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Highlights of Union Budget 2020 from Indirect Tax Perspective

Contributed by: Hammurabi & Solomon Partners

The Union Budget for the Financial Year 2020-21 presented in the Parliament on February 1, 2020, by the Hon’ble Finance Minister of India Smt.Nirmala Sitharaman announced a series of reforms aiming to fast track the growth of the economy through a series of measures including a 16 point action plan for boosting the agricultural sector, major infrastructure investments, driving digital revolution, encouragement to foreign investment, protection to the domestic manufacturing sector through changes in customs etc.

Some significant changes have been proposed to the GST provisions as well as Customs Act. These include stricter checks on steep rise in imports under Free Trade Agreements & also increase of Customs Duty in certain sectors such as electronic goods, healthcare etc. There is a concerted effort to align Indian customs regime with global norms. In relation to GST, there is a continued push towards simplification & technology-driven administration with new return forms & e-invoicing.

A quick recap on changes in relation to indirect taxes is as below:


  • A simplified return shall be implemented from 1st April 2020. It will make return filing simple with features like SMS based filing for NIL return, return pre-filling, improved input tax credit flow & overall simplification;

  • Delinking of the date of issuance of Debit Note from the date of issuance of an underlying invoice for the purpose of availing Input Tax Credit;

  • Amendment in Section 31 of the CGST Act to prescribe the manner of issuance of invoices in case of supply of taxable services;

  • Removal of the requirement of issuance of TDS Certificate by the deductor & to omit the corresponding provision of late fees for delay in issuance of TDS Certificate;

  • Provision is being amended to make the offence of fraudulent availing of input tax credit without an invoice or a bill, a cognizable & non-bailable offence; and to make any person who commits or causes the commission or retains the benefit of transactions arising out of specified offences liable for punishment;

  • Section 140 of the CGST Act is being amended (retrospectively) w.e.f. 1/07/2017, to prescribe the manner and time limit for taking transitional credit;

  • Provision is being amended for enabling issuance of removal of difficulties order for another two years, i.e. till five years from the date of commencement of CGSTAct;

  • Entries at 4(a) & 4(b) in Schedule II of the CGST Act is being amended with effect from 1/07/2017 to make provision for omission of supplies relating transfer of business assets made without any consideration from Schedule II of the said Act;

  • Exclusion from the ambit of Composition Scheme of certain categories of taxable persons, engaged in making-

  1. Supply of services not leviable to tax under CGST Act,

  2. Inter-State outward supply of services, or

  3. Outward supply of services through an E-Commerce Operator


  • Health Cess to be imposed, with immediate effect, on import of specified medical devices (under Tariff Chapter Headings 9018 to 9022) @ 5% as duty of Customs, on import value of such devices. Health Cess will not apply to medical devices which are exempt from BCD. Proceeds from this Cess will be used for creating infrastructure for health services;

  • Electronic Duty Credit Ledger will be created in the Customs system to issue duty credit in lieu of remission of any duty or tax to be given in respect of exports or in lieu of such other benefits in electronic form for its usage, transfer etc;

  • BCD on specified commodities changed, exemptions withdrawn on specified commodities, with immediate effect. Social Welfare Surcharge on specified commodities exempted & current exemptions withdrawn on specified commodities, with immediate effect.

  • Proposal to review Rules of Origin for sensitive items, in order to arrest undue claims under Free Trade Agreements


NCCD increased on specified cigarettes & tobacco products, with immediate effect. No change is made in NCCD rates of bidis.

Contributed by Hammurabi & Solomon Partners

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