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Budget – 2011Indirect Tax Proposals

FICCI-Ahmedabad Chapter01.03.2011

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• vs

Lets begin the game

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Service Tax Excise Customs

Whom do we have to meet on the way

30 Min

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•Service Tax

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Point of Taxation Rules, 2011

• Service Tax Payment has been altered from receipt of payment to provision of service.

• Date of provision of service shall be earliest of:-– Date on which service provided– Date of Invoice– Date of Payment

Effective – 1.04.2011

Rewriting the service tax

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• Services provided by Restaurants if– Air-conditioned– License to serve alcohol

Service Tax @ 3%

Effective – After issue of Notification

New Services under the net

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• Service provided by Hotels, Inns, Guest Houses, Clubs– Continuous period of stay < 3 Months– Declared Tariff of Rooms > Rs. 1000

Service Tax @ 5%

Effective – After issue of Notification

New Services under the net

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Expanding the scope of existing services

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Authorised Service Station

• Services provided by any person whether authorised or not

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Insurance Business• Complete Portion of Premium which is not invested by

Life Insurance Company• Rate – 1.5%, if paid on total premium

• Exemption to General Insurance under Rashtriya Swashya Bima Yojana

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Commercial Training / Coaching• All unrecognised courses also brought

under the definition of the chapter.

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Club / Association

• Services to non-members and members of other clubs now being made taxable.

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Health Services

• Services by clinics if• Centrally AC• More than 25 beds at any time

• Services related to diagnostic tests / investigative services.

• Services by consultant doctors at hospitals• Service Tax @ 5%

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Construction Services

• Cenvat Credit restricted to 40% under Work Contract services.

• Exemption – Complex services - JNURM and Rajiv Awaas Yojana

• Exemption – Work Contract services - Specified port / Airport

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Money Changing Services

• Rate of composition reduced from 0.25% to 0.1%

• New Rule 2(b) for valuation

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SSI

No Service Tax Audit < Rs. 60 Lacs

Interest Rate – Normal (-) 3%

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SEZ

Provisions with regard to Cenvat Credit Amended

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A.

B.

C.

D.

E.

Penal Provisions

Waiver from penalty if intention found to be ok

Delay in return filing – From Rs. 2K to Rs. 20K

Interest on delayed Payment – From 13% to 18% (1.4.11)

Prosecution provisions introduced – Delay > 6 Mnths

No concession from Penalty for cases involving Fraud

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• Central Excise & Customs

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• Basic rate of Excise remains unchanged• Concessional rate of excise duty of 4%

changed to 5% - Cakes, Drugs, Medical devices

• Excise Duty @ 1% without Cenvat imposed on 130 items earlier exempt – FMCG - Specs, Lenses, Cycles

• Concessional rate of 5% on exempted items like micro processors, storage media

• Branded Textile – ED @ 10%

Major Proposals

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Cement – Other than a mini plant

Impact on prices likely to be Rs.5-10/- per bag.

Sector Specific Exemption

Cement Present Proposed

RSP < Rs.190 Rs.290 Per MT 10% + Rs.80 per MT

RSP > 190 10% of RSP 10% + Rs. 160 per MT

Clinker Rs. 375 per MT 10% + Rs. 200 per MT

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Textile

ED @ 10% on branded textiles For non-branded products, old regime to continue Liability to pay of brand owners in case of

jobworking Excise duty on 5% on automatic looms and

projectile looms BCD on raw silk reduced from 30% to 5%. Various other products reduced by 2.5%. Reduction in BCD on acrylon and pulp to 2.5%

Sector Specific

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Food / Agro Cold Chain AC and conveyor Belt –

Agr – Hort – Dairy – Poultry – Marine Reduction in BCD on micro irrigation systems by 2.5%.

Automobile Concessional rate of 10% for factory built ambulances. Excise - Taxi Refund Scheme extended to vehicles = 13

passengers Full exemption to parts of power tillers. Definition of CKD – (Preassembled Engine/Gear Box)- 60% instead

of 10%

Paper Exemption – Cotton Stalk Particle Concessional rate of 5% - Corrugated boxes Reduction in BCD on waste paper to 2.5%

Sector Specific

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Precious Metals Excise Duty @ 1% on branded jewellery Excise Duty at Rs.1500/- per Kg on silver mfg during

gold refining

Water Supply Exemption to Pipe Fittings – Delivery of drinking water

from source- Plant-First storage Concessional rate – 1% for water filters w/o electricity

Health Excise duty reduced to 1% - Napkins / Diapers

Sector Specific

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Power Excise Duty exemption for goods required for

expansion of existing ultra mega power projects. Further exemption from CVD on import also

continues. This probably will reduce Chinese Advantage by 4-5%.

Steel / Metals

Tax on iron ore exports increased from 15% to 20%. Reduction in customs duty on steel scrap and ferro

alloys

Sector Specific

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Rule 2 Definition of inputs – Goods used in factory Input services – Construction services excluded Rule 5B – Asset written off – Cenvat Reversal Rule 6

Exempt Services to be paid at 5% Option to maintain separate books for goods and

prop for services Credit restricted to 50% for banking Credit restricted to 80% for insurance 6(5) omitted Exemption for services given to SEZ Concept of Trading service

Cenvat Credit Rules

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• I have enough money to last me the rest of my life, unless I buy something."

— Jackie Mason