STT hike to GST appellate tribunal: Key takeaways from Finance Bill 2023

Finance Bill 2023: Debt funds with less than or equal to 35 per cent invested in equity shares will be taxed at the investors' income tax slab and treated as short-term capital gains

The Finance Bill 2023 was passed in the Lok Sabha on Friday. A total of 64 official amendments were proposed in the Bill. These included setting up a committee under the finance secretary to review the national pension scheme and setting up a goods and services tax (GST) Appellate Tribunal.

The bill will now go to the Rajya Sabha for approval.

Finance Bill 2023: Here are key amendments passed in the Lok Sabha today

Committee to review NPS

A committee under the chairmanship of the finance secretary will be set up to review the National Pension System (NPS). It will "evolve and approach" to address the needs of government employees while ensuring fiscal prudence.

"The approach will be designed for adoption by both central and state governments," finance minister Nirmala Sitharaman said while making the announcement.

No long-term capital gains tax benefit on Debt MFs

Debt funds with less than or equal to 35 per cent invested in equity shares will be taxed at the investors' income tax slab and treated as short-term capital gains. This is similar to how bank deposits are taxed in India. It will be applicable on investments done after April 1.

Moreover, the debt mutual fund investments will also not allow indexation from April 1 in the above-mentioned case.

STT on futures and options trading hiked by up to 25 per cent

The securities transaction tax (STT) on the sale of future and option contracts was hiked by up to 25 per cent. It has been hiked by 24 per cent on the sale of options and 25 per cent on the sale of futures contracts.

TDS on online gaming apps preponed

From the earlier date of July 1, 2023, the date of application of the tax deducted at source (TDS) on online gaming applications has been preponed to April 1. Online gaming companies are presently liable to pay 18 per cent GST on their gross revenue.

Hike in tax on royalty or technical fee earned by a foreign resident

The tax on royalty or technical fees earned by non-resident companies has been hiked from 10 per cent to 20 per cent.

"This rate increase will lead to a higher rate of tax of withholding tax obligations on payments to be made to non-residents unless there is a tax treaty benefit which reduces such rate. In a typical example of payments made to US companies, the rate of withholding tax on royalty and fees for technical services under the tax treaty was 15%, however, Indian companies while making such payments used to take benefit of a lower rate as per the domestic tax act. Now, where such rate under the domestic tax act has been increased to 20%, such benefit shall not be available," said Saurrav Sood, practice leader of International Taxation at SW India.

"Further, where even if tax treaty benefit is taken when such non-resident will file its income tax return in India, the differential tax will be required to be paid at the time of filing of return of income," Sood added.

Tax benefits to offshore banking units in GIFT City

The offshore banking units operating in Gujarat International Finance Tec-City (GIFT City) will now get a 100 per cent tax deduction on their income for ten years.

Changes to LRS

Tax collection at source (TCS) shall apply to all Liberalised Remittance Schemes (LRS), even if they are within India.

Moreover, all credit card payments for foreign tours will be considered under LRS. The Reserve Bank of India (RBI) will now look into such payments which escape tax at source.

GST Appellate Tribunal

The benches of the GST Appellate Tribunal would be set up in every state while there will be a principal bench in Delhi which will hear appeals related to "place of supply". Currently, taxpayers need to file their petitions in high courts.