analysis of budget proposals - 2013 by vikram nankani chairman, indirect tax committee and...
TRANSCRIPT
Analysis of Budget Proposals - 2013
By Vikram NankaniChairman, Indirect Tax Committee
and Partner,ELP
1st March, 2013
INDIRECT TAXES
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BIG POINTS
POSITIVES: Voluntary Compliance Encouragement Scheme. No Change in the rate of Service Tax. Tax Reform Administration Commission proposed- a non-adversarial tax
administration.
NEGATIVES: CENVAT Credit Scheme untouched. GST- No deadline proposed for implementation. Section 4 of Excise Act not amended : Commissioner of Central Excise Vs. Fiat
India Pvt. Ltd. , (2012 (283) ELT 161).
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Service Tax - amendments
“Voluntary Compliance Encouragement Scheme” proposed One time scheme for truthful declaration of Service Tax dues Available for dues payable for the period 1st October 2007 to 31st December
2012 On payment of tax dues, immunity from penalty, interest and any proceedings
No matter covered under declaration to be reopened in any proceedings before any authority or Court
Eligibility criteria: Not applicable to person who has filed Returns and disclosed liability but has not
paid the disclosed amount or part thereof No notice or order of determination has been issued on or before 1st March 2013
Scheme not available for subsequent period where notice / order issued for earlier period Where inquiry / investigation has been initiated and is pending as on 1st March
2013, the designated authority reject the declaration for reasons recorded in writing- provision is unclear-is the word ‘shall’ to be read as may- discretionary?
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Service Tax - amendments
Payment of declared tax dues 50% on or before 31st December 2013 Remaining 50% on or before 30th June 2014 Option to pay along with interest on or before 31st December 2014
Interest applicable for the period from 1st July 2014
Commissioner empowered to issue Show Cause Notice where he has reasons to believe that declaration made was “substantially false”
Show Cause Notice to be on par with Show Cause Notice under S. 73 or S.73A Commissioner cannot issue Show Cause Notice after expiry of one year
No subsequent refund of tax dues paid as per the declaration will be available. Sub Section 2A inserted in Section 73
It is proposed that in case of fraud, collusion, wilful misstatement ,suppression of facts or contravention of any provisions with an intent to evade payment of tax has not been established, the Central Excise Officer shall determine the service tax payable as if the notice was issued for offences for which a period of 18 months applies.
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Negative List of Services
Modification in Scope of Services Scope of services by way of education as a part of an ‘approved vocational
education course’ proposed to be modified Courses run by institutes/ centres affiliated to ‘State Council for Vocational
Training’ to be included Courses run by institutes affiliated to the National Skill Development
Corporation to be omittedTesting services relating to agricultural products also proposed to be covered
under Negative list
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Service Tax - amendments
Mega Exemption Notification modified Exemption provided to Educational Institutions modified
The words ‘provided to or by’ has been replaced with ‘provided to’. Services by Education Institutions will be liable to tax which are in relation to
auxiliary educational services or renting of immovable property Exemption on Copyrights
The exemption of Service Tax on temporary transfer or permitting the use or enjoyment of a copyright has been limited to cinematograph films for exhibition in a cinema hall or cinema theatre
Exemption provided to Restaurants The exemption to restaurants not having Air Conditioning facility
Exemption on transportation by rail or a vessel Exemption has been withdrawn on services in relation to transportation by rail or a
vessel of specified petroleum and petroleum products, postal mail or mail bags and household effects
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Service Tax - amendments
Exemption on transportation by Goods Carriage Exemption has been extended to agricultural produce, specified food stuffs,
chemical fertilizers and oil cakes, specified newspaper or magazines, relief material and defence or military equipment
Exemption on vehicle parking to general public This entry has been deleted
Exemption to Service provided to Government Exemption on repair or maintenance of aircraft has been omitted
Notification 26/ 2012 dated June 20, 2012 Abatement for construction of complex, buildings, civil structure intended for
sale prior to issuance of completion certificate is revised as under: For Residential Unit having a carpet area upto 2000 Sq ft or where the amount
charged is less than Rs. 1 Crore – 75% For others – 70% Effective Rate- 3.075 % and 3.69 %.
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CENVAT Credit - amendments
Explanation inserted in Rule 3 Explanation clarifies that in respect of default under sub-rule (5), (5A) and (5B)
of Rule 3, recovery of duty to be covered under Rule 14 of the CENVAT Credit Rules
Rule 14 deals with recovery of CENVAT credit wrongly taken and utilized or erroneously refunded
Now, Rule 14 would be applicable even for recovery of duty on goods cleared ‘as such’ or after being used or pursuant to write off in books of accounts
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Expansion in scope of Advance Ruling proceedings Definition of ‘activity’ being expanded to enable an existing manufacturer to
seek advance ruling when he starts a new line of business Notifications issued to make “Resident public limited companies” eligible for
seeking advance ruling on Central Excise and Service Tax matters which was earlier allowed only in Customs matters
Advance ruling can now be sought for admissibility of the credit of Service Tax paid on input services also
Certain offences to be cognizable and non-bailable Section 9A of the Excise Act is proposed to be amended to make the following
offences as cognizable and non-bailable Offence relating to excisable goods and involving evasion of duty or contravention of
provisions pertaining to utilization of Credit, where the duty leviable thereon under this Act exceeds fifty lakh rupees
This amendment is to overcome the judgment of the Hon’ble Supreme Court in the case of Om Prakash vs Union of India [2011 (272) E.L.T. 321 (S.C.)], which held that the offences under the Excise Act are non-cognizable and bailable
Central Excise – legislative amendments
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Section 11 of the Excise Act proposed to be amended to enable recovery from a person holding money for or on account of the defaulter (Garnishee proceedings )
Proposed ceiling of 365 days up to which the Tribunal can grant stay of recoveries
Stay shall stand vacated beyond 365 days even if the disposal of the Appeal is pending for no fault of the assessee
This amendment ignores the decision of the Hon’ble Supreme Court in the case of Commissioner of Central Excise Vs. Kumar Cotton Mills Pvt. Ltd. [ 2005 (180) E.L.T. 434 (S.C.)]
Monetary limit for matters heard and disposed by Single Bench of the Tribunal increased from Rs.10 lakh to Rs.50 lakh
Central Excise – legislative amendments
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Excise duty rates Standard rate of 12% remains intact Duty on Mobile handsets including cellular phones having retail sale price of more
than Rs. 2000 increased from 1% to 6% Duty on SUVs (including utility vehicles falling under CTH 8703) and engine capacity
>1500 cc increased from 27% to 30% Duty on marble slabs and tiles increased from Rs 30 per square meter to Rs 60 per
square meter Duty on chassis of diesel motor vehicles for the transport of goods (falling under 8706
00 42) reduced from 14% to 13%Reinstating the optional Excise duty regime for branded garments prior to Budget
2011 – i.e. Nil Zero excise duty route available in addition to the CENVAT route To cover cotton and man made sector (Spun Yarn at Yarn , Fabric and Garment Stage 12 % excise duty on man made Fibre, Full exemption in case of cotton
Branded medicaments of Ayurveda, Unani, Siddha, Homeopathy or Bio-chemic system brought under MRP based valuation with an abatement of 35%
Central Excise – Rate changes
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Customs DutyCustoms Duty
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Expansion in scope of Advance Ruling proceedings Definition of ‘activity’ being expanded to enable an existing importer or exporter
to seek advance ruling when he starts a new line of businessCertain offences to be cognizable and non-bailable
Section 104 of the Customs Act is proposed to be amended to make the following offences as cognizable and non-bailable
Offence relating to evasion of duty, import of prohibited goods, availment of drawback where the amount exceeds fifty lakh rupees
Section 47 has been amended to provide that any importer who fails to pay duty within “two days” from the date on which bill of entry is returned to him for payment of duty is liable to pay interest
Earlier the period for payment of duty was five days excluding holidays and the same has now been amended to two days excluding holidays .
Section 49 – Period for storage of imported goods in warehouse pending clearance
Goods can be stored up to a period of 30 days. Extension of 30 days can be given at a time by the Commissioner.
Customs – legislative amendments
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Section 142 of the Customs Act proposed to be amended to enable recovery from a person holding money for or on account of the defaulter (Garnishee proceedings )
This amendment seeks to overcome the Judgment of the Delhi High Court in the case of Anita Grover Vs. Commissioner of Central Excise, (2012-TIOL-1049-HC-DEL-CUS)
Proposed ceiling of 365 days up to which the Tribunal can grant stay of recoveries
Stay shall stand vacated beyond 365 days even if the disposal of the Appeal is pending for no fault of the assessee
Monetary limit for matters heard and disposed by Single Bench of the Tribunal increased from Rs.10 lakh to Rs.50 lakh
Amendment to Baggage Rules: Vide Notification No. 25/2013-Cus. (N.T.) dt. March 1, 2013, jewellery up to an aggregate
value of Rs. 50,000 [hitherto Rs. 10,000] by a gentleman passenger and up to Rs. 1,00,000 [hitherto Rs. 20,000] for a lady passenger has been prescribed as importable duty free.
Customs – legislative amendments
Steam Coal and Bituminous Coal- BCD- 2% for both- No retrospective change. Earlier it was 1% and 11% respectively.
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Customs
Power of arrest
Offence Cognizable / Bailable Power of arrest
CUSTOMS
Specific offences (in excess of Rs. 50 lakhs)
Cognizable and non-bailable
• Arrest only upon authority of Commissioner of Central Excise• Must be taken before a Magistrate without unnecessary
delay
Others Non-cognizable and bailable
• Arrest only upon authority of Commissioner of Central Excise• AC/DC to have same powers as an officer in charge of a police
station under Section 436 of the CrPC for the purpose of releasing an arrested person on bail
SERVICE
TAX
Specified offences of more than Rs.50 lakhs
Cognizable and non-bailable
• Arrest only upon authority of Commissioner of Central Excise• Inform such person of the grounds of arrest and produce him
before a magistrate 24 hours
Specified offences of less than Rs.50 lakhs
Non-cognizable and bailable
• Arrest only upon authority of Commissioner of Central Excise• AC/DC to have same powers as an officer in charge of a police
station under Section 436 of the CrPC for the purpose of releasing an arrested person on bail
EXCISE
Specified offences of more than Rs.50 lakhs
Cognizable and non-bailable
• Power to arrest any person if there is reason to believe that such person is liable to punishment under the Act/Rules, with prior approval of the Commissioner of Central Excise
Specified offences of less than Rs.50 lakhs
Non-cognizable and bailable
Power of arrest
Power of arrest already provided for under Section 104 of the Customs Act Specification of cognizable / non-cognizable and bailable / non-bailable
offences vide 2012 amendmentsEquivalent provisions now introduced under the Finance Act for the first
time Previously, position in law governed by Om Prakash vs. Union of India [2011-
TIOL-95-SC-CX-LB] which held that all offences under the Excise Act were non-cognizable and bailable, given the deeming effect under Section 9A(1) of the Excise Act to this effect
Said Section 9A(1) of the Excise Act made applicable to Service Tax vide Section 83 of the Finance Act, 1994
Now, offence of collection of Service Tax and non-payment of the same for a period of 6 months made cognizable and non-bailable
Similar amendment in respect of power of arrest proposed under Section 13 of the Excise Act vide Finance Bill, 2012, but not enacted in Finance Act, 2012
Goods and Service Tax (‘GST’)Goods and Service Tax (‘GST’)
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GST
No definitive time line statedStatement of consensus between Centre and StatesGST law to be drafted by State Finance Ministers and GST CouncilDraft Bills on Constitutional Amendment and GST to be placed before the
House in next few monthsRecent progress with consensus between Centre and States on the
following: Compensation for phasing out CST agreed at Rs. 34,000 for three years
Specific allocation made in the Budget for Rs. 9000 Cr. as first installment Centre to suggest draft legislation to the States Flexibility available to States to join GST Centre to propose floor rate for tax with narrow band within which State will
retain right to vary SGST Contentious Dispute Settlement body to be dropped
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Signals of GST
Issue 2011 2012 2013 Emerging Position
Transition date No date stated
Constitutional amendments
Indication of Bill to be placed before House in next few months
Draft GST law State Finance Ministers and GST Council to draft the law. Indication of Bill
CST No reduction in CST rate
CST compensation CST compensation agreed at Rs. 34000 Cr. Specific Budget allocation of Rs. 9000 Cr. Towards first installment
Expanded scope of ST Scope of 2 services under Negative list expanded
IT Infrastructure / Administrative structure
No further development
Political will Many States forming a consensus25
THANK YOU