Tax provisions good, but govt should be mindful of related costs

Finance Minister Nirmala Sitharaman unveiled her second Union Budget, that promised to further the goal of ‘ease of doing business and automation,’ by way of certain progressive measures such as simplified return system and e-invoicing mechanism, which is to be introduced by April 1, 2020. 

Highlighting the achievements of new goods and services tax (GST) law such as, consolidation of various taxes, formalisation of economy, reduction in overall tax incidence, that current budget plans to continue with the legacy of reforms to stimulate growth, simplified tax structure, ease of compliance and reduced litigations. 

As expected, full blown intent to use artificial intelligence and deep learning information technology (IT) platforms by government is of utmost priority in order to tackle the menace of dummy entities, bogus claim of input tax credit and curb tax evasion. Further, implementation of e-invoicing process and new returns system simultaneously will improve scrutiny at hand of the government, thereby avoiding tax evasion. To promote the Government’s credo of ease of doing business in India, these progressive changes have some tax payer-friendly features, such as filing of NIL returns via SMSs, pre-filling of returns. All this will lead to an improved flow of input tax credit and better facilitation of trade and commerce in the economy. 

However, the government should be mindful as regards infrastructure-related issues and the other related costs that come with implementation of such changes. While it was expected that the government will provide some roadmap or framework as to the progress and readiness of the new return filing system and e-invoicing process, there were no such clarifications made. All this could have eased the stress of corporates and professionals. 

To provide a level playing field to domestic manufacturers, the Budget has proposed varied measures on the Customs Law front. The ‘Health Cess’ is proposed to be levied on import of certain specified medical equipment to increase competitiveness of Indian medical equipment manufacturers. 

With an intent to further the “Make in India” initiative, the government has strengthened measures to curb misuse of import under of preferential agreements and imposed additional safeguard measures. Continuing with such intention, the government has also proposed to increase customs duties on certain items such as footwear and furniture. It further plans to launch a scheme later in the year for reversion of duties and taxes on exported products, where refund of duties and taxes levied at central, state and local levels will be provided to exporters. 

All in all, present budget is forward looking and in line of promoting the primary goal of ‘ease of doing business and automation’, where ease of compliances and need of domestic players has been addressed to some extent. However, certain announcements made are yet to be formalised to protect honest taxpayers rights, For example, the intent to formalise elimination of tax harassment vide ‘Tax Payer Charter’ under the Income Tax Act, 1961 – a similar provision should have been considered under Indirect tax legislations as well.  

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Krishan Arora, Partner (Indirect tax), Grant Thornton India LLP and Karan Kakkar, director (Indirect tax), Grant Thornton India LLP. Views shared are personal.