Budget 2015
Contents
HEADS UP
Contents
Direct tax proposals Indirect tax proposals
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Direct Tax Direct Tax Proposals
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Important tax rates – AY 2016-17
Particulars
Taxable Income Less
Than INR 1 Crore
Taxable Income Less
Than INR 10 Crore
Taxable Income More
Than INR 10 Crore
Effective MMR 30.90% 34.61%
Effective Corporate Tax Rate (Domestic
Company) 30.90% 33.06% 34.61%
Effective Corporate Tax Rate (Foreign
Company) 41.2% 42.02% 43.26%
Effective MAT 19.06% 20.39% 21.34%
Effective DDT 20.36%
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Direct tax regime – Rationalisation
› Presently individual, HUF, companies are liable to pay wealth tax
@1% if the net wealth exceeds INR 30 Lakh
› To decrease the compliance burden for assesse and administrative burden for revenue, it is proposed to abolish Wealth tax
› However, information relating to the assets covered under the erstwhile Wealth-tax Act, will have to be mentioned in the Income tax return to ensure that there is no escapement of income from tax
› The FM has proposed in his speech a gradual reduction in corporate tax rate from 30% to 25% over next four years. This shall be counterbalanced by a reduction in exemptions
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Indirect transfer – Subjectivity curbed
Following amendments have been proposed w.r.t. taxability of gains on transfer of shares / interest in a Foreign Entity:
› Such gains to be taxable under domestic tax law, if FMV of underlying Indian assets exceeds:
INR 10 cr., and
50% of all assets of the Foreign Entity
› No tax on minority shareholders holding no control / management, and upto 5% voting power, capital or interest
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Indirect transfer – Subjectivity curbed
› When taxable in India, such gains should be computed by way of reasonable attribution to Indian assets
› Indian concern through / in which the Foreign Entity holds any Indian assets (being the underlying assets from which value of Foreign entity’s shares is derived) made liable to furnish prescribed information
› These requirements can be onerous for some Indian corporates, where the relationship with the foreign shareholder(s) is not strategic
Penalty for failure: 2% of transaction value (minimum INR 5 Lacs)
› Determination of FMV of assets and attribution of gains, is yet to be notified
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REIT and InviT – Capital Gains
› Presently, capital gains on sale of listed units of REIT/ InviT acquired by a Sponsor through exchange of shares of unlisted SPV, are not eligible for LTCG exemption / lower tax rate on STCG (as available to other unit holders)
› It is proposed to bring the Sponsor at par with other unitholders, whereby units allotted in lieu of transfer of SPV to REIT / InviT shall be eligible for LTCG exemption / lower tax rate on STCG
be eligible for LTCG exemption / lower tax rate on STCG
› However, MAT will continue to apply
› Also, if the Sponsor transfers the Real Estate asset to the REIT, the aforementioned preferential regime will not be available
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REIT and InviT – Capital Gains
› Presently, rental Income arising to REIT is taxable in its hands, and is not eligible for pass-through status
› It is proposed that rental income shall not be taxable in the hands of REIT and no TDS shall apply to the same
Income distributed to unitholders (from the rental income) shall be taxable in their hands
taxable in their hands
› TDS on above, in case of resident unitholders shall be 10%, and for non-resident unitholders it shall be 30% (40% in case of a company)
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AIF – Tax pass through
› New tax pass-through regime for SEBI registered Category 1 and 2 AIF
› The new regime now covers AIFs organized as LLPs, partnerships, etc. (earlier regime only covered trusts and companies)
› All income (other than business income) shall be exempt in the hands of the fund, and taxable in the hands of unit holder under hands of the fund, and taxable in the hands of unit holder under same heads of income
› Tax shall be charged in the hands of unit-holders irrespective of actual distribution of income from fund
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AIF – Tax pass through
› Any loss incurred by the fund would be available for set-off against its income (or to be carried forward to subsequent years). The same shall no more be available to unit holders, against their income
› Funds would be required to withhold tax @10% on income distributed / credited to unit holders. Non-resident unit holders should be able to claim treaty benefits, if available
should be able to claim treaty benefits, if available
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Company – Deciding Residential Status
› Earlier, situation of control and management of affairs of a Company wholly in Indian was the criteria for determining its residential status
› The same has been amended to propose that any company which at any time in the year has its ‘Place of effective management’
(“POEM”) in India shall become an Indian resident (“POEM”) in India shall become an Indian resident
› DTAAs and OECD have the concept of POEM for determining residency of a company. However, usage of term “any time in the year” significantly widens the scope in Indian context
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Fund Managers of Offshore Funds
› FM delivers his word from Budget speech last year. Introduces concrete proposal to encourage fund managers to shift to India without constituting an Indian 'Business Connection' of their off-shore fund
› This exception to general principle of 'Business Connection', is subject to various conditions, some of which may require a relook, such as:
such as:
› 5% cap on total participation by Indian residents
› No 10 or fewer members should hold 50% or more participation
› Fund manager should not be an employee / connected person, or be entitled to more than 20% profits of the fund
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Deferment of GAAR
› GAAR provisions are currently proposed to come into effect from FY 2015-2016
› Budget 2015 proposes deferment of GAAR provisions by further two years and the same shall apply to investments made on or after 01 April 2017(application to prospective investment is mentioned in speech but missing in Finance Bill)
› The deferment has been attributed to the awaited report on BEPS project currently being undertaken by OECD with India’s active participation. The same may require structural changes to be made in current GAAR proposals
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Domestic TP – Limit Enhanced
› To determine reasonableness of expenditure between related parties or group companies, Transfer Pricing provisions on domestic transactions were introduced in Finance Act 2012
› Currently, Transfer Pricing provisions are applicable to taxpayer, if aggregate value of specified transactions exceeds INR 5 Crores, in which case they constitute “specified domestic transactions”
which case they constitute “specified domestic transactions”
› To reduce the compliance burden on mid-sized assessee, the limit for applicability of Transfer Pricing provisions is proposed to be raised to INR 20 Crores
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Investment Incentives
Allowance of additional depreciation
› Additional depreciation @ 20% is allowed to the manufacturing and power sector, on purchase and installation of new plant and machinery in first year. However, if such assets are acquired and put to use for less than 180 days then the depreciation is restricted to 10% and the balance 10% cannot be availed
to 10% and the balance 10% cannot be availed
› Non availability of balance 10% depreciation may motivate assesse to defer the investment in plant and machinery to next year
› To remove this lacunae, it has been proposed that the balance
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Investment Incentives
Tax incentives for Andhra / Telangana
› Additional investment allowance @ 15% (over and above existing investment allowance @ 15%) of cost of new assets acquired and installed is proposed to be allowed if:
› The taxpayer sets up a manufacturing undertaking in the notified backward areas of these states on or after 01 April 2015
2015
› New asset are acquired or installed between 01 April 2015 to 31 March 2020
› Additional depreciation @ 35% is proposed to be allowed (instead of 20% in other cases) on new plant and machinery purchased and installed in notified backward areas of these states between 01 April 2015 and 31 March 2020
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Employment Generation Incentivized
› Currently, an Indian company engaged in manufacture of goods in a “factory” is allowed (for 3 financial years) a deduction of 30% of additional wages paid to new regular workmen employed by it
› Wages currently imply wages to workmen exceeding 100 employed in a year, subject to some conditions
› To encourage new employment opportunities, it is proposed to
› To encourage new employment opportunities, it is proposed to amend the section, as under:
- The benefit is being extended to non company assessee's having manufacturing units fulfilling the prescribed conditions
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Reduced tax rate – Royalty / FTS
› Royalty / FTS income of Non Residents is currently taxable @ 25%.
Although tax treaties prescribe a lower rate, obtaining TRC from revenue authorities of payee’s country (for taking treaty benefit) is a challenge faced by various entities
› In order to reduce this hardship and encourage technology transfers, it has been proposed to reduce the rate to 10% with transfers, it has been proposed to reduce the rate to 10% with effect from 01 April 2016
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Rationalization of MAT provisions
› To promote investment climate in India, it is proposed that MAT provisions shall not apply to Net Income of FII’s, other than Short Term Capital Gain on which STT has not been paid
› The amendment however fall short of industry expectation of clarification that no MAT is payable by a foreign company. This would have come as a relief to Private Equity investors as well
would have come as a relief to Private Equity investors as well
› Further, it is proposed that share of a company (being member of an AOP) in the income of AOP and relatable expenditure thereon shall not be considered while computing MAT liability of the company
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Indian Branch of Foreign Banks
› There has been considerable litigation in past, as regards taxability in India, of interest paid by Indian branches of Foreign Banks, to their Head Office or other branches
› Henceforth, such branches shall be treated as tax entities separate and independent of their HO
› Further, interest paid by them to their HO / other branches outside
› Further, interest paid by them to their HO / other branches outside India, will be taxable in India
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Demerged asset – Capital Gains
› There were certain gray areas in computation of capital gain on subsequent sale by a Resulting Company, of assets acquired previously by it upon demerger
› The same have been now been rationalized by providing that such gains shall be computed with reference to the cost of acquisition (and improvement) of the said assets to the Demerged company
› To determine the nature of the capital gain (Long-term vs. Short- term), the period for which the Demerged company held the asset, shall also be taken into account
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MF Schemes – Tax Neutral Merger
› Various Mutual Funds currently run parallel schemes having essentially similar features. Non existence of tax neutrality provisions is a hindrance to merger of these schemes
› The Finance Bill 2015 proposes to introduce provisions to make such mergers tax neutral wherein:
- The period of holding of consolidating scheme will be added for calculating holding period of consolidated scheme
- The cost of acquisition of consolidating scheme will be considered acquisition cost of consolidated scheme
› These provisions shall only apply to merger of similar schemes (Equity-Equity & Non Equity - Non Equity)
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GDRs
› Pursuant to the notification of Depository Receipt Scheme, 2014 the Depository Receipts (DRs) have replaced the erstwhile GDRs
› While the GDRs could only be issued based on underlying shares / FCCBs of a listed company, the DRs in the current scheme represent a much broader spectrum, including shares / debts instruments issued by unlisted companies, and unsponsored DRs
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GDRs
› Capital markets were expecting a tax-friendly liberalised depository regime, in line with Sahoo committee recommendations, such as:
Conversion of DRs into permissible securities and vice versa, and NR-to-NR transfer of DRs to be tax neutral
Beneficial tax treatment to apply to DRs based on all permissible securities
securities
Alignment of tax treatment of sponsored GDRs with that of sale of shares in listed company
› However, the proposed amendment falls short of this expectation, as the definition of DRs is restricted to the ones based on shares issued and FCCBs
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CSR vs. Income-tax deduction
› CSR activities were made mandatory for specified Companies by Companies Act, 2013. Under IT Act, although expenditure on CSR is disallowed, a benefit is separately allowed by way of specific deductions (e.g. – CSR expenditure on payments to Prime Minister’s National Relief Fund)
› To encourage the schemes of Swachchh Bharat, it has been
› To encourage the schemes of Swachchh Bharat, it has been proposed to provide 100% deduction from income. However, this deduction would not be allowed if expenditure is done in pursuance of CSR regulations
› Co-relation of allowability of deduction under IT Act vis-à-vis
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Withholding tax on transporters
› In case of payments made to transporters, there exists a beneficial provision which allows non deduction of tax, provided the transporter furnishes PAN
› It is proposed to apply this beneficial provision only to small transporters (those who do not own more than 10 goods carriages at any time during the previous year)
at any time during the previous year)
› To avail benefit of this provision the transporter should furnish declaration of not owning more than10 goods carriages along with its PAN
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All payment to NRs – Form 15CA/CB
› Presently, in case of payments to NRs, prescribed from (i.e. form 15CA/CB) is to be furnished only if the amounts are chargeable to tax under the IT Act. Further, no penalty is leviable if such form is not furnished
› In order to increase scrutiny of all payments to NRs, it has been proposed that the prescribed form will be required to be furnished proposed that the prescribed form will be required to be furnished for all payment to non residents, whether taxable or not
› Furthermore, penalty of INR 1 lakh has been proposed to be levied on failure to furnish / furnishing inaccurate information in the aforesaid prescribed form
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Penalty for Concealment – MAT
› Taxpayers to which MAT / AMT is applicable, to be subjected to a higher penalty for concealment of income, with reference to the tax effect of such concealment on their MAT / AMT liability
› Such incremental liability will be in addition to penalty on concealment of income computed under normal provisions
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Personal Tax – Raining Deductions
› It is proposed to allow following tax benefits on investments made in Sukanya Samriddhi Account Scheme, introduced in 2014:
- Investments made in the scheme will be eligible for deduction u/s 80C of the Act
- Interest accrued on deposits made will be exempt from tax -
- Withdrawal from such account shall be exempt from tax
› The memorandum to Finance Bill / Notes to clauses specifies that the said amendment is effective retrospectively from financial year
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Personal Tax – Raining Deductions
› The limit of deduction u/s 80 D for medical insurance premium has been increased to INR 25,000 and for senior citizens to INR 30,000
› Increase in limit to INR 25,000 for non senior citizens is mentioned in the memorandum, however the Finance Bill inadvertently misses the required amendment in this regard
› Scope of section 80D has been widened to include medical expenditure by or for very senior citizen (age exceeding 80 years).
The aggregate deduction would however not exceed INR 30,000
› Annual ceiling for investment in annuity plan of LIC or any other insurer for receiving pension from fund set up under a pension scheme has been increased to INR 1,50,000 under section 80CCC
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Personal Tax – Raining Deductions
› Under section 80CCD, restriction on deduction to INR 1,00,000 for contribution in Notified Pension Scheme of Central Government is proposed to be deleted
› Further, an additional deduction up to INR 50,000 is proposed to be provided to individual assessee for contribution to such scheme
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PF payments – Withholding tax
› Under the existing provisions, in case of payments by Recognised Provident Fund (‘RPF’) to employees on account of pre-mature withdrawal (i.e. before 5 years or transfer to new employer), tax is to be deducted by computing year-wise amount of taxable income
› In order to remove difficulties faced in calculation of tax, it has been proposed to fix the rate of withholding tax @10% in case of pre- proposed to fix the rate of withholding tax @10% in case of pre- mature withdrawal, if the amount exceeds INR 30,000. In the absence of PAN, tax is to be deducted at Maximum Marginal Rate
› This amendment is proposed to be effective from 01 June 2015
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Foreign Tax Credit
› To bring more clarity in availing credit of taxes paid outside India, it is proposed that CBDT may make and notify rules containing the procedure for granting credit of taxes paid by an Indian resident outside India
› This amendment will take effect from 01 June 2015
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Tax Administration – Revision of orders
› Income tax provisions relating to revision of order passed by assessing officer under section 263 have been amended to include situations in which such order shall be deemed to be “prejudicial to the interest of revenue”
› This Amendment will take effect from 01 June 2015
› These deeming provisions are extensively wide and provide
› These deeming provisions are extensively wide and provide arbitrary powers to revenue authorities to revisit closed assessments
› Clarification is required on these provisions to prevent misuse
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Tax Administration – Reduced litigation
› Presently, the assesse has the option of not filing an appeal against an unfavorable order if the identical question of law in pending in his own case at HC or SC level (subject to specified conditions).
Instead, the assessing officer will apply the ratio of HC or SC as and when it’s finalized mutatis mutandis to the present case
› However, no parallel provision is available to revenue which has
› However, no parallel provision is available to revenue which has lead to multiplicity of litigation
› To avoid multiplicity of litigation, similar provisions have been
proposed to be introduced for revenue wherein in such cases, after the order of CIT(A), the revenue can move to ITAT informing about
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Black Money – Proposals
› In his speech, the FM also referred to a proposed new law on black money
› Incentivizing credit / debit card transactions, and disincentivizing cash transactions
› Concealment of income / assets w.r.t. foreign assets to be prosecutable with R.I. upto 10 years. The same shall be non- prosecutable with R.I. upto 10 years. The same shall be non- compoundable, and without an option to approach the Settlement Commission
› Penalty for concealment in such a case shall be levied @ 300% of tax sought to be evaded
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Black Money – Proposals (Cont.)
› Non-disclosure / inadequate disclosure of foreign assets in return of income to be liable for rigorous imprisonment up to 7 years
› Income w.r.t. any undisclosed foreign asset / income therefrom to be taxable at the maximum marginal rate, without any exemptions / deductions
› Beneficial owner / beneficiary of foreign assets to be mandatorily
› Beneficial owner / beneficiary of foreign assets to be mandatorily required to file return, even if there is no taxable income
› Abettors of above offences to be liable for prosecution and penalty
› Concealment in relation to a foreign asset to be made a predicate
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Black Money – Proposals (Cont.)
› Amendment also made to enable attachment and confiscation of equivalent asset in India where foreign asset cannot be forfeited
› FEMA to be amended to the effect that if any foreign exchange / security / immovable property is held in contravention of FEMA, then action may be taken for seizure and eventual confiscation of assets of equivalent value situated in India
› For curbing domestic black money, Benami Transactions (Prohibition) Bill to be introduced to enable confiscation of benami property and provide for prosecution
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› Acceptance / repayment of loan or deposit for amount exceeding INR 20,000 is currently not allowed in cash
› However, there was no specific restriction relating to money received as advance for transfer of immovable property, and hence shelter was taken by assesses to defeat the existing provision, leading to generation of black money
Black Money – Proposals (Cont.)
leading to generation of black money
› To curb generation of black money, the existing restriction on amount exceeding INR 20,000 is also proposed to be applied to advance for transfer of immovable property with effect from 01 June 2015
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Indirect Tax Indirect Tax
Proposals
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GST- Way Forward
› The Goods and Service Tax (GST) is one of the biggest taxation reforms in India. The Hon’ble Finance Minister in his Budget speech show cased the Union Government’s commitment to implement Goods and Service Tax laws
› The draft provisions of GST law would be made available shortly on the public domain after the Constitutional Amendment Bill is passed the public domain after the Constitutional Amendment Bill is passed by the Upper House and the President of India assenting the same
› India is expected to move to the new tax regime from 01 April 2016
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Service Tax
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Change of Rate
› Effective rate of Service tax increased from 12.36% (inclusive of cess) to 14%. ‘Education Cess’ and ‘Secondary and Higher Education Cess’
to be subsumed in the revised rate
› Alternative tax rate applicable in case of Air Travel Agent, Insurer of Life Insurance Business, Forex Conversion Agency and Distributor or Selling Agent of Lottery, also changed
Selling Agent of Lottery, also changed
The above provision shall come into effect from the date to be Notified after the enactment of the Finance Bill, 2015
› An enabling provision to levy “Swachchh Bharat Cess” @ 2% or less
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Negative List
Following services are taken out from the negative list and are brought under the service tax net:
› Services provided by Government / local authority to a business entity
› Access to amusement facility such as rides, bowling alleys, amusement arcades, water parks, etc.
› Admission to entertainment event of concerts, non-recognized
› Admission to entertainment event of concerts, non-recognized sporting events, pageants, music concerts and award functions, if the amount charged for admission is more than Rs 500
› Carrying out any processes as job work for production or manufacture of alcoholic liquor for human consumption
The above provisions will come into effect from the date to be notified
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Exemptions Withdrawn
Exemption in respect of following services is withdrawn:
› Services of construction, repair of civil structures, etc. when provided to Government in respect of:
Civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession
profession
A structure meant predominantly for use as an educational, clinical, or an art / cultural establishment
A residential complex predominantly meant for self-use or the use of their employees or other specified persons
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Exemptions Withdrawn
› Transportation of ‘food stuff’ by rail / vessels / road will be limited to transportation of food grains including rice and pulses, flours, milk and salt
› Services provided by a performing artist in folk or classical art form of music, dance or theater, will be limited only to such cases where amount charged is upto Rs 1,00,000 for a performance (except Brand ambassador)
Brand ambassador)
› Services provided by departmentally run public telephone, guaranteed public telephone operating only local calls
› Service by way of making telephone calls from free telephone at airport and hospital where no bill is issued
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Exemptions Withdrawn
› Services provided by a mutual fund agent to a mutual fund or assets management company
› Services provided by distributor to a mutual fund or AMC
› Services provided by selling or marketing agent of lottery ticket to a distributor of lottery
The above provisions will come into effect from the 01 April 2015 The above provisions will come into effect from the 01 April 2015
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Exemptions
Exemption is extended to following services :
› Ambulance services provided to patients
› Services provided by Common Effluent Treatment Plant operator for treatment of effluent
› Services of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruits and vegetables
packing, labeling of fruits and vegetables
› Life insurance service provided by way of Varishtha Pension Bima Yojna
› Service provided by way of exhibition of movie by the exhibitor/
theatre owner to the distributor or association of persons consisting of exhibitor as one of it’s member
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Exemptions
› Service provided by way of admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve
› Transport of goods for export by road from the factory/ place of removal to a Land Customs Station (LCS)
The above provisions will come into effect from the 01 April 2015
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Abatement
› A uniform abatement has been proposed for transport by rail, road and vessel to bring parity in these sectors. Service Tax shall be payable on 30% of the value of such services subject to condition of non-availment of Cenvat Credit on inputs, capital goods and input services
› The abatement for executive (business/first class) air travel, wherein the service element is higher, has been reduced from 60% to 40%
the service element is higher, has been reduced from 60% to 40%
› Abatement is being withdrawn on chit fund services
The above provisions will come into effect from the 01 April 2015
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Changes in Service Tax Rules
› Simplification of registration process. Registration shall now be granted within two days
› A provision for issuing digitally signed invoices is being added along with an option of maintaining records in electronic form and their authentication by means of digital signatures
The above provisions will come into effect from the 01 April 2015
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Reverse Charge
› Manpower supply and security services when provided by individual, HUF, partnership firm to a body corporate are being brought to full reverse charge. Presently, these are taxed under partial reverse charge mechanism
› Following services are brought under reverse charge mechanism (full reverse charge):
Services provided by mutual fund agents and mutual fund distributors
Services provided by agents of lottery distributor
Services provided by a person involving an aggregator (applicable from 01.03.2015)
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Penalty
Penalty provisions substituted to rationalize penalties as follows:
› In cases not involving fraud / collusion / wilful mis-statement / suppression of facts or contravention of any provision of the Act or rules with the intent to evade payment of service tax:
In addition to the service tax determined, a penalty not exceeding 10% of the service tax so determined shall be payable
if service tax and interest payable thereon is paid within 30 days of issue of show cause notice, no penalty shall be payable
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Penalty
› In cases involving fraud / collusion / wilful mis-statement of suppression of facts or contravention of any provision of the Act or rules with the intent to evade payment of service tax:
a penalty equal to the service tax shall be payable
if service tax and interest payable thereon is paid within 30 days of communication of show cause notice, the amount of penalty payable shall be 15% of the service tax
payable shall be 15% of the service tax
if service tax and interest payable thereon is paid within 30 days of the date of communication of order of the Central Excise Officer, the amount of penalty shall be equal to 25% of the service tax so determined
The above provisions will come into effect from the date of enactment of Finance Bill, 2015
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Others
› The value of reimbursable expenditure is now included as
“consideration for services provided” subject to certain exceptions
› The option of advance ruling is now extended to all resident firms as defined
› Matters pertaining to rebate of export of services shall now lie with Government after the adjudication of matters by Commissioner (Appeals) i.e. review of orders by Central Government
› “Service” definition amended to clarify inclusion of services provided by chit foremen and agents of lottery tickets
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Central Excise
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Central Excise
› Standard ad valorem rate of central excise duty increased from existing 12% to 12.5%
› Rate of excise duty applicable to goods covered by the Medicinal and Toilet Preparations Act, 1955 is also increased from 12% to 12.5% ad valorem
› Education Cess (2%) and Secondary and Higher Education Cess
› Education Cess (2%) and Secondary and Higher Education Cess (1%) leviable on excisable goods as a duty of excise is fully exempted
› Other Basic Excise Duty rates (ad valorem as well as specific) with
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Central Excise
› Existing excise duty exemption on solar water heater and system replaced by optional excise duty of Nil without CENVAT credit / 12.5% with CENVAT credit
› Excise duty of 2% without CENVAT credit / 12.5% with CENVAT credit provided to tablet computer. Full exemption granted to parts credit provided to tablet computer. Full exemption granted to parts
& components for use in manufacture of tablet computer
› Excise duty on mobile handsets including cellular phone is changed from 1% without CENVAT credit/ 6% with CENVAT credit to 1% without CENVAT credit/ 12.5% with CENVAT credit
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Central Excise
› Excise duty exempted on specified raw materials for use in manufacture of pacemakers, subject to actual user condition
› Goods manufactured domestically and supplied against International Competitive Bidding exempted from excise duty subject to condition that
such goods when imported attract Nil Basic Customs Duty and Nil CVD
such goods when imported attract Nil Basic Customs Duty and Nil CVD
if imported goods are eligible for Nil Basic Customs Duty and Nil CVD subject to certain conditions, then the said conditions shall also apply mutatis mutandis to such goods when manufactured domestically and supplied against International Competitive Bidding
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Change in Rates
Item/ Products Increase/
Decrease
Existing Rate
New Rate
Peanut Butter ↑ NIL 2%
without Credit
6%
with Credit Waters, including mineral waters and aerated
waters, containing added sugar or other sweetening
↑ 12% 18%
waters, containing added sugar or other sweetening matter or flavoured1
Goods falling under Chapter sub-heading 2523 29 ↑ 900 per tonne
1000 per tonne Goods falling under tariff item 3923 21 00 and
Chapter sub-heading 3923 29
↑ 12% 18%
Leather footwear of Retail Sale Price exceeding Rs.10002
↓ 12% 6%
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Change in Rates
Item/ Products Increase/
Decrease
Existing Rate
New Rate Pig iron SG grade (7201 1000) and ferro-silicon-
magnesium (7202 2900) for manufacture of cast components of wind operated electricity generators
↓
12%
NIL
Round copper wire and tine alloys for use in the manufacture of PV ribbon (tinned copper
interconnect) for manufacture of solar PV cells and
↓ 12% NIL
interconnect) for manufacture of solar PV cells and modules
Wafers for use in the manufacture of IC modules for smart cards
↓ 12% 6%#
Inputs for use in manufacture of LED driver and MCPCB for LED lights and Fixtures & LED Lamps
↓ 12% 6%#
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MRP Valuation
› Condensed milk put in unit containers are liable for MRP Valuation with an abatement of 30%
› Extracts, essences and concentrates of tea or mate including iced tea are now notified for MRP Valuation with an abatement of 30%
› Lemonade, Soya milk drinks, fruit pulp based drinks and beverages
› Lemonade, Soya milk drinks, fruit pulp based drinks and beverages containing milk are now liable for MRP Valuation with an abatement of 35%
› The abatement percentage has been reduced from 35% to 25% for all kind of footwear
› MRP based assessment is being prescribed expressly for LED Lights or fixtures including LED lamps with an abatement of 35%
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Penalty
Penalty provisions substituted to rationalize the penalty as follows:
› In cases not involving fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision or rules with the intent to evade payment of excise duty:
in addition to the duty determined, a penalty not exceeding 10% of the duty so determined, or, Rs 5,000 whichever is higher shall be payable duty so determined, or, Rs 5,000 whichever is higher shall be payable
if duty and interest payable thereon is paid either before issue of show cause notice or within 30 days of issue of show cause notice, no penalty shall be payable and all proceedings shall be deemed to be
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Penalty
› In cases involving fraud or collusion or wilful mis-statement of suppression of facts or contravention of any provision or rules with the intent to evade payment of excise duty:
a penalty equal to the duty shall be payable. In respect of cases where the details relating to such transactions are recorded in the specified record, penalty payable shall be 50% of the duty so determined
record, penalty payable shall be 50% of the duty so determined
if duty and interest payable thereon is paid within 30 days of communication of show cause notice, the amount of penalty payable shall be 15% of the duty
if duty and interest payable thereon is paid within 30 days of the date of communication of order of the Central Excise Officer, the amount of penalty shall be equal to 25% of the duty so determined
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Central Excise Rules
› Manufacturer allowed to issue invoice authenticated by means of a digital signature
› Manufacturer allowed to maintain and preserve the daily stock account in electronic form provided each page of the record shall be authenticated by means of digital signatures
shall be authenticated by means of digital signatures
› Registration to be granted within 2 days. Process simplified to benefit manufacturers and dealers
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Central Excise Rules
› Rules amended to specifically allow:
goods to be dispatched directly to the job-worker on the direction of the manufacturer or service provider, subject to the condition that the invoice shall contain the specified particulars
goods to be sent directly to any person on the direction of the registered dealer, subject to the condition that the invoice shall contain the detail of the dealer as buyer and such person as consignee
goods imported can be sent directly to buyer, provided the invoice issued by importer mention that goods are sent directly to buyer
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Cenvat Credit Rules
› The period for taking Cenvat Credit is extended from six months to one year from the date of invoice
› Cenvat Credit of Service Tax paid under partial reverse charge was available on making payment to the services provider. The said provision has been amended to allow the credit after such said provision has been amended to allow the credit after such service tax is paid by the service recipient
The above provisions will come into effect from 01 March 2015
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Petrol & Diesel- Change in duty structure
Duty Rates applicable upto 28.02.2015 Duty Rates applicable with effect from 01.03.2015 CENVAT
Rs. / Ltr
SAED Rs/ Ltr
AED Rs/ Ltr
Edu Cess
Total Rs / Ltr
CENVAT Rs. / Ltr
SAED Rs. / Ltr
AED Rs. / Ltr
Ed. Cess Rs. / Ltr
Total Rs. / Ltr
Unbranded Petrol
8.95 6 2 3% 17.46 5.46 6 6 NIL 17.46
Branded Petrol
10.10 6 2 3% 18.64 6.64 6 6 NIL 18.64
Unbranded Diesel
7.96 NIL 2 3% 10.26 4.26 NIL 6 NIL 10.26
Branded Diesel 14% + Rs 5/ltr or Rs 10.25/Ltr whichever is lower
NIL 2 3% 12.62 6.62 NIL 6 NIL 12.62
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Others Changes
› Excise Duty on cut tobacco is being increased from Rs.60 per kg to Rs.70 per kg
› With respect to Pan Masala, Gutkha and Chewing Tobacco, the maximum speed of packing machines has been specified as a relevant factor for determining the duty under Compounded Levy relevant factor for determining the duty under Compounded Levy Scheme
› There has been a change in the mechanism for levy of duty on cigarettes and other products
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Customs
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Exemption
› CVD and SAD fully exempted on specified raw materials namely battery, titanium, palladium wire, eutectic wire, silicone resins and rubbers, solder paste, reed switch, diodes, transistors, capacitors, controllers, coils (steel), tubing (silicone) for use in the manufacture of pacemakers
› In order to address the issue of Cenvat Credit accumulation of SAD
Exemption granted to all goods (except PCBs) required for use in the manufacture of specified goods (IT Agreement products)
Exemption granted to inputs for use in the manufacture of LED drivers and MCPCB for LED lights, fixtures and LED lamps
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Exemption
› Exemption from BCD is granted to following items:
Parts and components of Cash Dispenser and automatic bank note dispensers
Evacuated Tubes with three layers of solar selective coating for use in the manufacture of solar water heater and system
High Density Polyethylene for manufacture of telecommunication grade optical fibres or optical fibres cables
Digital Still Image Video Camera of specified configuration and Parts and Components of these cameras
Organic LED TV panels
Black Light Unit Module for use in the manufacture of LCD/ LED TV panels
Magnetron upto 1 KW for use in the manufacture of microwave ovens
› Parts, components and accessories for use in the manufacture of tablet computers www.taxguru.in
Rate Change
Items / products Existing Rate New Rate
Ulexite ore 2.5% NIL
Liquefied butanes 5% 2.5%
Sulphuric acid for the manufacture of fertilizer 7.5% 5%
› Rate of BCD reduced in respect of following items:
Sulphuric acid for the manufacture of fertilizer 7.5% 5%
Isoprene 5% 2.5%
Styrine, Ethylene Dichloride (EDC) and Vinly Chloride Monomer (VCM)
2.5% 2%
Anthraquinone 7.5% 2.5%
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Rate Change
Items/ products Existing
Rate
New Rate C-Block Compressor, Over Load Protector (OLP) &
Positive thermal co-efficient and Crank Shaft for compressor, for use in the manufacture of Refrigerator compressors
7.5% 5%
Specified Components of CNC lathe machines and 7.5% 2.5%
Specified Components of CNC lathe machines and machining centers, namely Ball screws, linear Motion Guides and CNC Systems
7.5% 2.5%
Zeolite, ceria zirconia compounds and cerium compounds for use in the manufacture of wash coats, which are further used in manufacture of catalytic converters
7.5% 5%
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Rate Change
Items/ products Existing
Rate
New Rate Water blocking tape, Ethylene-Propylene-non-
conjugated-Diene Rubber (EPDM) and Mica glass tape for use in the manufacture of insulated wires and cables
10% 7.5%
‘Metal parts’ for use in the manufacture of electrical 10% 7.5%
‘Metal parts’ for use in the manufacture of electrical insulators subject to actual user condition
10% 7.5%
Certain specified inputs for use in the manufacture of flexible medical video endoscopes
5% 2.5%
Artificial heart (left ventricular assist device) 5% NIL
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Rate Change
› Rate of duty increased in respect of following items:
BCD on Metallurgical coke (2701 12 00) is increased from 2.5% to 5%
Tariff rate on iron & steel and articles of iron or steel, falling under Chapters 72 and 73 of the Customs Tariff, increased from 10% to 15% - However, there is no change in the effective rates of basic customs duty on these goods
Tariff rate on Commercial Vehicles increased from 10% to 40% and effective rate from 10% to 20%. Customs duty on commercial vehicles in Completely Knocked Down (CKD) kits and electrically operated vehicles including those in CKD condition will continue to be at 10%
Additional Duty of Customs on imported Motor Spirit (Petrol) and High Speed Diesel Oil (commonly known as Road Cess) is being reduced from Rs. 2 to Rs.
8 litre. However, effective rate of Additional Duty of Customs levied on imported petrol and diesel is increased from Rs. 2 to Rs. 6 per litre
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Others
› Concessional BCD is extended to Active Energy Controller for manufacture of renewable power system inverters subject to conditions
› SAD on Naphtha (2710) , Styrine, Ethylene Dichloride (EDC) and Vinyl Chloride Monomer (VCM) for use in manufacture of excisable Vinyl Chloride Monomer (VCM) for use in manufacture of excisable goods reduced from 4% to 2%
› SAD on melting scrap of iron or steel, scrap for the purpose of melting, copper scrap, brass scrap and aluminium scrap reduced to
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Gaurav Singhal, Chartered Accountant
Manish Khurana, Chartered Accountant
Malav Shah
Chartered Accountant
Pawan Kumar Pahwa Advocate
Anuj Mahajan,
Chartered Accountant
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