analysis of indirect tax proposals – union budget – 2014- 2015 madhri. g advocate, t.s.gopalan...

ANALYSIS OF INDIRECT TAX PROPOSALS –

UNION BUDGET – 2014-2015

MADHRI. G

ADVOCATE,

T.S.GOPALAN & CO.

ANDHRA CHAMBER

OF

COMMERCE

SOME FIGURESTAX REVENUES Actual

2012-2013Budget

2013-2014Revised

2014-2015Budget

2014-2015

Taxes on Income & Expenditure

552815.58 660439.00 629871.00 729280.00

Taxes on Property & Capital Transaction

5842.47 7670.00 6447.00 6941.00

Customs 165346.22 187308.00 175056.00 201819.00

Excise Duties 175844.91 196804.95 178787.24 206356.00

Service Tax 132600.94 180141.00 164927.00 215973.00

EXPECTATIONSRoadmap to GST;100% utilization of cenvat credit of capital goods in the first year itself;Increase in threshold limit in service tax from 10lacs to 25lacs;Special Additional Duty??Reduction in CST rateVAT or service tax or both??Tax Refunds

FM SPEECH – PARA 9“The debate whether to introduce a Goods and Services Tax (GST) must now come to an end. We have discussed the issue for the past many years. Some States have been apprehensive about surrendering their taxation jurisdiction; others want to be adequately compensated. I have discussed the matter with the States both individually and collectively. I do hope we are able to find a solution in the course of this year and approve the legislative scheme which enables the introduction of GST. This will streamline the tax administration, avoid harassment of the business and result in higher revenue collection both for the Centre and the States. I assure all States that government will be more than fair in dealing with them”.

CUSTOMS

CHANGES IN TARIFF

CHEMICALS & PETROCHEMICALSBCD on reformate – 10% to 2.5% BCD on propane, ethylene, ethane, propylene, butadiene – 5% to 2.5% BCD on de-natured ethyl alcohol and methyl alcohol – 7.5% to 5% BCD on crude naphthalene – 10% to 5% BCD on fatty acides, crude palm stearin, RBD ad other palm stearin and specified industrial grade crude oil – 7.5% to nil and specified industrial grade crude oil – 7.5% to Nil for manufacture of soaps and oleochemicals subject to actual used condition BCD is also being reduced on crude glycerine from 12.5% to 7.5% in general and from 12.5% to Nil for manufacture of soaps subject to actual user condition

CHANGES IN TARIFF

ENERGY SECTORThe duty structure on non-agglomerated coal of various types is being rationalized at 2.5% BCD and 2% CVDBCD on metallurgical coke is increased from Nil to 2.5%Exemption from BCD is being granted on re-gasifed LNG for supply to PakistanLiquefied Propane and Butane mixture, Liquefied Propane, Liquefied Butane and LPG imported by IOC, BPCL or HPCL for supply to Non-Domestic Exempted Category (NDEC) customers is fully being exempted retrospectively w.e.f 08.02.2013

CHANGES IN TARIFF

METALSBCD on stainless steel flat products – 5% to 7.5% BCD on ships imported for breaking up – 5% to 2.5% Export duty on bauxite – 10% to 20% BCD on coal tar pitch – 10% to 5% BCD on battery waste and battery scrap – 10% to 5% BCD on steel grade limestone and steel grade dolomite – 5% to 2.5%

CHANGES IN TARIFFELECTRONICS HARDWAREBCD on LCD & LED panels of below 19” – 10% to NilBCD exempted for specified parts of LCD & LED TV panelsBCD on colour picture tubes for manufacture of cathode ray TVs – 10% to NilBCS on specified telecommunication products not covered under ITA – Nil to 10%SAD on all inputs/components used in manufacture of laptops, desktops & tablets is exempted, subject to actual user conditionCess levied on imported electronic productsFull exemption from SAD on specified inputs for manufacture of smart cards.BCD to E-book readers – 7.5% to NilCVD exemption on portable x-ray machine/system is being withdrawn

CHANGES IN TARIFFRENEWABLE ENERGY SECTORBCD on forged steel rings used in the manufacture of bearings of wind operated electricity generators – 10% to 5%SAD fully exempted on parts & components required for manufacture of WEGs.BCD on machinery, equipments etc., required for setting up of solar energy products reduced to 5%Full exemption from BCD on specified raw materials used in manufacture of solar backsheet & EVA sheetFull exemption from BCD on flat copper wires used in manufacture of PV ribbons for solar PV cells/modulesConcessional duty of 5% on machinery, equipment etc. for setting up of compressed biogas plant.

EXCISE

RETROSPECTIVE EXEMPTIONS

Un-branded articles of precious metals are being exempted from ED for the period 01.03.2011 to 16.03.2012;ED on PSF & PFY manufactured from plastic waste or scrap or plastic waste or scrap or plastic waste including waste PET bottles is being exempted retrospectively w.e.f 29.06.2010 to 07.05.2012;Intermediate product ‘Tow’ arising during the course of manufacture of such PSF/PFY is being exempted retrospectively w.e.f. 29.06.2010 to 10.07.2014;Full exemption from ED is being provided to liquefied propane and butane mixture, liquefied propane, butane and LPG for supply of NDEC by IOC, HPCL, BPCL retrospectively from 08.02.2013 so as to treat NDEC customers, such as hospitals, government canteens, BSF/CISF mess etc. at par with domestic customers for the purpose of supply of LPG.

CHANGES IN TARIFF

FIRST SCHEDULEED on Cigarettes increased by 72% for cigarettes of length not exceeding 65mm and by 11% to 21% for cigarettes of other lengths. Similar increases are proposed on cigarettes, cheroots and cigarillos.ED increased from 12% to 16% on pan masala, from 50% to 55% on unmanufactured tobacco and from 60% to 70% on zarda scended tobacco, gutkha and chewing tobacco.

CHANGES IN TARIFF

ED is exempted on parts of tractors removed from one or more factories of a tractor manufacturer to another factory of the same manufacturer for manufacture of tractors; ED on winding wires of copper – 10% to 12%; ED @ 2% (without CENVAT) or 6% (with CENVAT) is imposed on PSF and PFY manufactured from plastic waste or scrap including PET bottles w.e.f 11.07.2014; ED on recorded smart cards is increased to uniform rate of 12%; Full exemption from ED is provided to reverse osmosis membrane element used in water filtration or purification equipment (other than household type filter);

CHANGES IN TARIFF

ED is reduced from 12% to 6% on footwear of retail price exceeding Rs. 500 per pair but not exceeding Rs. 1000 per pair; Concessional ED of 2% (without CENVAT) and 6% (with CENVAT) is extended to gloves specially designed for use in sports; Various exemptions and reductions given in Renewable Energy Sector similar to customs; Additional duty of Excise levied @ 5% on aerated waters containing sugar;Cess (Customs component) is being exempted on goods cleared by an EOU into the DTA.

THE FIAT SYNDROME

THE Supreme Court in the case of CCE, Mumbai vs. Fiat India (P) Ltd. held that where products were sold at considerable losses for an unduly long period of time for the purpose of market penetration, the transaction value cannot be accepted for the purpose of levy of excise duty.

The matter reached the Board and after consultations issued a Circular dated January 15, 2014 clarifying a couple of issues on the subject matter.

Amendment now made in Central Excise Valuation Rules, 2000 –

"Provided that where price is not the sole consideration for sale of such excisable goods and they are sold by the assessee at a price less than manufacturing cost and profit, and no additional consideration is flowing directly or indirectly from the buyer to such assessee, the value of such goods shall be deemed to be the transaction value.“

even if the assessee sells the goods at a price less than the manufacturing cost and profit and no additional consideration is flowing directly or indirectly from the buyer to the assessee, then the value of such goods shall be deemed to be the transaction value.

LEGISLATIVE CHANGES Section 15A inserted – Central Government to prescribe an authority or agency to whom the information return shall be filed by the specific persons such as Income Tax Authorities, State Electricity Boards, VAT or Sales Tax Authorities, Registrar of Companies etc. Information collected for the purpose of identification of tax evaders. Proposal to introduce Section 15B for imposition of penalty if the information return is not submitted.Section 32E(1) amended to allow filing of applications of settlement before Settlement Commission in cases where the applicant has not filed returns after recording reasons for the same.

LEGISLATIVE CHANGES Section 35B(1) amended to increase the discretionary powers of the Tribunal to refuse admission of appeal from existing Rs. 50,000 to Rs. 2,00,000;MANDATORY FIXED PRE-DEPOSIT – 7.5% (of duty + penalty) before CCE(A) or Tribunal first stage and 10% (of duty + penalty) before Tribunal in second stage, subject to a maximum of INR 10 crores.STAY???UNDUE HARDSHIP???

SERVICE TAX

Changes effective from 11.07.2014;Changes effective from the date of enactment of Finance

Bill, 2014;Changes effective from a notified date after the

enactment of Finance Bill, 2014;Changes with effect from 01.10.2014.

Changes w.e.f 11.07.2014Services provided by operators of the Common Bio-medical Waste

Treatment Facility to a clinical establishment by way of treatment or disposal of bio-medical waste or the processes incidental thereto;

Services provided by or to an Educational Institution – transportation, catering, security, cleaning, housekeeping services, admission or conduct of examination; (Renting of immovable property and auxiliary educational services????)

Renting of residential or lodging places, hotels, dharamshalas or ashrams with tariff per day of Rs. 1000 or more;

Changes w.e.f 11.07.2014Services by way of transportation by rail or a vessel from one place in India to

another of organic manure and cotton, ginned or baled will be exempt;Exemption in respect of service of passenger transportation by an air-

conditioned contract carriage is withdrawn – Abatement of 40% with no cenvat credit is prescribed;

Services provided to Government, a local authority or a governmental authority by way of water supply, public health, sanitation conservancy, solid waste management or slum improvement and up-gradation only will continue to be exempt but the exemption will not be extendable to other services such as consultancy, designing, etc. not directly connected with these specified services;

Changes w.e.f 11.07.2014Services of life insurance business provided in respect of Life micro-

insurance product as approved by the IRDA, having maximum amount of cover of fifty thousand rupees;

Services by way of loading, unloading, packing, storage or warehousing of cotton, ginned or baled shall be fully exempt;

Services received by the RBI, from outside India in relation to management of foreign exchange reserves like external asset management, custodial services, securities lending services shall be exempt;

Services provided by a tour operator to a foreign tourist in relation to a tour conducted wholly outside India will be exempt

Changes w.e.f 11.07.2014 - SEZoCentral Excise Officer would issue authorization in Form A-2, within fifteen

working days from the date of receipt of Form A-1 by the Central Excise Officer.

oSEZ Units or the Developer will, pending issuance of Form A-2, be entitled to avail upfront exemption on the basis of Form A-1. To furnish a copy of authorization within 3 months from the date of receipt of specified services.

o In respect of full reverse charge, there would be no requirement of furnishing service tax registration number of service provider.

oA service shall be treated as exclusively used for SEZ operations if the recipient of service is SEZ unit or developer, invoice is in the name of such unit/developer and the service is used exclusively for furtherance of authorized operations in SEZ.

Changes w.e.f 11.07.2014

oThe resident private limited company is being included as a class of persons eligible to make an application for advance ruling in service tax.

oIn relation to service provided or agreed to be provided by a director of a company or a body corporate to the said company or the body corporate, the recipient of such service is made person liable to pay service tax. This is in view of requests by body corporate such as the Reserve Bank of India.

oPlace of Removal is defined in Cenvat Credit Rules

Changes w.e.f 11.07.2014

Rule 12A of CCR is being amended to disallow transfer of credit by a large taxpayer from one unit to another.

The condition for availing abatement in case of GTA service is being amended with immediate effect to clarify that the condition for non- availment of credit is required to be satisfied by the service providers only. Service recipient will not be required to establish satisfaction of this condition by the service provider.

Changes after enactment of Finance Bill

Services provided by ESIC prior to 01.07.2012 is exempted.Central Excise provisions made applicable to service tax:

◦ Any explanation inserted in a Notification within 1 year from issue, will be effective from date of issue of Notification.

◦ New Section whereby third party sources will furnish periodic information.◦ Failure to provide above information will attract penalty.

Section 73 – timelines for completion of adjudication:Section 80 – amended to remove the waiver of penalty of 50% if details of transactions available in previous record.

Changes after enactment of Finance Bill

Power of search & seizure to Central Excise Officer:Section 87 - To incorporate power to recover dues of a predecessor from the

assets of a successor purchased from the predecessor;Section 94 - To obtain rule making powers (a) to impose upon assessees ,

inter alia, the duty of furnishing information, keeping records and making returns and specify the manner in which they shall be verified; (b) for withdrawal of facilities or imposition of restrictions (including restrictions on utilization of CENVAT credit) on service provider or exporter, to check evasion of duty or misuse of CENVAT credit; and (c) to issue instructions in supplemental or incidental matters

Changes effective from 01.09.2014

A manufacturer or a service provider shall take credit on inputs and input services within a period of six months from the date of issue of invoice, bill or challan w.e.f. 1st September, 2014


E-payment of service tax is being made mandatory for all assesses. Rule 2A of Service Tax (Determination of Value) Rules, 2006, category ‘B' and ‘C' of works contract are proposed to be merged into one single category, with percentage of service portion as 70%.


Variable rates of interest:Extent of delay Simple interest rate per annum

Up to six months 18%

More than six months and upto one year

18% for first six months, and 24% for the period of delay beyond six months

More than one year 18 per cent. for the first six months of delay; 24 per cent. for the period beyond six months up to one year and 30 per cent. for any delay beyond one year.


Provision for prescribing conditions for determination of place of provision of repair service carried out on temporarily imported goods is being omitted.

The definition of intermediary is being amended to include the intermediary of goods in its scope.

Service consisting of hiring of Vessels (excluding yachts) and Aircraft is being excluded from Rule 9(d). Accordingly, hiring of vessels, or aircraft, irrespective of whether short term or long term, will be covered by the general rule, that is, the place of location of the service receiver. Hiring of yachts would however continue to be covered by Rule 9 (d).


POT in respect of reverse charge will be the payment date or the first day that occurs immediately after a period of three months from the date of invoice, whichever is earlier. This amendment will apply only to invoices issued after 1st October, 2014.credit of input service of renting of a motor cab or tour operator if such services are received from a person engaged in the similar line of business i.e. a sub-contractor providing services of renting of motor cab or tour operator to the main contractor Taxable portion in respect of transport of goods by vessel is being reduced from 50% to 40%In renting of motor vehicle, where the service provider does not take abatement the portion of service tax payable by the service provider and service receiver will be modified as 50% each.

Changes effective from a notified date after the enactment of the Finance Bill

Following services will be taxable:◦ Services of sale of space for advertisement on hoardings, out-of-home media,on film

screen in theatres, bill boards, conveyances, buildings, cell phones, ATMs, tickets, commercial publications, aerial advertisement website etc. excluding such sale of space for advertisement in print media.

◦ Services provided by Radio taxis or radio cabs whether air conditioned or non-air conditioned. “radio taxi” means a taxi including a radio cab, by whatever name called, which is in two-way radio communication with a central control office and is enabled for tracking using Global Positioning System (GPS) or General Packet Radio Service (GPRS).

Government will prescribe rules for determination of rate of exchange for calculation of taxable value in respect of certain services.

THANK YOUMADHRI.G.

ADVOCATE

MOB: 99401 57312.

T.S.Gopalan & Co.,

Advocates & Notaries,

No. 17, Lakshmanan Street, T.Nagar,

Chennai – 600 017.

Email – [email protected]

mailto:[email protected]

analysis of indirect tax proposals – union budget – 2014- 2015 madhri. g advocate, t.s.gopalan...

Documents

nil bcd

cvd bcd

tariff metals bcd

gst slide

actual used condition

service tax

tax refunds

tax administration