Immediate application of ammendments in Indirect Taxes- 8/12/2010

Dear All,

 

Its not a single term today but a concept that I am posting.

 

As we all are aware, the amendment to rates of direct as well as indirect taxes are proposed by the Finance minister in the budget every year on 28^th February. The Finance Bill is debated and discussed in the Parliament and then after Presidential assent the Bill becomes an Act. Therefore, technically all amendments to the rates etc are applicable from or after the date on which the Finance bill receives Presidential assent. However, the rates of indirect taxes are made applicable immediately from the next day i.e. from 1st March. Any idea how such a mechanism works?

 

There is a small Act of only 6 sections called as the “Provisional Collection of Taxes Act, 1913” which provides that certain  provision shall have the force of law immediately on the expiry of the day on which the Bill containing it is introduced. An important provision is that the Bill introducing the proposed Act should make a specific mention about the immediate applicability as aforesaid.

 

If one carefully reads the Finance Bill, at the end, there is a reference drawn to the Provisional Collection of Taxes Act, 1913 w.r.t immediate applicability of certain sections of the Finance Bill and therefore such rates are applicable immediately from 1st March.  This Act also provides that in case the proposed amendment does not get passed, the amounts collected will have to be refunded.

 

For bare text of the Act, please refer

 

http://www.vakilno1.com/bareacts/Laws/The-Provisional-Collection-Taxes-Act-1931.html

Regards,

 

CA Rahul Joglekar

Partner

Gokhale & Sathe

Chartered Accountants