Budget 2022’s GST adjustments foreshadow harsher laws to come.

Budget 2022’s GST adjustments foreshadow harsher laws to come.

Nirmala Sitharaman, the Finance Minister, has announced her second budget since the COVID-19 pandemic began. She opened her address by praising India’s 9.2% GDP growth rate, which is the highest among global economies. She also stated that this year’s Union Budget will create the groundwork and blueprint for the economy for the next 25 years.

There was a significant focus on digital reforms across education, health, taxation of digital assets, and the launch of e-services, in addition to the fact that it was a digital budget. Agriculture, startups, e-vehicles and energy, defence, healthcare, infrastructure, and housing were among the sectors that experienced a wave of recovery measures.

In terms of GST, the FM stated that despite the pandemic, income has been strong, with a record receipt of Rs.1,38,394 crore gross GST revenues in January 2022. Since the commencement of GST, this has been the largest ever collection.

GST Law

The Central Goods and Services Tax (CGST) Act was intended to be amended in the Union Budget 2022. The deadline for amending, correcting, or uploading missed sales invoices or notes, as well as claiming missed input tax credit, has been moved from September to November of the following year.

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Section 29 of the CGST Act was changed to allow an officer to cancel a GSTIN. A composition taxpayer’s registration may be revoked if they fail to file an annual return for three months after the 30th April deadline the following year. For other taxpayers, a six-month consecutive return filing default has been replaced by a consecutive tax period default, if applicable.

A new sub-section in Section 37 stipulates that taxpayers will be barred from providing details of outward supplies for a tax period if the same information is pending for any preceding tax period. In keeping with this logic, Section 39 has been changed to prevent taxpayers from filing a Section 39 return if their Section 37 return is still pending.

Section 38, which governs the provision of inward supplies, has been altered to eliminate the reference to the former GSTR-2 and replace it with GSTR-2A and 2B. ‘Communication of details of inward supply and input tax credit’ has been added to the section.

The deadline to file GSTR-5 for non-resident taxpayers under GST has been moved from the 20th to the 13th of the next month.

Sections 42, 43, and 43A, which deal with the matching and reversal of tax credits, are also gone. Once the CBIC has notified the modifications to the GST law, they will take effect.

Duties on Customs

Faceless Customs is now completely operational in terms of customs duties. Furthermore, it is planned that over 350 exemption entries be phased away over time. Exemptions on some agricultural products, fabrics, chemicals, pharmaceuticals, and medical gadgets that have sufficient domestic capacity are included.

In order to reduce disputes, the budget proposes simplifying the customs rate and tariff structure for industries such as chemicals, textiles, and metals. Exemptions on things that are manufactured or can be manufactured in India will be removed, in line with the goals of ‘Make in India’ and ‘Atmanirbhar Bharat.’ Concessional duties will also be applied to the raw materials used in the production of intermediary products.

By September 30, 2022, the customs administration of Special Economic Zones (SEZs) will be totally IT-driven and run through the Customs National Portal.

Imports of capital goods and project materials


The Union Budget for 2022 proposes phasing out concessional rates for capital goods and project imports and replacing them with a 7.5 percent mild tariff. This will help the home economy flourish and the ‘Make in India’ strategy succeed. Exemptions for modern machinery that isn’t made in India, on the other hand, will continue.

The effect on businesses

The GST adjustments announced in this budget foreshadow stricter restrictions to come, particularly in the areas of return filing and input tax credit. The GST law has already been amended twice in the new year of 2022, with both changes taking effect on January 1, 2022. Section 16(2)(aa) was added to allow taxpayers to claim input tax credits only if their vendors upload a specific invoice or debit note to their GSTR-1 or Invoice Furnishing Facility (IFF). The beneficiary taxpayer’s GSTR-2B must then reflect this information.

The Banking Sector Wants GST Relaxation in Budget 2022

This change was bolstered by Rule 36(4), which was also changed to eliminate the concept of a provisional input tax credit limit. In order to receive input tax credit, taxpayers must must transmit invoices from their suppliers.

The GST law governing outward supplies has also been strengthened by the government. It is now critical that the GSTR-1 and GSTR-3B outward supplies coincide. The GST portal is already sending out error warnings suggesting that if the liability recorded in the GSTR-1 versus the GSTR-3B differs by more than 10%, the GST registration can be suspended. This message also appears if the input tax credit claimed in the GSTR-3B differs by more than 10% from the values auto-populated from the GSTR-2B.

Businesses are under greater pressure than ever to reconcile purchase and sales data more often and in real time. Furthermore, there is an unprecedented reliance on vendors, necessitating more frequent follow-up to pressure them into uploading bills on time. Excessive input tax credit claims may result in demand notices and penalties, while under-claimed input tax credits may have a negative impact on working capital and profitability.

Budget 2022: You Can Update Your ITR Within 2 Years, What Does This Mean?

Budget 2022: You Can Update Your ITR Within 2 Years, What Does This Mean?

The income tax reporting requirements for normal taxpayers have been tightened in Budget 2022. Taxpayers will now be able to file an updated tax return if they failed to declare specific income to the IRS while completing their initial return. They can pay an extra tax to update their income tax returns (ITR) within two years after the end of the relevant assessment year. While updating the ITR, it is important to note that an additional tax will be paid on the additional income.

What Will Change After Budget 2022 Under the New ITR Rule?

Individual taxpayers have until December 31 of the relevant fiscal year to file an amended or late return, according to current income tax legislation. This extended deadline for filing an amended return may not be sufficient for everyone. Budget 2022 included a provision extending the deadline for filing late income tax returns in order to encourage more people to do so.

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Explained: The Revised Income Tax Filing Norm

To give taxpayers extra time to file updated or late income tax returns, the Union Budget 2022 suggested adding a new sub-section (8A) to Section 139 of the Income Tax Act, 1961. If a taxpayer fails to declare income to tax within two years of the end of the relevant assessment year, the new law will give them two years from the end of the relevant assessment year to do so.

The Budget memorandum stated, “It is proposed to add a new provision in section 139 of the Act for any individual to file an updated report of income, whether he has made a return before for the relevant assessment year or not.”

How much do you have to pay if you file your ITR late or revised?

If taxpayers file a belated return within a year of the end of the applicable assessment year, they will be charged a 25% annual penalty. If a tax filer updates their returns after a year but before two years, an additional tax of 50% is planned in Budget 2022. On the tax and interest owing on the additional income reported in the amended return, the additional tax is required.

Why may the cap on tax-saving deductions under section 80C be increased in Budget 2022?

It should be noted that taxpayers will not be allowed to use this service if the amended return results in a lower income tax burden or refund than the initial tax return.

How the New ITR Filing Norm Will Benefit Taxpayers

The newly proposed law will assist income taxpayers in avoiding penalties for underreporting or misreporting their earnings. “The proposal for an updated return for a period longer than that provided in the existing provisions of the Income-tax Act would, on the one hand, bring the use of huge data with the IT Department to a logical conclusion, resulting in additional revenue realisation, and, on the other hand, it will facilitate ease of compliance for the taxpayer in a litigation-free environment,” according to the Budget memorandum.

The most important benefit of this provision is that tax payers will be relieved of their fear of penalties and prosecution because they will be able to update ITRs to reflect income that was inadvertently missed for the previous two years. We must understand that if an ITR was not submitted at all in a previous year, we will not be able to use the option of revising the ITR to report missing income.”

Budget 2022 revealed new income tax reforms.

Budget 2022 revealed new income tax reforms.

The government would allow a one-time window to remedy omissions in income tax filings (ITRs), according to Finance Minister Nirmala Sitharaman. Taxpayers will be able to file an amended return on payment of taxes within two years of the end of the relevant assessment year, according to a new tax law introduced by the Finance Minister.

1) ITR filing: Relief for taxpayers

According to FM, taxpayer have two years from the end of the relevant assessment year to file an updated ITR. According to the FM, this is a new provision that will ensure voluntary tax filing and reduce litigation.

“As a concept, trust-based governance is increasingly being included into income-tax legislation. If there are any errors or omissions, a new provision has been provided to file an amended return to modify and pay the applicable taxes, which must be done within two years of the relevant assessment year. Ritesh Kumar, Partner at IndusLaw, says, “It promotes trust-based governance.”

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2) Digital asset proceeds are subject to a 30% tax.

Finance Minister Nirmala Sitharaman has announced a 30% tax on virtual/digital asset revenues.

“Virtual digital assets are subject to a 30% tax. Other than acquisition costs, there are no deductions. There is no allowance for a set-off against other income. If a sale exceeds a specified threshold by 1%, tax withholding will be activated. Employer contributions to the National Pension System (NPS) were raised from 10% to 14% for state government employees, bringing them in line with central government employees. Non-government personnel are not eligible “Saraswathi Kasturirangan, Partner at Deloitte India, commented.

“Virtual digital assets (crypto): establishing a specific tax regime for virtual digital assets (such as crypto) while offering clarity is not what the industry expected.” “The 30% tax rate and set-off loss restriction is a pretty aggressive move in deterring crypto transactions,” stated Ritesh Kumar, Partner, IndusLaw.

3) Net Promoter Score

The maximum tax deduction for contributions to the NPS by state government employees has been increased from 10% to 14 percent.

“We have fully grasped the value of the most recent provisions for taxpayers. One excellent scheme is the tax deduction limit on the employer’s contribution to the NPS account of state government employees, which has been increased to 14 percent. And the new return filing provision is far better than the old one, with a maximum time limit of two years till the end of the assessment year. To make things even better, the tax benefits for startups have been extended for another year,” stated Amit Gupta, MD, SAG Infotech.

“Increasing the employer’s contribution to the NPS account of central and state government employees to 14 percent is a solid step toward easing the tax burden on employees.” The extending of the return filing deadline to two years would relieve the strain on assessors and ITOs. However, we had hoped that the budget will increase the standard deduction limit from Rs. 50,000 to Rs. 1,00,000, and that WFH employees would receive special tax relief,” said Gaurav Kapoor, Director & Co-Founder, Fincorpit Consulting Private Limited.

4) Payments made for the transfer of digital assets will be subject to a 1% TDS.

Budget forecasts include changes to the GST and the reduction of import tariffs.

5) Only a 15% levy on long-term capital gains will be applied to all assets.

“Long term capital gains to be subject to surcharge solely at 15 percent for all assets as against graded surcharge. “At the moment, this is only available for listed shares and mutual fund units,” FM Sitharaman explained.

“At the moment, the surcharge on long-term capital gains on listed shares and equity funds is capped at 15%, but the surcharge on other LTCG is based on total income.” According to tax expert Balwant Jain, the FM has proposed a ceiling on all LTCG.

Relief from income taxes on Covid-19 treatment costs and compensation

“In terms of personal taxation, the budget doesn’t have much to offer.” Persons who got money for expenses related to Covid 19 treatment, on the other hand, have been granted relief. Similarly, money received by family members upon a person’s death will be exempt up to ten lakhs for family members,” according to tax expert Balwant Jain.

Persons with disabilities are eligible for tax assistance.

A differently-abled individual’s parent or guardian can enrol in an insurance plan for that person. Only if the lump-sum payment or annuity is accessible to the differently-abled person upon the death of the subscriber, i.e. parent or guardian, is the parent or guardian entitled to a deduction.

There may be times when differently-abled dependants require an annuity or lump sum payment, even if their parents or guardians are still alive. I suggest that annuity and lump-sum payments to differently-abled dependents be made during the lifespan of the parents/guardians, i.e., when the parents/guardians reach the age of sixty.