With an aim to widen the tax net and plug evasion, Finance Minister Nirmala Sitharaman on Monday took authorisation to hike excise duty on petrol and diesel by Rs 8 per litre, besides imposing a digital tax on foreign e-commerce players.
The digital tax at the rate of 2 per cent may particularly come as a setback to Chinese e-commerce players like AliExpress, Shein, and Club Factory selling in India.
A provision for this in the Finance Bill was among the more than 40 changes in the Finance Bill, introduced in the Lok Sabha. It was passed without a discussion.
Amid falling crude oil prices, the government had on March 14 raised excise duty on petrol and diesel by Rs 3 per litre each.
This will help raise an additional Rs 39,000 crore in revenue annually. This duty hike included Rs 2 a litre increase in special additional excise duty and Rs 1 in road and infrastructure cess. This hike took the special additional excise duty to the threshold of Rs 10 for petrol and Rs 4 in diesel. The limit has now been increased to Rs 18 a litre in case of petrol and Rs 12 in the case of diesel by way of amending the Eighth Schedule of the Finance Act.
In a setback to Chinese e-commerce players like AliExpress, Shein and Club Factory selling in India, the government imposed a 2 per cent digital tax on trade and services of non-resident e-commerce operators, expanding the scope of the equalisation levy.
The provision will come into effect from April 1 this year and e-commerce operators have to pay the levy at the end of each quarter.
Amit Maheshwari, Partner, AKM Global, said that the scope of the equalisation levy would only increase with time as long as a global consensus is missing.
“Interestingly, the applicability is also on supply by non-resident operators to non-residents provide that the sale of advertisement or sale of data has a nexus is India. This would pose practical difficulties in compliance,” he said.
Rajat Mohan, partner, AMRG Associates said that the provisions of the equalisation levy would will give a push to make in India initiatives of central government and would also keep in check massive dumping of good in India especially by Chinese online companies.
“Slowing Indian economy would need a safety net from Chinese manufacturing, distribution and e-commerce companies who are eyeing price sensitive Indian markets as an easy target for unloading supplies at deep discount,” said Mohan.
The amendments also introduced a Rs 15 lakh threshold for taxing non-residents' income.
The amendment to Budget 2020 seeks to tax only those Indian citizens, who have stayed in India for a period of 120 days or more and have total income (other than income from foreign source) exceeding Rs 15 lakh during the previous year.
Amit Singhania, partner, Shardul Amarchand Mangaldas said that the residency rule for qualifying non-resident status relaxed for individuals deriving total income less than Rs 15 lakh from Indian sources was a welcome step, but the threshold is a bit on lower side.
Tightening tax evasion, the amendments introduced a higher tax deduction at source at bank withdrawals for defaulters. With effect from July 1, 2020, a person who has not filed income-tax returns for all of the three preceding previous years will be subjected to tax deducted at source (TDS) at the rate of 2 per cent if withdrawal amount is between Rs 20 lakh and Rs 1 crore and at the rate of 5 per cent for withdrawals over Rs 1 crore.
Normally, 2 per cent TDS applies for cash withdrawals of over Rs 1 crore.
With the Finance Bill abolishing dividend distribution tax, making it taxable at the hands of shareholders, a clarificatory change has been made, providing that dividends received by the shareholders after April 1, 2020, shall not be taxed if tax has been paid in accordance with the erstwhile provisions as per the earlier law.
“This addresses the confusion revolving around the scenario where dividend has been declared/ distributed by the company before April 1, 2020 and DDT has been paid in accordance with the erstwhile provisions but dividend was received by such shareholder on/after April 1, 2020. The recipient shareholders shall now be spared from double taxation of the dividend in such a case,” said Nangia.
Relaxation has also been given to individuals remitting money overseas abroad, especially for overseas education, especially by loan, where rate of TCS has been reduced from earlier 5 per cent to 0.5 per cent.