1. Introduction
This document provides a detailed analysis of excerpts from a Finance Bill, focusing on the key themes, proposed amendments, and important facts. The document primarily deals with proposed changes to the Income-tax Act, the Central Goods and Services Tax Act, the Customs Act, the Central Excise Act, the Government Securities Act, and other related legislation. The Bill proposes numerous amendments, many with effective dates of April 1, 2025, or April 1, 2026.
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Main Themes
Several overarching themes emerge from the provided clauses:
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Expansion of Scope to Include Inland Vessels:
A major theme is the expansion of the definitions and provisions related to shipping to include “inland vessels”. This is reflected in amendments to sections 115V, 115VB, 115VD, 115VG, 115V-I, 115VK, 115VT, 115VV and 115VZA of the Income Tax Act. This suggests a deliberate effort to provide similar tax treatment to the inland waterways sector as is currently given to ocean shipping.
- Quote: “It is proposed to include reference to inland vessel in the said section to provide that a qualifying ship would include inland vessel registered under the Inland Vessel Act, 2021 as well.” (Referring to proposed amendment of Section 115VD).
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Streamlining and Time-Bound Processes:
Several amendments aim to streamline procedures and introduce time limits for various processes. For example, section 115VP is amended to mandate orders on applications for the tonnage tax scheme within a specific timeframe.
- Quote: “Provided that for an application received under sub-section (1) on or after the 1st April, 2025, order under sub-section (3) shall be passed before the expiry of three months from the end of the quarter in which such application was received.” (Referring to the proposed amendment of Section 115VP)
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Extension of Deadlines:
Some clauses push back previously established deadlines. For instance, the period for commencement of operations for certain units to be eligible for a specific benefit has been extended to 2030 from 2026.
- Quote: “(B) for the figures “2026”, the figures “2030” shall be substituted;” (Relating to amendment of clause (10D))
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Clarification and Updates of Definitions:
There is also an emphasis on clarifying existing definitions. For example, definition of “aircraft” and “ship” is being clarified and in some cases, definitions of “inland vessel” have been added.
- Rate Changes: The bill also introduces several changes to the rates applicable to certain goods as well as changes to the definition of what is not considered dividend.
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Key Amendments and Facts
Income-tax Act Amendments
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Section 17 (Perquisites):
The threshold of ₹50,000 for certain benefits is proposed to be replaced by “such amount as may be prescribed”, indicating a possible change in reporting requirements for these allowances. Similarly, the threshold of two lakh rupees is proposed to be changed to an amount “as may be prescribed.”
- Quote: “for the words “fifty thousand rupees”, the words “such amount as may be prescribed” shall be substituted;”
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Section 92 (Transfer Pricing):
A new subsection (3B) is inserted allowing the arm’s length price of an international transaction to apply to similar transactions for the two consecutive years immediately following, subject to the assessee opting in. This is designed to reduce the burden of ongoing transfer pricing reviews
- Quote: “(3B) The arm’s length price, being determined in relation to the international transaction or the specified domestic transaction under sub-section (3) for any previous year shall apply to similar international transaction or specified domestic transaction for the two consecutive previous years immediately following such previous year…”
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Sections 115V, 115VB, 115VD, 115VG, 115V-I, 115VK, 115VT, 115VV, 115VX, and 115VZA (Tonnage Tax):
Multiple sections relating to tonnage tax are amended to include “inland vessels” under the purview. This is a significant extension of the scope of the existing provisions to include inland waterways transportation and related infrastructure.
- Quote: “for the word “ship”, the words “ship or inland vessel, as the case may be,” shall be substituted;”
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Section 132 (Search and Seizure):
The period for completion of certain actions is changed from “thirty days from the date of order” to “one month from the end of the quarter in which the order is made”, aiming to standardize deadlines.
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Section 139 (Return Filing):
The time limit for the belated filing of the return of income is extended from twenty-four months to forty-eight months.
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Section 158BA, 158BB (Block Assessment):
Changes are proposed to the assessment of undisclosed income in the block period assessment. It is stated that income related to international transactions should not be considered for the block period and should be considered in the assessment under the usual provisions.
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Section 206AB and 206CCA:
Section 206AB and 206CCA of the Income Tax Act are to be omitted.
Central Goods and Services Tax (CGST) Act Amendments:
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Section 39:
The requirement for filing returns is amended from “within such time” to “within such time, and subject to such conditions and restrictions”. The change indicates the introduction of additional constraints on filing GST returns.
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Schedule III:
Clause (aa) is inserted into paragraph 8, with effect from 1 July 2017 to clarify the treatment of the supply of goods warehoused in a Special Economic Zone or in a Free Trade Warehousing Zone.
Customs Act Amendments
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Section 27:
Changes are made to the process of provisional assessment of duty on goods, such that the officer may assess the duty provisionally rather than direct it to be assessed provisionally. A two-year timeframe is provided for finalizing the duty provisionally assessed.
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Sections 127B and 32E:
Sections related to settlement of cases are amended to define “pending application”.
Central Excise Act Amendments
- A new section is inserted after section 31 allowing the compounding of certain offenses.
- Section 2 Various definitions are amended and added including definitions related to “local funds”, “municipal funds”, and “unique identification marking”.
Government Securities Act Amendments:
- The Government Securities Act is extended to all the states and union territories. Previously it was applicable to all the states and union territories except the State of Jammu and Kashmir.
- Quote: “to all the States and Union territories” shall be substituted” (Referring to proposed changes in Section 1 of the Act)
Other Notable Amendments:
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Unit Trust of India Act:
Amendment to section 13 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002, extends the validity period to 2027.
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Rate Changes:
Several changes are introduced to the rates applicable to goods in various chapters. (e.g. increased rates in Chapters 15, 20, 25, 26, 27, etc.)
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Definition of Dividend:
An amendment to the definition of “dividend” provides an exclusion to loans between group entities, subject to certain conditions.
- Quote: “(iia) any advance or loan between two group entities, where,––(A) one of the group entity is a “Finance company” or a “Finance unit”…”
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Implications
The proposed amendments in this Finance Bill excerpt indicate significant shifts in various areas:
- Taxation: Significant amendments are related to income tax provisions related to the taxation of shipping, transfer pricing, search and seizure, filing returns, and block assessment. Changes in the rates of different goods indicate a potential increase in prices for such goods.
- Shipping and Inland Waterways: The emphasis on incorporating “inland vessels” into the tonnage tax scheme and other shipping provisions shows a government focus on promoting this mode of transportation.
- Compliance: The deadlines for some processes are standardized, whereas other amendments increase the compliance burden on taxpayers.
- Ease of Business: Amendments such as those in relation to transfer pricing are meant to aid the ease of business.
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Conclusion
These excerpts of the Finance Bill propose a broad range of amendments affecting various sectors, with significant emphasis on the shipping industry, taxation, and government security regulation. Stakeholders need to be aware of the effective dates of these amendments, especially the ones that come into effect on 1 April 2025 and 1 April 2026, to ensure compliance and avoid any adverse implications.
This briefing document is based on the provided excerpts and should be further validated with the complete Finance Bill and associated legal analysis for accuracy.
Disclaimer: This blog is for informational purposes only and does not constitute any legal advice. Readers should seek expert legal counsel before taking any action based on the content.