Indirect Tax Amendments Introduced by the Finance Act

The legislative amendments introduced to the indirect tax laws in the Budget by way of Finance Bill, 2021 (‘Finance Bill’) have taken effect from April 1, 2021 with the Finance Bill having received Presidential assent and, accordingly, having been made into the Finance Act, 2021 (‘Finance Act’). The key legislative amendments to indirect taxes are summarized below:

i.    Anti-dumping duties (‘ADD’) and Countervailing duties (‘CVD’) are some of the measures available to a country to protect its domestic industry from the unfair trade practice of dumping (e., selling of products at the country of dumping at prices lower than that at the country of origin/ other markets). Such duties are charged over and above customs duties so as to remove the impact of dumping and create a level playing field for the domestic industry. However, such duties may be nullified if the exporters reduce the prices of goods by the amount of ADD/ CVD. If such reduction is without any valid reason, the practice is called absorption.

The Finance Act has introduced anti-absorption provisions for the first time in the Indian legislative framework. With regard to ADD investigations, the Finance Act has introduced a new sub-section (1B) to Section 9A of the Customs Tariff Act, 1975 (‘CTA’); whereas in respect of CVD investigations, the Finance Act has introduced a new sub-section (1B) to Section 9 of the CTA. Both the provisions provide that if the Central Government is of the opinion (upon such enquiry as may be necessary) that absorption of ADD and/ or CVD has taken place so as to render such duties ineffective, it may modify such duties to counter the effect of such absorption;

ii.   The Finance Act has amended Section 25 of the Customs Act, 1962 (‘Customs Act’) to prescribe that all conditional exemptions provided under the Customs Act, unless otherwise specified or varied or rescinded, will be valid till March 31 falling immediately two years from the date of introduction of such exemption. All existing conditional exemptions will be valid till March 31, 2023, if not specifically extended / rescinded earlier; and

iii.   The Finance Act has introduced a new section 28BB to the Customs Act prescribing a two-year time limit (further extendable by one year by the Commissioner of Customs), for completion of any proceedings under the Customs Act which would culminate in issuance of a show cause notice.

Published In:Inter Alia - Quarterly Edition - March 2021 [ English Chinese japanese ]
Date: March 31, 2021