With a focus on inclusive growth and enhancing tax transparency and simplification, Budget 2024-25 includes significant proposals concerning indirect taxes. The Budget Estimates project a double-digit growth in Goods and Services Tax (GST) collections for FY 2024-25, and the Budget aims to achieve this by streamlining compliances and assessment procedures, enhancing digitalization, and focusing on dispute resolution. Further, the Budget 2024 – 2025 has recognised the need for export promotion and the significance of the gems and jewellery sector in India’s merchandise exports. Recently, the Authorised Economic Operator in Customs was expanded to also include the gems and jewellery sector, with an objective of making Indian exporters competitive and streamline their process to global standards. The focus has been on making exports faster and more efficient. From an indirect tax standpoint, let us look at certain key reforms in GST and Customs as laid out in the Budget.
Reduction in Custom Duty Rates on various inputs used in G&J industry
In previous Budgets, the Social Welfare Surcharge on gold, silver, and platinum was phased out. To further enhance the competitiveness of the gems and jewellery (G&J) industry and boost domestic value addition in gold and precious metal jewellery, the Finance Bill proposes a reduction in customs duties. The new effective rates are 6% for gold and silver, and 6.4% for platinum. The table below provides a detailed breakdown of the rates on various inputs:
| Commodity | Basic Customs Duty Rates | AIDC Rates* | Effective Customs Duty Rate | |||||
| From | To | From | To | From | To | |||
| Gold Bars | 10% | 5% | 5.00% | 1.00% | 15% | 6% | ||
| Gold Dore | 10% | 5% | 4.35% | 0.35% | 14.35% | 5.35% | ||
| Platinum | 10% | 5% | 5.40% | 1.40% | 15.40% | 6.40% | ||
| Silver Bar | 10% | 5% | 5.00% | 1.00% | 15% | 6% | ||
| Silver Core | 10% | 5% | 4.35% | 0.35% | 15% | 5.35% | ||
It can be seen from the above that there are significant reductions in the effective Customs Duty rates for various items of gold, silver and platinum. These changes are designed to support the G&J industry’s growth and increase the domestic production of high-value jewellery.
Streamlining of Certain Assessment Procedures and Time Limit for Issuance of Notices
The Finance Bill introduces Section 74A to the CGST Act, effective from FY 2024-25, superseding Sections 73 and 74. This amendment changes the time limit for issuing assessment notices to 42 months from the due date of the annual return for the financial year, and the same shall apply uniformly across all types of taxpayers. For example, FY 2024-25, with the annual return due on 31st December 2025, the deadline for issuing notices will be 30th June 2029.
Previously, Sections 73 and 74 allowed time limits of three and five years, respectively, depending on whether the assessment involved a taxpayer alleged to have committed fraud, wilful misstatement, or suppression of facts. It is important to note that Sections 73 and 74 will remain applicable for all financial years up to and including FY 2023-24.
Further even from FY 2024 – 25 onwards, the taxpayers found liable for fraud, misstatements, or wilful suppression of facts will still face a higher penalty, equivalent to the tax due, in addition to tax and interest. The Finance Bill has imposed different penalty norms for taxpayers alleged to have committed fraud, wilful misstatement, or suppression of facts.
Time Limit for Issuing Orders in respect of Notices Under New Section 74A
The GST Council, in its 53rd meeting, recommended a common time limit for issuing assessment orders under Sections 73 and 74 from FY 2024-25 onwards. The time limit for taxpayers to avail the benefit of reduced penalties has been increased from 30 days to 60 days. The Finance Bill specifies a 12-month time limit from the notice issuance date for completing assessments and issuing orders. For instance, a notice issued on 1st April 2026 for FY 2024-25 requires an order by 31st March 2027, giving tax authorities more time for thorough assessments. This time limit earlier was significantly shorter and was only 3 months from date of issuance of notice.
Conditional Waiver of Interest and Penalty for FY 2017-18 to 2019-20
Recognising initial GST implementation challenges, the Finance Bill introduces Section 128A, which provides a waiver of interest and penalties for non-fraudulent taxpayers being assessed under Section 73 for the periods FY 2017-18, 2018-19, and 2019-20. The waiver of interest and penalty is conditional and is subject to payment of tax amount under dispute by 31st March 2025. Further, this waiver excludes cases of erroneously sanctioned refunds and applies only to open cases, which are still in appeal or under dispute, and do not appear to extend to cases where the taxpayer has already paid interest and penalty.
Reduction in Pre-Deposit Amounts for GST Appeals
To ease cash flow constraints, the Finance Bill proposes reducing the pre-deposit amounts for GST appeals. The maximum amount for appeals before the Appellate Authority i.e. Commissioner (Appeals) has been reduced from Rs. 25 crores to Rs. 20 crores each under CGST and SGST. For appeals before the yet to be formed GST Appellate Tribunal, the pre-deposit amount is reduced from 20% to 10% of the disputed tax amount, with a maximum ceiling of Rs. 20 crores each under CGST and SGST and Rs 40 crores under IGST.
Timelines for GST Appellate Tribunal Appeals
The GST Council’s 53rd meeting recommended a three-month period for filing appeals before the GST Appellate Tribunal, to be counted from a yet-to-be-notified date. The Finance Bill adopts this recommendation, providing taxpayers ample time to approach the Tribunal for dispute resolution. The formation and operational details of the GST Appellate Tribunal will be notified subsequently and has not yet been addressed in the Budget.
Relaxation in Timelines for Availing Input Tax Credit for the initial years of GST implementation
The Finance Bill clarifies that the time limit for availing input tax credit (ITC) for FY 2017-18, 2018-19, 2019-20, and 2020-21 is deemed as 30 November 2021, provided ITC is availed in GST returns (FORM GSTR 3B) filed up to that date. Retrospective amendments to Section 16(4) of the CGST Act have been introduced accordingly.
These amendments aim to streamline the assessment process, enhance clarity and certainty for taxpayers, and address various practical challenges faced during GST implementation.
The views expressed in this article are those of the author’s and do not necessarily reflect those of the GJEPC.