Budget 2022 - Tax And Policy Highlights: EY Analysis

EY Update

In this alert, EY has outlined the consolidated tax and policy highlights announced by finance minister Nirmala Sitharaman in the budget.

Macro fiscal

• 11.1% nominal gross domestic product growth rate assumed for FY23 (budget estimate)

• 8-8.5% real GDP growth assumed for FY23 (Economic survey)

• 9.6% growth in gross tax revenues with an assumed buoyancy of 0.9 for FY23

• 24.5% growth in capital expenditure in FY23

• 6.4% fiscal deficit target for FY23

Corporate tax

• New regime for taxation of Virtual Digital Assets introduced

• Additional incentives introduced to incentivise operations in IFSC

• Rate of surcharge on long term capital gain capped at 15%

• Clarifications for disallowance of health and education cess, expense incurred for exempt income and expenses connected with offence prohibited by law and compounding of offences

• Last date for incorporation for start-ups and commencement of manufacturing or production extended upto March 31 2023 and March 31, 2024, respectively

• Option to assesses and revise return to pay additional tax on undisclosed income

• SEZ regime to be replaced with a new legislation

Transaction Tax

• Scope of 'bonus stripping' and 'dividend stripping' expanded

• Withholding on purchase of immovable property made applicable on higher of stamp duty or sale consideration

Indirect tax

GST:

• Interest on input tax credit wrongly availed and utilised leviable @ 18% effective July 01, 2017

• Time limit for claiming ITC, issuance of credit note and rectification of errors relaxed till November 30 of following financial year

Customs:

• Around 350 custom duty exemptions withdrawn and 40 exemptions relating to capital goods and project imports to be gradually phased out

• Customs tariff structure simplified

• Officers of Directorate of Revenue Intelligence, audit and preventive formation considered as proper officer to validate actions taken by them

Personal tax

• Updated tax return introduced to provide an opportunity to taxpayers to correct omissions/ mistakes

• Surcharge on all long-term capital gains capped at 15%

• Increase in deduction for employer contribution to National Pension Scheme for state government employees

• Relief for persons with disability

• Exemption for Covid-19 related ex-gratia payments for medical treatment/ death

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