on Solar tempered glass for use in the manufacture of solar cell or solar module is extended till 31st March, 2024;

2. Basic Customs Duty exemption on toughened glass for solar thermal collectors or heaters extended till 31st March, 2024.

Fintech

1. KYC process will be simplified and will adopt a ‘risk-based’ instead of ‘one size fits all’ approach. Financial sector regulators will also be encouraged to have a KYC system fully amenable to meet the needs of Digital India;

2. NBFCs to be exempted from restriction on interest deductibility on interest payment to overseas associated enterprise;

3. Existing fiscal support for digital payment ecosystem will continue in 2023-24 owing to wide acceptance of Digital payments.

Logistics

1. Coastal shipping will be promoted as the energy efficient and lower cost mode of transport, both for passengers and freight, through PPP mode;

2. One hundred critical transport infrastructure projects, for last and first mile connectivity for ports, coal, steel, fertilizer, and food grains sectors have been identified to be taken up on priority with investment of 75,000 crore;

3. Fifty additional airports, heliports, water aerodromes and advance landing grounds will be revived for improving regional air connectivity.

Steel / Metals

Existing Basic customs duty on raw materials for manufacture of CRGO Steel, ferrous scrap and nickel cathode is being continued till 31st March, 2024;

Electronics

1. Relief in customs duty on import of certain parts and inputs like camera lens;

2. Concessional duty on lithium-ion cells for batteries to be continued for another year

3. Reduction on basic customs duty on parts of open cells of TV panels to 2.5% from 5%

SEZs

1. Deduction under Section 10AA of Income Tax Act shall be available to units engaged in exports only if exports proceeds are repatriated to India within a period of six months from the end of the previous year or, within such further period as the specified by RBI.

2. Filing of income-tax return is also proposed to be made mandatory for claiming deduction on export income.

E-commerce

1. Registered persons engaged in supplying goods through E- commerce operators proposed to be allowed to opt to pay tax under the Composition Levy;

2. Penalty of INR 10,000 or the amount of tax involved, whichever is higher, proposed to be levied on E-commerce Operators, in case any unregistered persons (who was liable to be registered and not otherwise exempted) is allowed to make supply of goods or services through it or a composition dealers is allowed to make inter-state supply of goods or services through it

Media and Entertainment

1. For online gaming, where net winnings are paid wholly in kind or partly in cash and partly in kind, person responsible for paying the net winnings to ensure that tax has been paid in respect of the net winnings, before releasing the winnings;

2. Income of notified news agency (set up solely for collection and distribution of news), is now taxable for assessment year beginning on or after the 1st April, 2024;

3. Minimum threshold for TDS on online gaming dispensed with from 1st July, 2023; it is proposed to provide for deduction of tax at source on net winnings in the user account at the end of the financial year

 

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