Government of India Ministry of Finance (Department of Revenue) Central Board of Indirect Taxes and Customs Notification No. 01/2022 – Central Tax New Delhi, the 24th February, 2022
New Delhi, the 24th February, 2022
G.S.R…..(E).- In exercise of the powers conferred by sub-rule (4) of rule 48 of the Central Goods and Services Tax Rules, 2017, the Government, on the recommendations of the Council, hereby makes the following further amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 13/2020 – Central Tax, dated the 21st March,2020, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) videnumber G.S.R. 196(E), dated 21st March, 2020, namely:-
In the said notification, in the first paragraph, with effect from the 1st day of April, 2022, for thewords “fifty crore rupees”, the words “twenty crore rupees” shall be substituted.
[F. No. CBIC- 20021/1/2022-GST]
(Rajeev Ranjan) Under Secretary to the Government of India
Note: The principal notification No. 13/2020 – Central Tax, dated the 21st March, 2020 was published in the Gazette of India, Extraordinary, vide number G.S.R. 196(E), dated 21st March, 2020 and was last amended vide notification No. 23/2021-Central Tax, dated the 1st June, 2021, published vide number G.S.R. 367(E), dated the 1st June, 2021.
Running a foreign company in India requires business owners to comply with various regulations and guidelines. The Companies (Registration of Foreign Companies) Rules, 2014 prescribes these guidelines and regulates the registration of foreign companies in India. These regulations comprise of rules relating to publishing details regarding directors and secretaries to the Registrar. It is crucial that business owners keep themselves updated regarding such rules to ensure compliance and prevent penalties.
Because of companies having less than 20% domestic content from government tenders being disqualified from public procurement possibilities, foreign firms have begun scrambling to set up establishments in India. Indian CA firms reported a rush from foreign companies to register in India to comply with the ‘Atma Nirbhar Bharat’ rules. Amit Maheshwari’s firm, Ashok Maheshwari and Associates, provides business advisory services to foreign companies and individuals. He believes that for a foreign individual, India continues to not be a lucrative goal for large-scale businesses.
Companies (Registration of Foreign Companies) Rules
Every foreign company must provide certain details to the Registrar within thirty days of establishing a place of business in India. In addition to the details specified in the Companies Act, 2013, such companies must publish details regarding a list of directors and secretaries.
Such companies must file Form FC-1 and pay the required fees to the Registrar, as mentioned in the Companies (Registration Offices and Fees) Rules, 2014. These applications must contain the necessary supporting documents as mentioned in sub-section (1) of Section 380 of the Rules. Additionally, such companies must also provide an attested copy of the approval obtained from the Reserve Bank of India. Approval affidavits from other regulators are also mandatory under the Foreign Exchange Management Act.
If any alteration occurs in the registration document delivered to the Registrar, the foreign company must file Form FC-2 containing all the details of the alteration. The business must file such an application within thirty days of the occurrence of the alteration.
Financial Statements of Foreign Companies
All foreign companies must prepare a financial statement of their business operations in India as per Schedule III of the Rules. Companies must deliver all such documents to the Registrar within six months of the close of the financial year. The Registrar may extend this period in writing by three months, if necessary under special circumstances. The financial documents that such companies need to maintain and file are as follows:
Documents to annex under Chapter IX of the Act, including the Accounts of Companies
Latest consolidated financial statements of the parent foreign company. If such documents are not in English, a certified translation in English
Statement of the related party transaction containing the following details:
Name of the person in India who is a partner
Nature of such relationship
Description and nature of the transaction
Amount of such a transaction during the year
Opening, closing, highest, and lowest balance during the year
Reason for such a transaction
The material effect of such a transaction on both parties
The amount is written off or written back to the related parties
A declaration that such transactions were carried out at an arms’ length basis
Any other details of the transaction to understand its financial impact
Statement of repatriation of profits including the following details:
Amount of profits repatriated
Recipients of the repatriation
Form and mode of repatriation
Dates of repatriation and details if it is to a jurisdiction other than the residence of the beneficiary
Approval of the Reserve Bank of India
Statement of transfer of funds including the following details:
Date of such a transfer
Amount of fund transferred or received
Mode of receipt or transfer of fund
Purpose of such receipt or transfer
Approval of the Reserve Bank of India or any other authority, if any.
Audit of Accounts and Returns
Every foreign company must get its accounts pertaining to the Indian business operations prepared and audited by a practising chartered accountant in India. The provisions of the rules and regulations regarding such audits will apply, mutatis mutandis, to the foreign company.
Every foreign company must also file with the Registrar Form FC- 3 containing a list of all the places of business established in India as on the date of the balance sheet. Additionally, they must also prepare and file an annual return via Form FC-4 within sixty days from the last day of its financial year. Such institutions must file and deliver such returns and documents to the Registrar having jurisdiction over New Delhi.
If a foreign company ceases to conduct business in India, it must provide notice regarding its closure to the Registrar. Once the Registrar receives the notice, the company no longer has an obligation to deliver any document to the Registrar.
Certification of Foreign Companies
A copy of any statutes, charter, memorandum, and articles or other instrument constituting or defining the company’s constitution must be duly certified as detailed below. Any altered document delivered to the Registrar must also be certified in the same manner.
If the Company incorporation occurs in a country outside the Commonwealth, the following individuals can certify the copy mentioned above:
An official of the Government where the original company resides
Notary of such a country
An officer of the company
These officials can certify the documents via the methods mentioned below:
Signature or seal authenticated by a diplomatic or a consular officer
The certificate of the company’s officer must be signed before a person having the authority to administer an oath.
If the company incorporation occurs in a country within the Commonwealth, the following individuals can certify the copy mentioned above:
An official of the Government where the original company resides
Notary of such a country
An officer of the company, on oath before an individual with the power to administer an oath within the Commonwealth
If the company incorporation occurs in a country outside the Commonwealth but is a party to the Hague Convention, 1961, an official of the Government where the original incorporation is committed can certify the copy, which would then need to be duly apostilled as per the Hague Convention
Additionally, the following documents must notarise and apostille in the country of origin as per the Hague Convention:
List of directors and secretary
Signatures and the address on the Memorandum of Association and proof of identity of foreign nationals.
Authentication of Translated Documents
All the documents filed with the Registrar by the foreign Companies must be in English, and if not, they must attach a translation in English duly certified as per the given rules. If such translations are made outside India, the following individuals can certify it through their signature and seal:
The official having custody of the original
A notary of the country where the company with incorporation
If a country lies outside the Commonwealth, a diplomat or a consular officer is empowered to do so.
If such translations are made in India, the following individuals can certify it through their signature and seal:
An advocate, an attorney, or a pleader entitled to appear before any High Court
Further, an affidavit of a competent person having, in the opinion of the Registrar, an adequate knowledge of the language of the original and of English.
Documents to Be Annexed to the Prospectus
The following documents must be annexed to the prospectus:
Any consent to the issue of the prospectus needed from any person as an expert
Contracts for an appointment of the managing director or manager or a memorandum giving full particulars
All material contracts, not entered in the ordinary course of business, but entered within the preceding two years
A copy of the underwriting agreement
A copy of the power of attorney
Action for improper use or description as a foreign company
The Union Budget 2022 was announced on 1st February 2022. These changes will come into effect from the date that CBIC notifies. Below are some of the changes made in GST through Union Budget 2022:
Changes to ITC provisions
A new clause (ba) to Sub-section (2) of section 16 was added stating that Input Tax Credit (ITC) for any supply can be availed only if it is not restricted via communication under section 38 or GSTR-2B to the registered person.
A registered taxpayer will not be able to utilise ITC on any invoice or debit note after the 30th of November following the end of the financial year to which such invoice pertains to or filing of annual return whichever is earlier.
Earlier this section restricted claiming ITC on any invoice or debit note pertaining to a particular financial year if it is not taken before the due date of filing of return for the month of September or filing of annual return, whichever is earlier.
Changes to cancellation of GST registration by officers
Budget 2022 amended Section 29. It states that the GST registration will be Cancelled by officer if:
If a composition taxable person (paying tax under Section 10) has not filed GSTR-4for a financial year by 30th April of the following financial year.
A person other than a composition taxable person has not filed a return for a financial year for such a continuous period as prescribed from time to time.
Extension of time limit for issuance of credit notes
It provided an extended time limit for issuance of credit notes up to the 30th of November following the end of the financial year or the date of filing the annual return, whichever is earlier.
Changes in furnishing details of outward supplies
It stated conditions for providing details of an outward supply in GSTR-1 and communication of such details to the recipients via GSTR-2B.
The two-way communication process while filing the return was cancelled due to the suspension of the GSTR-2 return.
An extended time limit up to 30th November of the following financial year was provided for rectification of errors regarding outward supplies as reported in GSTR-1.
It provides for sequential filing of outward supplies without skipping tax periods.
Revamp of Section 38 on ITC claims
Section 38(1) is revamped by prescribing terms and conditions for detailing inward supplies and ITC to the recipient by way of an auto-generated statement and thus doing away with the two-way communication process while filing the return.
Changes to the provisions regarding furnishing of GST returns
A non resident taxable person should file a monthly return in GSTR-5 by the 13th of the following month.
Provide an option to the person filing a return under proviso to Sub-section (1) by either paying the self-assessed tax or the amount prescribed.
Provide an extension of time up to the 30th of November of the following financial year for rectification of errors in Form GSTR-3B.
The filing of GSTR-1 was added as a condition for filing GSTR-3B for the said tax period.
Section 41 was modified and Sections 42, 43 and 43A were removed
Section 41 regarding claiming ITC was substituted to dissolve the concept of “claim” of eligible ITC on a provisional basis and provided for availing self-assessed ITC as per prescribed terms and conditions.
Sections 42 regarding matching, reversal and reclaim of ITC, 43 regarding matching, reversal and reclaim of reduction in output tax liability and 43A regarding the procedure for furnishing returns and availing ITC of the CGST Act are deleted.
Changes to the utilisation of balance available in the electronic credit ledger
It prescribed conditions for availing the balance available in the electronic credit ledger.
It allows the transfer of an amount from the electronic cash ledger of one person to another.
It prescribed the maximum proportion of output tax liability which may be discharged through an electronic credit ledger.
Changes to the provision of claiming refund of unutilised ITC
It explicitly provides that the refund of any balance in the electronic cash ledger can be availed only in the prescribed manner.
The refund claim of ITC on inward supplies can be made only within 2 years from the last day of the quarter in which supply was received.
To extend the scope of this sub-section for all types of refunds.
Miscellaneous amendments
Changes to the provision of the resignation of the director:It removed the reference of section 38 therefrom.
Changes are made to the provision of levy of late fees for delay in filing GSTR-8.
No levy of interest on ITC claimed wrongly but not utilised under section 50 of the CGST Act. It will be implemented retrospectively from 1st July 2017.
It provided for an extension of the time limit up to the 30th of November of the following financial year for rectification of errors in TCS values in GSTR-8.
Reference to section 38 was removed in Sub-section (2) of section 48.
Amendment of Notification No. 9/2018 dated 23rd January 2018- Central Tax and notify the common electronic portal for GST as “www.gst.gov.in”. This portal shall be used for all the functions as prescribed in CGST Rules, 2017 other than those required for e-way bills and e-invoicing.
A retrospective amendment from 1st July 2017 of Notification No. 13/2017- Central Tax, Notification No. 6/2017- Integrated Tax and Notification No. 10/2017- Union Territory Tax was made by notifying the rate of interest on delayed payment of CGST, IGST and UTGST from 24% per annum to 18% per annum.
Amendment of Notification No. 01/2017- Central Tax, Integrated Tax and Union Territory Taxby exempting the supply of unintended waste generated during the production of the fish meal except fish oil. This exemption is given for the period starting from 1st July 2017 to 30th September 2019. But, if tax is already collected then a refund will not be provided.
Notification No. 25/2019- Central Tax (Rate), Notification No. 24/2019- Integrated Tax (Rate) and Notification No. 25/2019- Union Territory Tax have been given retrospective effect from 1st July 2017. These notifications state that service by the grant of a liquor license by way of license fee or application fee shall neither be treated as supply of goods nor supply of service. But, if tax is already collected then a refund will not be provided.
In her Budget speech on February 1, finance minister Nirmala Sitharaman brought clarity to crypto taxation in India, but not everything is hunky-dory. She also proposed a host of amendments to the Income Tax Act, 1961, to incorporate these measures. These include inserting various sections and clauses such as Section 115BBH, 194S and Clause 47A.
But before delving into their implications, let us look at what the FM said regarding cryptocurrencies.
Introducing the taxation scheme for virtual digital assets, the minister said that there had been a phenomenal increase in transactions in this space. The magnitude and frequency of these transactions made it imperative to come up with a specific tax regime.
“Accordingly, for the taxation of virtual digital assets, I propose to provide that any income from the transfer of any virtual digital asset shall be taxed at the rate of 30%. Further, in order to capture the transaction details, I also propose to provide for TDS on payment made in relation to transfer of the virtual digital asset at the rate of 1% of such consideration above a monetary threshold,” she added.
The move has created clarity, confusion and chaos among the crypto community members. And this article will explore all three, one after the other.
According to the Finance Bill, these crypto taxation rules will be applicable from Assessment Year 2023-24, which means FY 2022-23, next financial year.
Let us look at each of these and understand how it may impact the crypto industry.
For Starters, What Is A Virtual Digital Asset?
The ministry of finance has proposed a new clause 47A under Section 2 of the Income Tax Act that defines the virtual digital asset as:
Any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account, including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically
A non-fungible token or any other token of similar nature, by whatever name called
This is the first time the Indian government has defined a broader digital asset that includes crypto unless otherwise specified by Executive order.
“The government has come a long way in its stance towards crypto from last February to now, and we are confident that this will herald a new era of growth and innovation for India in a Web 3.0 world,” said Avinash Shekhar, CEO of ZebPay, a leading crypto exchange operating in India.
Slapping A 30% Tax On Income From Crypto-Assets And NFTs
As stated in Sitharaman’s Budget speech, the Finance Bill, 2022, has proposed the insertion of Section 115BBH, according to which any income from the transfer of any virtual digital asset will be taxed at the rate of 30%.
The rest of the income will be taxed as per the existing slabs.
Here is an example to clarify it. Suppose you invest INR 1,000 in a crypto asset, say bitcoin, and sell it for INR 1,200 after some time. According to the latest tax proposal, you will have to pay a tax of INR 60 on INR 200 you have gained from the transaction. The same tax rule will apply to NFTs.
To understand how it would reflect on the annual earnings, let’s take the example of a crypto user Mukesh Kumar who earns INR 10 Lakhs annually. Out of INR 10 Lakhs, Kumar earned INR 1 Lakhs from crypto investments. In such a case Kumar’s income will be divided into two parts and taxed accordingly.
Income from other sources: INR 9 Lakhs to be taxed at 15% or 20%, depending on the tax regime
Income from crypto/NFT investments: INR 1 Lakhs taxed at 30% tax
Kumar will thus have to pay INR 30,000 tax solely on crypto income and 15% or 20% tax on the rest INR 9 Lakhs of income, depending on the new or old tax regime, he chooses.
How This Will Impact India’s Crypto Ecosystem
Meyyappan Nagappan, a leader in international tax practices at the law firm Nishith Desai Associates, said that earlier there was a complete lack of guidelines as to whether it would be trading income, investment or capital gains. And there used to be a bit of arbitrage. Even for trading income, one could claim expenses, carry forward losses and so on. It was also part of capital gains, and hence, was treated accordingly.
“Now it brings in more certainty, in a way, but it also brings in the highest tax regime. So, what is likely to happen is that if you want to make profits at the highest tax outflow, your investment strategy has to change. You cannot do the high-volume, low-margin part of trading anymore. The risk will be too high. My anticipation is that the trading pattern will shift more towards investment-style processing instead of arbitrage trading,” said Nagappan.
If the trading pattern changes, it may not augur well for crypto exchanges. In recent years, exchanges like CoinDCX and Coinswitch Kuber spent a lot of money to acquire customers. Their promotion essentially tried to lure the millennials to invest as low as INR 100. But the latest taxation means people will hesitate to trade or invest for the short term. In contrast, holders will continue to invest.
“I think that’s what the government wants,” said Rashmi Deshpande, partner, indirect taxes, at Khaitan and Co.
The government was expected to introduce the Crypto Bill. But it hasn’t done that. However, the authorities have realised that crypto transactions, especially by millennials from Tier 2 and Tier 3 cities, have gone up in the past two years. So they have introduced this, basically to safeguard people’s interests, she added.
According to her, “There is a good possibility that only those who are extremely serious about investing in this space will go ahead. Those who are not serious players and doing it for fun won’t invest anymore.”
TDS At The Rate Of 1%
The government has further proposed to add Section 194S to the Income Tax Act to provide for tax deductions on payments made for crypto transactions at the rate of 1%. This is being done to keep track of crypto transactions in the country.
The finance ministry has proposed a threshold for TDS applicable to crypto transactions. According to Clause 194S, no tax will be deducted if the payer is a ‘specified person’ and the value/aggregate value of such consideration paid to a resident is less than INR 50,000 during a financial year. In all other cases, the said limit is proposed to be INR 10,000 during a financial year.
Here, a ‘specified person’ has been defined as an individual or a HUF (Hindu undivided family) whose total sales, gross receipts or turnover from the business carried on by him or the profession exercised by him does not exceed INR 1 Cr in case of business or INR 50 Lakh in case of a profession, during the financial year immediately preceding the financial year when a virtual digital asset is transferred.
The Confusion: Budget Keeps Mum On Crypto Mining, Staking
Interestingly, the Budget has not mentioned the mining and staking of cryptocurrencies or how crypto miners are supposed to be taxed. According to Deshpande of Khaitan and Co, the current 30% taxation only applies to crypto buying and selling and does not encompass mining.
Hence, miners are not required to pay any crypto tax until they sell or convert these crypto-assets into INR or other virtual digital assets.
No Clarity For Crypto Startups
Until now, crypto exchanges have been charging 1-2% commission for facilitating crypto-to-crypto, crypto-to-INR and crypto-to-foreign currency transactions. These businesses currently pay 18% GST on the commissions earned from their services. But at times, income tax officials have asked them to pay 18% GST on transactions instead of commissions. The Union Budget has provided no further clarity in this regard.
Besides, not all crypto startups run crypto exchanges. Many of them are brokerage firms that buy, sell and hold crypto as part of their service bouquet. Further, some exchanges charge in crypto for providing crypto-to-crypto transactions. At some point in time, if these exchanges convert these cryptos into fiat currencies, the 30% tax will be applicable. However, it will not be a viable option if these platforms have to pay 30% tax on the profits made on these crypto transactions.
The Union Budget seeks to complement macro-economic level growth with a focus on micro-economic level all inclusive welfare. The Union Minister for Finance & Corporate Affairs, Smt Nirmala Sitharaman tabled the Union Budget 2022-23 in Parliament today.
The key highlights of the budget are as follows:
PART A
India’s economic growth estimated at 9.2% to be the highest among all large economies.
60 lakh new jobs to be created under the productivity linked incentive scheme in 14 sectors.
PLI Schemes have the potential to create an additional production of Rs 30 lakh crore.
Entering Amrit Kaal, the 25 year long lead up to India @100, the budget provides impetus for growth along four priorities:
PM GatiShakti
Inclusive Development
Productivity Enhancement & Investment, Sunrise opportunities, Energy Transition, and Climate Action.
Financing of investments
PM GatiShakti
The seven engines that drive PM GatiShakti are Roads, Railways, Airports, Ports, Mass Transport, Waterways and Logistics Infrastructure.
PM GatiShkati National Master Plan
The scope of PM GatiShakti National Master Plan will encompass the seven engines for economic transformation, seamless multimodal connectivity and logistics efficiency.
The projects pertaining to these 7 engines in the National Infrastructure Pipeline will be aligned with PM GatiShakti framework.
Road Transport
National Highways Network to be expanded by 25000 Km in 2022-23.
Rs 20000 Crore to be mobilized for National Highways Network expansion.
Multimodal Logistics Parks
Contracts to be awarded through PPP mode in 2022-23 for implementation of Multimodal Logistics Parks at four locations.
Railways
One Station One Product concept to help local businesses & supply chains.
2000 Km of railway network to be brought under Kavach, the indigenous world class technology and capacity augmentation in 2022-23.
400 new generation Vande Bharat Trains to be manufactured during the next three years.
100 PM GatiShakti Cargo terminals for multimodal logistics to be developed during the next three years.
Parvatmala
National Ropeways Development Program, Parvatmala to be taken up on PPP mode.
Contracts to be awarded in 2022-23 for 8 ropeway projects of 60 Km length.
Inclusive Development
Agriculture
Rs. 2.37 lakh crore direct payment to 1.63 crore farmers for procurement of wheat and paddy.
Chemical free Natural farming to be promoted throughout the county. Initial focus is on farmer’s lands in 5 Km wide corridors along river Ganga.
NABARD to facilitate fund with blended capital to finance startups for agriculture & rural enterprise.
‘Kisan Drones’ for crop assessment, digitization of land records, spraying of insecticides and nutrients.
Ken Betwa project
1400 crore outlay for implementation of the Ken – Betwa link project.
9.08 lakh hectares of farmers’ lands to receive irrigation benefits by Ken-Betwa link project.
MSME
Udyam, e-shram, NCS and ASEEM portals to be interlinked.
Guarantee cover under ECLGS to be expanded by Rs 50000 Crore to total cover of Rs 5 Lakh Crore.
Rs 2 lakh Crore additional credit for Micro and Small Enterprises to be facilitated under the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE).
Raising and Accelerating MSME performance (RAMP) programme with outlay of Rs 6000 Crore to be rolled out.
Skill Development
Digital Ecosystem for Skilling and Livelihood (DESH-Stack e-portal) will be launched to empower citizens to skill, reskill or upskill through on-line training.
· Startups will be promoted to facilitate ‘Drone Shakti’ and for Drone-As-A-Service (DrAAS).
Education
‘One class-One TV channel’ programme of PM eVIDYA to be expanded to 200 TV channels.
· Virtual labs and skilling e-labs to be set up to promote critical thinking skills and simulated learning environment.
· High-quality e-content will be developed for delivery through Digital Teachers.
· Digital University for world-class quality universal education with personalised learning experience to be established.
Health
An open platform for National Digital Health Ecosystem to be rolled out.
· ‘National Tele Mental Health Programme’ for quality mental health counselling and care services to be launched.
A network of 23 tele-mental health centres of excellence will be set up, with NIMHANS being the nodal centre and International Institute of Information Technology-Bangalore (IIITB) providing technology support.
Saksham Anganwadi
Integrated benefits to women and children through Mission Shakti, Mission Vatsalya, Saksham Anganwadi and Poshan 2.0.
Two lakh anganwadis to be upgraded to Saksham Anganwadis.
Har Ghar, Nal Se Jal
Rs. 60,000 crore allocated to cover 3.8 crore households in 2022-23 under Har Ghar, Nal se Jal.
Housing for All
Rs. 48,000 crore allocated for completion of 80 lakh houses in 2022-23 under PM Awas Yojana.
Prime Minister’s Development Initiative for North-East Region (PM-DevINE)
New scheme PM-DevINE launched to fund infrastructure and social development projects in the North-East.
An initial allocation of Rs. 1,500 crore made to enable livelihood activities for youth and women under the scheme.
Vibrant Villages Programme
Vibrant Villages Programme for development of Border villages with sparse population, limited connectivity and infrastructure on the northern border.
Banking
100 per cent of 1.5 lakh post offices to come on the core banking system.
Scheduled Commercial Banks to set up 75 Digital Banking Units (DBUs) in 75 districts.
e-Passport
e-Passports with embedded chip and futuristic technology to be rolled out.
Urban Planning
Modernization of building byelaws, Town Planning Schemes (TPS), and Transit Oriented Development (TOD) will be implemented.
Battery swapping policy to be brought out for setting up charging stations at scale in urban areas.
Land Records Management
Unique Land Parcel Identification Number for IT-based management of land records.
Accelerated Corporate Exit
Centre for Processing Accelerated Corporate Exit (C-PACE) to be established for speedy winding-up of companies.
AVGC Promotion Task Force
An animation, visual effects, gaming, and comic (AVGC) promotion task force to be set-up to realize the potential of this sector.
Telecom Sector
Scheme for design-led manufacturing to be launched to build a strong ecosystem for 5G as part of the Production Linked Incentive Scheme.
Export Promotion
Special Economic Zones Act to be replaced with a new legislation to enable States to become partners in ‘Development of Enterprise and Service Hubs’.
AtmaNirbharta in Defence:
68% of capital procurement budget earmarked for domestic industry in 2022-23, up from 58% in 2021-22.
· Defence R&D to be opened up for industry, startups and academia with 25% of defence R&D budget earmarked.
· Independent nodal umbrella body to be set up for meeting testing and certification requirements.
Sunrise Opportunities
Government contribution to be provided for R&D in Sunrise Opportunities like Artificial Intelligence, Geospatial Systems and Drones, Semiconductor and its eco-system, Space Economy, Genomics and Pharmaceuticals, Green Energy, and Clean Mobility Systems.
Energy Transition and Climate Action:
Additional allocation of Rs.19,500 crore for Production Linked Incentive for manufacture of high efficiency solar modules to meet the goal of 280 GW of installed solar power by 2030.
· Five to seven per cent biomass pellets to be co-fired in thermal power plants:
CO2 savings of 38 MMT annually,
Extra income to farmers and job opportunities to locals,
Help avoid stubble burning in agriculture fields.
· Four pilot projects to be set up for coal gasification and conversion of coal into chemicals for the industry
· Financial support to farmers belonging to Scheduled Castes and Scheduled Tribes, who want to take up agro-forestry.
Public Capital Investment:
Public investment to continue to pump-prime private investment and demand in 2022-23.
· Outlay for capital expenditure stepped up sharply by 35.4% to Rs. 7.50 lakh crore in 2022-23 from Rs. 5.54 lakh crore in the current year.
· Outlay in 2022-23 to be 2.9% of GDP.
‘Effective Capital Expenditure’ of Central Government estimated at Rs. 10.68 lakh crore in 2022-23, which is about 4.1% of GDP.
GIFT-IFSC
World-class foreign universities and institutions to be allowed in the GIFT City.
An International Arbitration Centre to be set up for timely settlement of disputes under international jurisprudence.
Mobilising Resources
Data Centres and Energy Storage Systems to be given infrastructure status.
· Venture Capital and Private Equity invested more than Rs. 5.5 lakh crore last year facilitating one of the largest start-up and growth ecosystem. Measures to be taken to help scale up this investment.
· Blended funds to be promoted for sunrise sectors.
· Sovereign Green Bonds to be issued for mobilizing resources for green infrastructure.
Digital Rupee
Introduction of Digital Rupee by the Reserve Bank of India starting 2022-23.
Providing Greater Fiscal Space to States
Enhanced outlay for ‘Scheme for Financial Assistance to States for Capital Investment’:
From Rs. 10,000 crore in Budget Estimates to Rs.15,000 crore in Revised Estimates for current year
· Allocation of Rs.1 lakh crorein 2022-23 to assist the states incatalysing overall investments in the economy: fifty-year interest free loans, over and above normal borrowings
In 2022-23, States will be allowed a fiscal deficit of 4% of GSDP, of which 0.5% will be tied to power sector reforms
Fiscal Management
Budget Estimates 2021-22: Rs. 34.83 lakh crore
· Revised Estimates 2021-22: Rs. 37.70 lakh crore
· Total expenditure in 2022-23 estimated at Rs. 39.45 lakh crore
· Total receipts other than borrowings in 2022-23 estimated at Rs. 22.84 lakh crore
· Fiscal deficit in current year: 6.9% of GDP (against 6.8% in Budget Estimates)
Fiscal deficit in 2022-23 estimated at 6.4% of GDP
PART B
DIRECT TAXES
To take forward the policy of stable and predictable tax regime:
Vision to establish a trustworthy tax regime.
To further simplify tax system and reduce litigation.
Introducing new ‘Updated return’
Provision to file an Updated Return on payment of additional tax.
Will enable the assessee to declare income missed out earlier.
Can be filed within two years from the end of the relevant assessment year.
Cooperative societies
Alternate Minimum Tax paid by cooperatives brought down from 18.5 per cent to 15 per cent.
To provide a level playing field between cooperative societies and companies.
Surcharge on cooperative societies reduced from 12 per cent to 7 per cent for those having total income of more than Rs 1 crore and up to Rs 10 crores.
Tax relief to persons with disability
Payment of annuity and lump sum amount from insurance scheme to be allowed to differently abled dependent during the lifetime of parents/guardians, i.e., on parents/ guardian attaining the age of 60 years.
Parity in National Pension Scheme Contribution
Tax deduction limit increased from 10 per cent to 14 per cent on employer’s contribution to the NPS account of State Government employees.
Brings them at par with central government employees.
Would help in enhancing social security benefits.
Incentives for Start-ups
Period of incorporation extended by one year, up to 31.03.2023 for eligible start-ups to avail tax benefit.
Previously the period of incorporation valid up to 31.03.2022.
Incentives under concessional tax regime
Last date for commencement of manufacturing or production under section 115BAB extended by one year i.e. from 31st March, 2023 to 31st March, 2024.
Scheme for taxation of virtual digital assets
Specific tax regime for virtual digital assets introduced.
Any income from transfer of any virtual digital asset to be taxed at the rate of 30 per cent.
No deduction in respect of any expenditure or allowance to be allowed while computing such income except cost of acquisition.
Loss from transfer of virtual digital asset cannot be set off against any other income.
To capture the transaction details, TDS to be provided on payment made in relation to transfer of virtual digital asset at the rate of 1 per cent of such consideration above a monetary threshold.
Gift of virtual digital asset also to be taxed in the hands of the recipient.
Litigation Management
In cases where question of law is identical to the one pending in High Court or Supreme Court, the filing of appeal by the department shall be deferred till such question of law is decided by the court.
To greatly help in reducing repeated litigation between taxpayers and the department.
Tax incentives to IFSC
Subject to specified conditions, the following to be exempt from tax
Income of a non-resident from offshore derivative instruments.
Income from over the counter derivatives issued by an offshore banking unit.
Income from royalty and interest on account of lease of ship.
Income received from portfolio management services in IFSC.
Rationalization of Surcharge
Surcharge on AOPs (consortium formed to execute a contract) capped at 15 per cent.
Done to reduce the disparity in surcharge between individual companies and AOPs.
Surcharge on long term capital gains arising on transfer of any type of assets capped at 15 per cent.
To give a boost to the start up community.
Health and Education Cess
Any surcharge or cess on income and profits not allowable as business expenditure.
Deterrence against tax-evasion
No set off, of any loss to be allowed against undisclosed income detected during search and survey operations.
Rationalizing TDS Provisions
Benefits passed on to agents as business promotion strategy taxable in hands of agents.
Tax deduction provided to person giving benefits, if the aggregate value of such benefits exceeds Rs 20,000 during the financial year.
INDIRECT TAXES
Remarkable progress in GST
GST revenues are buoyant despite the pandemic – Taxpayers deserve applause for this growth.
Special Economic Zones
Customs Administration of SEZs to be fully IT driven and function on the Customs National Portal – shall be implemented by 30th September 2022.
Customs Reforms and duty rate changes
Faceless Customs has been fully established. During Covid-19 pandemic, Customs formations have done exceptional frontline work against all odds displaying agility and purpose.
Project imports and capital goods
Gradually phasing out of the concessional rates in capital goods and project imports; and applying a moderate tariff of 7.5 percent – conducive to the growth of domestic sector and ‘Make in India’.
Certain exemptions for advanced machineries that are not manufactured within the country shall continue.
A few exemptions introduced on inputs, like specialised castings, ball screw and linear motion guide – to encourage domestic manufacturing of capital goods.
Review of customs exemptions and tariff simplification
More than 350 exemption entries proposed to be gradually phased out, like exemption on certain agricultural produce, chemicals, fabrics, medical devices, & drugs and medicines for which sufficient domestic capacity exists.
Simplifying the Customs rate and tariff structure particularly for sectors like chemicals, textiles and metals and minimise disputes; Removal of exemption on items which are or can be manufactured in India and providing concessional duties on raw material that go into manufacturing of intermediate products – in line with the objective of ‘Make in India’ and ‘Atmanirbhar Bharat’.
Sector specific proposals
Electronics
Customs duty rates to be calibrated to provide a graded rate structure – to facilitate domestic manufacturing of wearable devices, hearable devices and electronic smart meters.
Duty concessions to parts of transformer of mobile phone chargers and camera lens of mobile camera module and certain other items – To enable domestic manufacturing of high growth electronic items.
Gems and Jewellery
Customs duty on cut and polished diamonds and gemstones being reduced to 5 per cent; Nil customs duty to simply sawn diamond – To give a boost to the Gems and Jewellery sector
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A simplified regulatory framework to be implemented by June this year – To facilitate export of jewellery through e-commerce.
Customs duty of at least Rs 400 per Kg to be paid on imitation jewellery import – To disincentivise import of undervalued imitation jewellery.
Chemicals
Customs duty on certain critical chemicals namely methanol, acetic acid and heavy feed stocks for petroleum refining being reduced; Duty is being raised on sodium cyanide for which adequate domestic capacity exists – This will help in enhancing domestic value addition.
MSME
Customs duty on umbrellas being raised to 20 per cent. Exemption to parts of umbrellas being withdrawn.
Exemption being rationalised on implements and tools for agri-sector which are manufactured in India
Customs duty exemption given to steel scrap last year extended for another year to provide relief to MSME secondary steel producers
Certain Anti- dumping and CVD on stainless steel and coated steel flat products, bars of alloy steel and high-speed steel are being revoked – to tackle prevailing high prices of metal in larger public interest.
Exports
To incentivise exports, exemptions being provided on items such as embellishment, trimming, fasteners, buttons, zipper, lining material, specified leather, furniture fittings and packaging boxes.
Duty being reduced on certain inputs required for shrimp aquaculture – to promote its exports.
Tariff measure to encourage blending of fuel
Unblended fuel to attract an additional differential excise duty of Rs 2/ litre from the 1st of October 2022 – to encourage blending of fuel.
