Relevant Extracts | Departmental Clarifications Letter D.O.F. No. 334/02/2020-TRU, Dated 1-2-2021
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Letter D.O.F. No. 334/02/2020-TRU,
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Dear Principal Chief Commissioner/ Chief Commissioner/ Principal Director General/ Director General,
The Finance Minister has introduced the Finance Bill, 2021 in Lok Sabha today, that is 1st February, 2021. Changes in Customs, Central Excise, GST law and rates have been proposed through the Finance Bill, 2021. To prescribe effectives rates of duty, following notifications are being issued:
|Customs (Tariff)||02/2021-Customs to 15/2021-Customs||1st February, 2021|
|Customs (Non-Tariff)||09/2021-Customs (N.T) to 12/2021-Customs (N.T)||1st February, 2021|
|Customs (ADD)||05/2021-Customs (ADD) to 07/2021-Customs (ADD)||1st February, 2021|
|Customs (CVD)||01/2021-Customs (CVD) to 02/2021-Customs||1st February, 2021|
2. Unless otherwise stated, all changes in rates of duty take effect from the midnight of 1st February/2nd February, 2021. A declaration has been made under the Provisional Collection of Taxes Act, 1931 in respect of clauses 95(i), 115 and 116 of the Finance Bill, 2021 so that changes proposed therein take effect from the midnight of 1st February/2nd February, 2021. The remaining legislative changes would come into effect only upon the enactment of the Finance Bill, 2021.
3. Important changes in respect of Customs and Central Excise duty (including cesses) are contained in the Annexure to this letter as detailed below.
- Customs duty rate changes: The change in the rates of duty, SWS, tariff rates, omission of certain exemption and amendments in certain exemptions, conditions to exemptions are at Annexure A.
- Central Excise Changes: The changes in Central Excise Act and duty rates are at Annexure B.
- Agriculture Infrastructure and development Cess (AIDC): This new cess is being imposed on imports of certain items at specified rate. Simultaneously, basic customs duty is being reduced on the items being brought under new cess. This new cess is also being imposed as additional duty of excise on petrol and diesel. At the same time, Basis Excise Duty and Special Additional Duty of Excise are being reduced. The details are at Annexure C.
- Legislative changes in the Customs Act, Customs Tariff Act and Rules made thereunder:
- Certain significant changes have been made in the Customs Act. Mostly, these are for enhanced trade facilitation. A definite period of two year, extendable by one year is being prescribed for completion of investigation. Also, it is being prescribed that conditional exemption shall validity of two years unless specifically provided otherwise, or varied or rescinded earlier (the notification would end on 31st March falling immediately after two years of issue of exemption). IGCR Rules have been amended to allow job work on imported goods and also to allow disposal of goods at payment of duty on depreciated value. A few changes are for improving compliance.
- Certain changes have also been made in the Customs tariff Act and Rules made thereunder in the provisions relating to trade remedial measures (ADD/CVD and Safeguard Measures). Besides other changes, these changes introduce the provisions for anti-absorption investigation in ADD/CVD, bringing in uniformity in the provisions. Certain changes have also been made in the corresponding Rules. Also, first Schedule to the Customs Tariff Act has been proposed to be amended (w.e.f. 1.1.2022) to HS 2022 changes.
[The details are at Annexure D]
- Legislative Changes in the GST Act:
Certain changes have been in the CGST Act and the IGST Act on the basis of recommendations made by the GST Council. These changes will come into effect from the date to be notified. These changes include measures for facilitating taxpayers, such as removing the mandatory requirement of getting annual accounts audited and reconciliation statement, filing of the annual return on self-certification basis, etc. Changes have also been proposed for improving compliance, such as availing the input tax credit only if the details have been furnished by the supplier in the statement of outward supplies. Certain changes relate to provisions concerning seizure and confiscation, filing of appeal only on payment of a sum equal to twenty-five per cent of penalty imposed
[The details are at Annexure E]
4. This letter only summarizes the key highlights of the budgetary changes. It should not be used in any quasi judicial or judicial proceedings. The relevant legal texts contained in the Finance Bill and notifications alone have legal force. We have taken every possible care in making the changes error free. However, inadvertent errors cannot be ruled out given the scale of the exercise. I shall be grateful if the provisions of the Finance Bill and notifications are studied carefully and feedback is provided urgently, including the issues that may need clarification.
5. It is requested that all possible efforts may be made to guide the taxpayers by holding interactive sessions/seminars for their benefit. In case of any doubt or difficulty, I would request you to kindly bring it to my notice immediately at firstname.lastname@example.org or to the notice of Shri Gaurav Singh, Deputy Secretary (TRU) (Tel: 011-23092753, email: email@example.com Sh. J.S. Kandhari, Deputy Secretary (TRU) (Tel: 011-23095526, email: firstname.lastname@example.org) or Sh. Abhishek Verma, Budget Officer (TRU) (Tel: 011-23095547, email: email@example.com) We can also be reached at firstname.lastname@example.org.
6. Copies of Finance Bill, 2021, Finance Minister’s Budget Speech, Explanatory Memorandum to the Bill and relevant notifications can be downloaded directly from www.indiabudget.gov.in as well as www.cbic.gov.in.
7. To conclude, my team and I would like to express our gratitude to you for the valuable suggestions, feedback and support and would look forward to your comments/suggestions.
With warm regards,
- “Basic Excise Duty” means the excise duty set forth in the Fourth Schedule to the Central Excise Act, 1944.
- “Road and Infrastructure Cess” means the additional duty of excise imposed levied under section 112 of the Finance Act, 2018.
- “Special Additional Excise Duty” means a duty of excise levied under section 147 of the Finance Act, 2002.
- NCCD means “National Calamity Contingent Duty” levied under Finance Act, 2001, as a duty of Excise on specified goods at rates specified in the seventh schedule to Finance Act, 2001.
- “Agriculture Infrastructure and Development Cess” means the additional duty of excise, levied vide Clause 116 of the Finance Bill, 2021.
(1) New tariff items inserted in Chapter 24 in the fourth Schedule of the Central Excise Act, 1944 in accordance with upcoming Harmonised System 2022 Nomenclature.
(2) The Fourth Schedule to the Central Excise Act, 1944, is being amended with effect from 01.01.2022 to prescribe the rates following tariff items. [Clause 96 (ii) of the Finance Bill, 2021 refers]:
|Tariff Item||Description of goods||Unit||Rate of Duty|
|2404 11 00||Products intended for inhalation without combustion, containing tobacco or reconstituted tobacco||Kg.||81%|
|2404 19 00||Products intended for inhalation without combustion, Other||Kg.||81%|
(2) The Seventh Schedule of the Finance Act, 2001, is being amended with effect from 01.01.2022 to insert the following tariff items.
|Tariff Item||Description of goods||Unit||Rate of Duty|
|2404 11 00||Products intended for inhalation without combustion, containing tobacco or reconstituted tobacco||Kg.||25%|
|2404 19 00||Products intended for inhalation without combustion, Other||Kg.||25%|
(1) To align the First schedule of the Customs Tariff Act, 1975 to the Fourth Schedule to the Central Excise Act, 1944 in respect of Crude Petroleum Oil, it is proposed to amend entries in heading 2709 so as to replace the existing tariff items and entries thereof (2709 10 00, 2709 20 00 in the Fourth schedule of the Central Excise Act, 1944 and 2709 00 00 of the First schedule of the Customs Tariff Act, 1975) in both the First schedule of the Customs Tariff Act, 1975 and the Fourth schedule of the Central Excise Act, 1944, with the following two new tariff items (w.e.f 1.4.2021):
2709 00 10 — petroleum crude
2709 00 20 — other
(2) Agriculture Infrastructure and Development Cess (AIDC) is being imposed on Petrol and High-speed diesel falling under CETH 2710 at the rate of Rs. 2.5 per litre and Rs. 4 per litre respectively. Simultaneously, Basic Excise Duty and Special Additional Excise Duty on Petrol and High-speed diesel is being calibrated. The details of these changes are given in Annexure-C. [Notification Nos. 01/2021-Central Excise and 02/2021-Central Excise, both dated 1st February, 2021 refer]
(3) Exemptions from Special Additional Excise Duty (SAED) and Road and Infrastructure Cess (RIC) is being provided to new category of blended fuels namely, 15% Methanol blended Petrol (M-15 fuel) and 20% Ethanol blended Petrol (E-20 fuel), provided appropriate excise duty on Petrol and appropriate GST on ethanol/methanol and cosolvents has been paid. [notification Nos. 04/2021-Central Excise, 05/2021-Central Excise and 06/2021-Central Excise, all dated 1st February, 2021 refer]
(4) Exemption from Agriculture Infrastructure and Development Cess (AIDC) is being provided to blended fuels namely 5% ethanol blended petrol, 10% ethanol blended petrol, 20% bio-diesel blended High speed diesel, and new category of blended fuels namely, 15% Methanol blended Petrol (M-15 fuel) and 20% Ethanol blended Petrol (E-20 fuel). [Notification No. 03/2021-Central Excise, dated 1st February, 2021 refers]
(5) The Exemptions available to blended fuels, 5% ethanol blended petrol, 10% ethanol blended petrol, 20% bio-diesel blended High speed diesel from Basic Excise Duty, Special Additional Excise Duty and Road and Infrastructure Cess is being amended to include the reference to the AIDC in the definition of appropriate duty of excise on petrol/diesel being blended. [Notification Nos. 02/2021-Central Excise, 05/2021-Central Excise and 07/2021-Central Excise, all dated 1st February, 2021 refer]
(6) Amendment in Fourth Schedule made by Notification No. 08/2019-CE (T) dated 31.12.2019 shall be made effective w.e.f. 01.01.2020, retrospectively [clause  of the Finance Bill, 2021 refers].
(7) It is proposed to specify correct IS “17076” against the tariff item 27101249 and made effective from 01.01.2020, retrospectively [clause [97(i)] of the Finance Bill, 2021 refers]
(8) It is proposed that tariff rate of 14% + Rs. 15.00 per litre against tariff items 2710 20 10 and 2710 20 20 may be prescribed and made effective from 01.01.2020, retrospectively. [clause [97(ii) and 97(iii)] of the Finance Bill, 2021 refers]
Amendments in CGST, IGST and UTGST Acts, 2017
Amendments carried out in the Finance Bill, 2021 will come into effect from the date when the same will be notified, as far as possible, concurrently with the corresponding amendments to the similar Acts passed by the States and Union territories with Legislature.
I. AMENDMENTS IN THE CGST ACT, 2017
- A new clause (aa) in sub-section (1) of Section 7 of the CGST Act is being inserted, retrospectively with effect from the 1st July, 2017, so as to ensure levy of tax on activities or transactions involving supply of goods or services by any person, other than an individual, to its members or constituents or vice versa, for cash, deferred payment or other valuable consideration.
- A new clause (aa) to sub-section (2) of the section 16 of the CGST Act is being inserted to provide that input tax credit on invoice or debit note may be availed only when the details of such invoice or debit note have been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note.
- Sub-section (5) of section 35 of the CGST Act is being omitted so as to remove the mandatory requirement of getting annual accounts audited and reconciliation statement submitted by specified professional.
- Section 44 of the CGST Act is being substituted so as to remove the mandatory requirement of furnishing a reconciliation statement duly audited by specified professional and to provide for filing of the annual return on self-certification basis. It further provides for the Commissioner to exempt a class of taxpayers from the requirement of filing the annual return.
- Section 50 of the CGST Act is being amended, retrospectively, to substitute the proviso to sub-section (1) so as to charge interest on net cash liability with effect from the 1st July, 2017.
- Section 74 of the CGST Act is being amended so as make seizure and confiscation of goods and conveyances in transit a separate proceeding from recovery of tax.
- An explanation to sub-section (12) of section 75 of the CGST Act is being inserted to clarify that “self-assessed tax” shall include the tax payable in respect of outward supplies, the details of which have been furnished under section 37, but not included in the return furnished under section 39.
- Section 83 of the CGST Act is being amended so as to provide that provisional attachment shall remain valid for the entire period starting from the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV till the expiry of a period of one year from the date of order made thereunder.
- Section 129 of the CGST Act is being amended to delink the proceedings under that section relating to detention, seizure and release of goods and conveyances in transit, from the proceedings under section 130 relating to confiscation of goods or conveyances and levy of penalty.
- Section 130 of the CGST Act is being amended to delink the proceedings under that section relating to confiscation of goods or conveyances and levy of penalty from the proceedings under section 129 relating to detention, seizure and release of goods and conveyances in transit.
- Section 151 of the CGST Act is being substituted to empower the jurisdictional commissioner to call for information from any person relating to any matter dealt with in connection with the Act.
- Section 152 of the CGST Act is being amended so as to provide that no information obtained under sections 150 and 151 shall be used for the purposes of any proceedings under the Act without giving an opportunity of being heard to the person concerned.
- Section 168 of the CGST Act is being amended to enable the jurisdictional commissioner to exercise powers under section 151 to call for information.
- Consequent to the amendment in section 7 of the CGST Act paragraph 7 of Schedule II to the CGST Act is being omitted retrospectively, with effect from the 1st July, 2017.
II. AMENDMENTS IN THE IGST ACT, 2017
Section 16 of the IGST Act is being amended so as to:
- zero rate the supply of goods or services to a Special Economic Zone developer or a Special Economic Zone unit only when the said supply is for authorised operations;
- restrict the zero-rated supply on payment of integrated tax only to a notified class of taxpayers or notified supplies of goods or services; and
- link the foreign exchange remittance in case of export of goods with refund.
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