Finance Act 2023 updated: Income tax and GST amendments discussed

On Monday, Lok Sabha endorsed the changes to Finance Bill 2023 proposed by Rajya Sabha. The Lok Sabha has now passed the Finance Bill 2023 with a few additional amendments to the Income Tax, CGST, IGST, and compensation cess Acts, which were originally tabled at Lok Sabha on February 1st, 2023. Read further to understand what amendments were made to the original Finance Bill 2023.

Finance Bill 2023: Income Tax Amendments

shall come into force on the 1st day of April, 2023 and

– applies to any specified sum

– received during the previous year

– by a unit holder from a business trust – with respect to a unit held by the unit holder

– The sum should not be in the nature of income referred to in clause (23FC) or (23FCA) of Section 10, nor should it be chargeable to tax under sub-section (2) of Section 115UA.

A formula is provided for the computation of the specified sum, with inclusions and exclusions stated.

Explanation 1 and Explanation 2 have also been added Section 48(ii), covering the reduction of the cost of acquisition of a unit of a business trust by any sum received by a unit holder from the business trust. In simple words, if any sum received by a unit holder from a business trust is neither chargeable to tax in the hands of unit holder nor in the hands of business trust then such sum shall be reduced from the cost of acquisition of such unit.

• The income is received by a non-resident from the portfolio of securities or financial products or funds managed or administered by any portfolio manager on behalf of such non-resident;
• The income is received in an account maintained with an Offshore Banking Unit in any IFSC, as referred to in Section 80LA(1A); and
• The income accrues or arises outside India and is not deemed to accrue or arise in India.

• For non-resident individuals or foreign companies, dividend income is subject to a special tax rate of 20% (plus surcharge and health & education cess) as per Section 115A(1)(a)(A). The same tax rate applies to dividends received from Mutual Fund units.

• If a non-resident or foreign company earns royalty or technical service fees that are not related to a permanent establishment or fixed place in India, they will be taxed on a gross basis (without any deduction for expenditure) at a special tax rate of 10% under Section 115A(1)(b)(A)/(B)

• A new proviso has been added to Section 115(1)(a)(A), stating that dividends received from a unit in an IFSC (as per Section 80LA(1A)) will now be taxed at 10%. This concessional tax rate of 10% will apply to non-residents and foreign companies.
• The special tax rate of 10% on royalty income and fees for technical services earned by non-residents or foreign companies (as mentioned in Section 115(1)(b)(A)/(B)) has been increased to 20%.

1. 10(46B) exempts the income of the following credit guarantee trusts and funds from tax:

• National Credit Guarantee Trustee Company Limited (NCGTC),
• Credit guarantee funds established and fully funded by the Central Government and managed by NCGTC, and
• Credit Guarantee Fund Trust for MSMEs (CGTMSE) created by CG and SIDBI.

1. Section 10(34B) exempts dividend income earned by an IFSC unit primarily engaged in the aircraft leasing business. However, the exemption is subject to the condition that the company paying the dividend should also be located in an IFSC and engaged in the aircraft leasing business.

• The non-resident or Unit of an IFSC must primarily be involved in the business of leasing an aircraft,
• Income should be in the form of capital gains arising from the transfer of equity shares of a domestic company.
• Domestic company must be a Unit of an IFSC and engaged primarily in the business of leasing an aircraft,
• It must start its operations on or before March 31, 2026 and
• The equity shares of the domestic company must be transferred within 10 years of its operations, with the exception being if the domestic company started its operations before April 1, 2024, in which case the 10-year time limit will be counted from that date.

• 5% TCS rate for remittances made under LRS and a 20% TCS rate for sale of Overseas Tour Program Packages (TPP)
• TCS is only required when the aggregate of remittance exceeds Rs. 7 lakhs and is for educational or medical purposes.

1. scheduled banks with offshore banking units in a Specific Economic Zone (SEZ), and
2. banks established under foreign laws that have offshore banking units in an SEZ.

• An investment vehicle in which Abu Dhabi Investment Authority is the direct or indirect sole shareholder or unit holder or beneficiary or interest holder and such investment vehicle is wholly owned and controlled, directly or indirectly, by the Abu Dhabi Investment Authority or the Government of Abu Dhabi; or
• Other funds notified by the Central Government

Finance Bill 2023: GST Amendments

• The jurisdiction, powers and authority conferred on the appellate tribunal shall be exercised by the Principal Bench and State benches (formerly known as the National and Regional benches)
• Proviso to new Subsection (5) puts a condition that if any one of the issues involve place of supply, then only the Principal Bench can hear such a case.
• Subsection (7) inserted stating that the senior-most judicial member in State benches will be the Vice-president (and exercise such power of the President) but for all other purposes be a member
• Subsection (9) inserted to allow the President to interfere and refer the cases where the members of the bench differ in any point/s to be decided based on majority opinion, as follows-
  • Appeal by State Bench members – To another member of the same State Bench or other states
  • Appeal by Principal Bench members – To another member of the Principal Bench or member of any State Bench
  • Combined period of 10 years as district judge to be eligible for judicial member
  • Technical member (Centre) must have served in Indian Revenue (Customs and Indirect Taxes) service or of the All India Service with at least 3 years of experience in the administration of an existing law or GST in the Central Government, and has completed at least 25 years of service in Group A;
  • Technical member (State) should have been an officer above the rank specified and should have completed 25 years of service in Group A or equivalent, with at least 3 years of experience in the administration of the existing law or GST or the field of finance/taxation in the state government
  • Appointed/re-appointed by the government based on recommendations of Search-cum-Selection committee
  • Constitution of committee, powers, removal procedures have been specified

  Section	Existing Integrated Goods and Services Tax Act, 2017	Amendment to the Finance Bill 2023
  13- Place of supply of services where location of supplier or location of recipient is outside India	The place of supply of the services of transportation of goods, other than by way of mail or courier, shall be the place of destination of such goods.	Section 13(9) of IGST Act is deleted. The provision of place of supply for services of transportation of goods is the location of the recipient of services where location of supplier or recipient of services is outside India.

  Schedule/ Serial No.	Existing Goods and Services Tax (Compensation to States) Act, 2017	Amendment to the Finance Bill 2023
  1 – Pan Masala	135% Ad valorem	51% of retail sale price per unit
  2- Tobacco and manufactured tobacco substitutes, including

  For any clarifications/feedback on the topic, please contact the writer at ektha.surana@clear.in

  

  Pursuing CA alongside my passion for content writing. Here, I ship some interesting content your way on topics- tax, personal finance and the likes .
  Find my peace and energy in exploring culinary arts, anything fitness, post-card worthy places, books, indie music and more.