‘Record GST collections allow government to focus on aligning with strategic priorities’

Marked as a blueprint for the next 25 years, the impetus of the Budget proposals is on public spending to put economic recovery back on track. The recent GST collections are a positive indication, especially with a record collection in January 2022 at `1.4 lakh crore.

From an indirect tax standpoint, while there have been no big bang rate change announcements, the government’s long-term objective is to support domestic manufacturing, exports and move towards sustainable growth. The rationalisation of Customs exemptions (across sectors such as electronics, chemical, textiles, medical devices and drugs, medicines with specific focus on capital goods) have been done with twin objectives. First, to provide for concessional rates to raw materials/ inputs used for manufacturing intermediate products and second, to reduce concessions on finished products without significantly impacting essential imports.

For carbon emission neutrality and sustainable growth, additional `19,500 crore have been parked for the production-linked incentive (PLI) scheme in the solar power sector. Other proposals in this relation include inclusion of energy storage systems in list of the infrastructure sectors and increased excise duty on unblended fuel from October 1, 2022.

Another significant announcement has been made for an overhaul of SEZ laws to enable the states partner in the development of enterprise and service hubs. While the details are still awaited, it is expected that this would lead to operational ease and efficient utilisation of existing SEZ infrastructure. These could include relaxations in export obligations and entry/ exit into and from SEZs. These reforms are expected to be implemented by mid-FY23.

On the technology front, as part of the Digital India initiative, the SEZ administration would move to the Customs portal by September 30, 2022, which should also help boost ‘ease of doing business’. Additionally, the process for import of goods at concessional rate is also being automated and standardised which should accelerate clearances.

There have been significant changes proposed under Customs laws. One of them is a retrospective amendment to validate actions of the DRI officials on customs investigations. Unauthorised publication of import or export data has been made an offence. New provisions have been proposed to curb undervaluation under customs. Also, the jurisdiction of customs officials has been expanded under ‘faceless assessment’.

One of the reasons for buoyancy in GST collections has been the government’s crackdown on fake invoices and unauthorised availment of input credit. It seems that the government is keen to intensify its efforts in this direction. In the Budget, it has introduced rigorous provisions in GST law requiring recipient to reverse credit where GST has not been paid by the supplier and also to restrict the GST credit to the recipient basis extent allowed in an auto-generated statement. This said statement is expected to include details of available as well as non-available credit basis various criteria such as excess availment of credit (beyond prescribed limit) by the supplier.

The way the provision is worded, there are lot of aspects which needs clarity (e.g. treatment of cut-off credits, proportion of credit restriction where only a percentage difference exists between tax declared and tax paid by the supplier). An early clarification should help bring clarity. Needless to mention that it is a step in the right direction, but the provision is likely to add to the compliance burden and also could impact the working capital requirement of the taxpayers.

To conclude, in Budget 2022, the government managed to walk the tight rope without introducing any drastic changes and continued its directional efforts to bring rationalisation across provisions in line with strategic priorities of India.

(The author is Partner, Price Waterhouse & Co LLP. Views are personal.)