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Poised for ‘Yogakshema’ (welfare of the people), the Union Budget 2022, stands out on balancing GDP growth rate of 9.2% with fiscal deficit pegged at 6.9%, and phenomenal increase of 35% in capex outlay, to inject ‘booster dose’ for accelerating the pace of the economy.
On Tax front, FM has batted some ‘fours’ this time (and not sixers) and bowled some ‘googlies.
In Direct Tax domain, new manufacturing units have been incentivized by extending section 115BAB eligibility date for commencement of production by one more year up to 31.3.2024. Start-ups have been encouraged by extending the period of their incorporation by one more year, up to 31.03.2023 u/s 80IAC, for providing tax incentives. Trading in Cryptocurrencies has been given a legal recognition, by bringing them to tax net @ 30% u/s 115BBH, without allowing any adjustment of losses set-offs. A new section 194S has been inserted providing for TDS @ 1% on purchase of cryptocurrencies above rupees 10,000/50,000. Level playing field has been provided to Co-operative Societies by bringing down their AMT rate to 15% and to State Govt. employees by increasing their employer NPS contribution limit to 14%.
However, some well-settled legal positions arising out of time-tested judicial pronouncements have been overturned. The Apex Court judgement in the case of ‘Principal CIT Vs. Maruti Suzuki Ltd. (2019) 416 ITR’, has been nullified by inserting section 170(2A), to give legal sanctity to proceedings initiated in the name of a non-existing entity. Further, an Explanation to section 14A has been inserted to enable disallowance under this section even in absence of any exempt income. Though taxpayers have been allowed to furnish their ‘updated returns’ by declaring increased income, within an extended period of two years, u/s 139(8A), but the associated heavy cost of payment of additional tax of up to 50%, acts as a spoiler. TDS provisions u/s 206AB have been made more stringent by reducing the eligibility criteria of return filing time period of deductees, from two years to one year. A by-default right of personal hearing through video conferencing has been vested in the assessee in faceless assessments u/s 144B. However, the Legislature, instead of encouraging the concerned faceless assessment authorities to ensure adherence to principles of natural justice, (audi alteram partem) u/s section 144B(9), has conveniently chosen to omit, sub-section (9) of section 144B, to nullify recent numerous judgements setting aside faceless assessments. A new section 194R has been inserted providing for TDS @ 10% on benefit or perquisite in excess of rupees 20,000/- arising out of business or profession u/s 28(iv). So, now, think twice before accepting any gifts from your clients, my dear fellow practitioners.
In indirect tax domain, timeline for availment of input tax credit has been extended till 30th November, following the financial year u/s 16(4), which will facilitate taxpayers to reconcile their GST annual return 9 & 9C, with their audited books of accounts, with tax audit due date generally being 31st October. However, new restrictions on availment of input tax credit have also been proposed in section 16(2) and section 38. Now input tax credit can be availed only when it is not restricted in the auto generated details communicated to the taxpayer u/s 38. This auto generated report by GSTN portal will now report cases of ineligible input tax credit to taxpayers, including cases where output tax liability as per GSTR 1 is greater than that paid in GSTR 3B, denial of input tax credit to taxpayer, on default of deposition of GST by supplier and also on availment of input tax credit in excess of the amount of eligible credit as communicated in the auto generated report to the supplier. Further the hon’ble Apex Court judgement in Canon India Pvt Ltd vs. CC., Civil Appeal no. 1827 of 2018, has been overturned by proposing relevant amendments in section 2(34), 3 and 5, authorising DRI officers to issue summons and show cause notices.
All in all, a progressive budget with long-sighted vision of accelerating demand, but with an exception of unjustified tendency of overturning settled legal positions, by turning the explanatory memorandum to Finance Bill 2022 into an appeal submission.
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