The Finance Bill, 2021 proposes to amend indirect tax laws with an aim to provide impetus to domestic production, rationalize Customs duty and safeguard measures, and reduce the compliance burden on the taxpayer.

The Finance Bill, 2021 (Bill) was a fully digital budget in the backdrop of COVID-19. It proposes several changes to strengthen the foundation of indirect tax laws such as the introduction of an online customs portal. The Budget also proposes several changes to emphasise building production capabilities in India, such as increasing customs duty rates on certain goods. Several proposals have also been made to reduce compliance burden for taxpayers under the GST framework such as the removal of requirement of GST audit by a chartered/cost accountant. We discuss some of the key changes below.

1.  Customs Act, 1962

(a)  Customs Online Portal

The Bill seeks to introduce an online portal for Customs similar to the GSTN portal under the Goods and Services Tax laws. This portal would be a single point solution for facilitating registration, filing bills of entry, shipping bills, other documents and forms, and payment of duties of Customs. An amendment is also proposed to Section 153 to allow service of order, decision, summons, notice or any other communication to the taxpayer through the common portal.

This portal is expected to be a positive step towards streamlining Customs related compliances. It is also likely to assist in seamless integration of Customs clearance process with the faceless Customs assessment program known as 'Turant Customs' which was introduced in year 2020.

(b)  Automatic expiration of exemptions

Under the provisions of Customs Act, 1962 (Customs Act), certain conditional exemptions have been granted from the payment of customs duty on certain products. The Bill proposes to now expire these conditional exemptions in a time-bound manner. It is proposed that all conditional exemptions will expire on the 31 March of the year which follows after the exemption has been in place for two years (i.e. on the 31 March falling immediately after two years from the date of grant of such exemption). This period may also be varied or rescinded by the Government. The validity of all existing exemption i.e. the exemption which is in force as on the date on which the Bill receives the President's assent, will be calculated from 1 February 2021 and therefore will expire on 31 March 2023.

(c)  Time limit for completion of inquiry/investigations

The Bill proposes to insert Section 28BB to provide a time limit of 2 years for completion of inquiry or investigation under the Customs Act which would result in issuance of show cause notice. The time limit would be applicable to all cases, including those involving fraud, collusion, wilful suppression etc. The time limit of 2 years may be extended by the Principal Commissioner for an additional 1 year on sufficient cause being shown and for reasons to be recorded in writing.

Notably this amendment, if adopted, will come into effect prospectively and would not cover any on-going enquiry/ investigation.

(d)  Time of presenting bill of entry

The Bill proposes to amend Section 46(3) to mandate presentation of bill of entry at the customs station on the day preceding the day of arrival of aircraft or vessel carrying the goods. The Bill also proposes to empower the Board to prescribe different time limits as it may deem fit for presentation of the bill of entry but not later than the end of the day of arrival.
The proposed amendment is likely to decrease the time required for Customs clearance of imported goods.
(e)  Electronic amendment of documents

The Bill proposes to amend Section 149 to allow electronic amendment of any document through the customs automated system on the basis of risk evaluation. The Board, under the proposed provision, may also specify the amendments that can be carried out by the importer or exporter on the common Customs portal.

The proposed amendment is in line with Government's efforts to integrate various aspects of tax laws by use of technology. Electronic amendment would allow faster transmission of importer/ exporter related data and documents, thus, resulting in efficient communications between various Customs department.

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