Budget 2020 – Analysis of tax implications

Lakshmikumaran & Sridharan (L&S) is holding a Seminar to discuss Finance Bill, 2020 presented in the Parliament on 1-2-2020. The bill and notifications issued propose many significant changes in provisions relating to Income Tax and Customs law.

Income Tax

Apart from making sweeping changes in the scheme of taxation of individuals, key amendments have been proposed in the corporate tax regime, provision relating to tax collection/ deduction at source and powers of tribunal to grant stay. Some of the major changes proposed are:

• Removal of Dividend Distribution Tax (DDT) and taxation of dividends in the hands of recipient
• Widening of Tax Collection at Source (TCS) provision to cover sale of all goods
• TDS obligations on e-commerce operator on transactions of sale of goods or provision of services
• Curtailment of powers of ITAT to grant full stay of demand by requiring a minimum deposit of 20%
• Vivad se Vishwas dispute resolution scheme
• Further incentivization of start-ups by raising the turnover limit to INR 100 crores and deferred of taxation of ESOPs
• Deferment of Significant Economic Presence (SEP)
• Changes in transfer pricing and income attribution provisions
• Amendment to residency rules for individuals
• Introduction of concessional rate of tax for individuals and cooperative societies

Customs

As far as Customs laws are concerned, the general theme of Budget, 2020 is towards protecting the domestic industry and incentivise investment in India and give impetus to ‘Make in India’ programme. The rate of basic customs duty on several finished goods including household goods has been increased in the Finance Bill, 2020. As a result of the increase in customs duties, the importers may have a tendency to import the goods with higher duties from countries with which India has a free trade arrangement. The Government in this budget has also laid down the procedure for verifying the Country of Origin certificates which are the basis for the importers to enjoy the duty benefits bestowed by virtue of Free Trade Agreement. The Government also aims at bringing in provisions which will safeguard the domestic industry from high volumes of exports by other countries. Key changes in the customs framework include:

• Insertion of a new chapter, in the Customs Act, 1962, on administration of rules of origin under FTAs which makes importers obligatory to maintain “sufficient information” for claiming exemption under the FTAs.
• Central Government under the Ministry of Finance being empowered to ‘prohibit’ the import of "any goods" for preventing injury to the economy.
• Clarification on timelines for adjudication of a show cause notice issued before 2018 by customs authorities.
• Scope of powers of customs authorities to recover duties widened to include benefits received under any other law or scheme of the Gentral Government for instance the RoSCTL.
• Creation of electronic duty credit ledger
• Introduction of a new Health Cess on medical goods imported into India to finance the health infrastructure in India.
• Amendment in Section 8B of the Customs Tariff Act to also allow for safeguard measures in the form of tariff-rate quota or such other measures
• Clarificatory revisions to anti-circumvention provisions in AD Rules
• Introduction of anti-circumvention provisions in CVD rules
• Anti-dumping duty for co-operative un-sampled exporters/producers may also be extended to new producers/exporters pursuant to new shipper review
• Revision of AD rules and CVD rules to ensure consistency with each other
• Pre-initiation and continued consultations with the government of the exporting country throughout a CVD investigation

To understand the implications arising from various proposals and discuss the finer nuances, Lakshmikumaran & Sridharan is organizing a seminar series on ‘Budget 2020- Analysis of Tax Proposals’ as per the schedule below.

Venues & Dates