Budget Panorama

Analysis of key proposals in Finance Bill 2015

CA Krishna Upadhya S

BUDGET PANORAMA2

ForewordThe Union Budget in India is considered one of the most significant and anticipated event in India economic and political calendar. Amidst expectation growing beyond the growth rate of India economy and a call for ‘big bang’ budget, the Finance Minister of the county, Mr.Arun Jaitley presented the Union Budget 2015-16 on 28th February, 2015. The reactions to the budget by common man, industrialists and economists have been equally skewed towards both positive and negative sides of it.

While it could be difficult to judge whether it is a big bang budget or not, as the definition of that term is highly subjective, it can definitely be said that it is a decent and forward looking one. A significant focus on the budget seems to be directed towards foreign investment and very little seems to have been thought about investments that could be gathered within the country. The honesty with which the FM has deferred the target to achieve the fiscal deficit at 3% to 3 years instead of the earlier promised 2 years seems to be a justifiable step considering the increased public spending, such fiscally indiscipline honesty might not be appreciated any further. It is more important to empower the common man and the economy than to support it continuously at the cost of destabilizing the economic balance.

Coming to the tax proposals, the intent to implement Goods and Services Tax (GST) legislation from 01st April 2016 is a highly commendable move, as it gives the much needed reforms to the indirect taxes regime of the country. The proposal to reduce the tax rate and withdrawing the exemptions available from FY 2016-17 onwards with a word of caution is a highly appreciable gesture. This allows corporate to plan their affairs and would not look like a rude shock.

A very big disappointment from a tax perspective is the absence of tax administrative reforms. It has increasingly been experienced by tax payers and professionals that the tax authorities and departments are increasingly become hostile and the tax administration authorities are turning to become tax collection authorities. With such hostility, the rate of compliance and the intent to comply comes down. The highly ambitious move to setup TRACES and enabling e-Tax Governance in tax collection and administration of both Direct and Indirect taxes are bogged by such hostilities both due to departmental inefficiency and due to implementation of such systems by tech companies which have very limited understanding of the evolution of tax laws and practices in the country. Though it is not required that administrative reforms are made in the Union Budget, it would have sent a very strong message to tax payers that tax is not a burden but a contribution; and to the tax administration that it is not required to be hostile to be effective.

It is definitely to be conceded that the Union Budget 2015 is definitely aimed at the path of uplifting the investor sentiments and stimulate foreign investment. In the days ahead if there are measures taken to stimulate domestic investment coupled with administrative reforms and reduced mindless litigation, the country could go towards achieving sustained double digit growth and the ‘Make in India’ campaign could become successful.

CA Krishna Upadhya S

BUDGET PANORAMA 3

Key Policy Statement and Proposals made by the Finance Minister ►Government revised the fiscal target and revised the journey for fiscal deficit target

of 3% to 3 years rather than 2 years.

►Target of ₹ 8.5 lakh crore of agricultural credit during the year 2015-16 and focus on improving the quality and effectiveness of activities under MGNREGA.

►Micro Units Development Refinance Agency (MUDRA) Bank, with a corpus of ₹20,000 crores, and credit guarantee corpus of ₹ 3,000 crores to be created. MUDRA Bank will be responsible for refinancing all Micro-finance Institutions which are in the business of lending to such small entities of business through a Pradhan Mantri Mudra Yojana.

►A Trade Receivables discounting System (TReDS) which will be an electronic platform for facilitating financing of trade receivables of MSMEs to be established.

►Comprehensive Bankruptcy Code of global standards to be brought in fiscal 2015-16 towards ease of doing business.

►National Investment and Infrastructure Fund (NIIF), to be established with an annual flow of ₹ 20,000 crores to it.

►Tax free infrastructure bonds for the projects in the rail, road and irrigation sectors.

►NBFCs registered with RBI and having asset size of ₹ 500 crore and above may be considered for notifications as ‘Financial Institution’ in terms of the SARFAESI Act, 2002.

►(SETU) Self-Employment and Talent Utilization to be established as Techno-financial, incubation and facilitation programme to support all aspects of start-up business. ₹1000 crore to be set aside as initial amount in NITI.

►5 new Ultra Mega Power Projects, each of 4000 MW, in the Plug-and-Play mode.

►Government to bring enabling legislation to allow employee to opt for EPF or New Pension Scheme. For employee’s below a certain threshold of monthly income, contribution to EPF to be option, without affecting employers’ contribution.

►Distinction between different types of foreign investments, especially between foreign portfolio investments and foreign direct investments to be done away with. Replacement with composite caps.

BUDGET PANORAMA4

►An IIT to be set up in Karnataka

►An autonomous Bank Board Bureau to be set up to improve the governance of public sector bank.

►CPI inflation projected at 5% by the end of the year, consequently, easing of monetary policy.

►GDP growth in 2015-16, projected to be between 8 to 8.5%.

►Efforts on various fronts to implement GST from next year

BUDGET PANORAMA 5

Direct Tax ProposalsIndividual Taxation►Rate of taxation

Type of Assessee Tax Slabs

Tax Rate Edu-cation Cess

Surcharge

Individual and HUF, income < ₹ 1 crore

No change

No change No change

No change

Resident or Non Resident Individual and HUF, income > ₹ 1 crore

No change

No change No change

Increased from 10% to 12%

►Residential Status of member of ships - The Finance Bill proposes to provide mechanism for determination of residential status of an individual who is a citizen of India and a member of the crew of a foreign bound ship leaving India in a manner and subject to such conditions as may be prescribed later. Whilst earlier, the determination of residential status of persons leaving India on Indian ship alone was present in the law.

►Deductions from Tax computation

(a) The threshold limit for investment in annuity plan of LIC or for investing in a plan to receive pension from any other insurer, the limit for investment has been proposed to be increased to ₹1.50 lakhs from earlier ₹ 1 lakhs. However, this is subjected to an overall limit of ₹ 1.50 lakhs (as always existed) for investment under 80C, pension plan as mentioned above and an individual’s contribution to National Pension Scheme collectively.

(b) Tax deduction on an additional investment of ₹ 50,000 per year into National Pension Scheme is proposed to be allowed over and above the ₹ 1.50 lakhs

BUDGET PANORAMA6

(c) Tax Benefits for Health Insurance and Medical expense

Type of Payment Individual, Spouse and De-

pendent children (Family)

Parents Total

a) Health insuranceFamily and Parents Below 60 years

₹ 25,000 ₹ 25,000 ₹ 50,000

Family below 60 years and Parents above 60 years

₹ 25,000 ₹ 30,000 ₹ 55,000

Family and Parents Above 60 years

₹ 30,000 ₹ 30,000 ₹ 60,000

As a Welfare measure towards very senior citizens: it is also proposed to provide that any payment made on account of medical expenditure in respect of a very senior citizen, if no payment has been made to keep in force an insurance on the health of such person, as does not exceed ₹30,000 shall be allowed as deduction under section 80D. The aggregate deduction available to any individual in respect of health insurance premia and the medical expenditure incurred would however be limited to thirty thousand rupees. Similarly aggregate deduction for health insurance premia and medical expenditure incurred in respect of parents would be limited to thirty thousand rupees.

(d) The FM proposes to increase the exemption for medical treatment of a dependent with disability from ₹ 50,000 to ₹ 75,000 and for treatment of dependent with severe disability from ₹ 75, 000 to ₹ 125,000.

(e) Expenditure incurred by an individual for himself or dependent; or HUF for its members, who are very senior citizens (80 years and above), for the treatment of certain specified disease, a sum of ₹ 80,000 is allowed as deduction. There is no change in amount of deduction in cases where the assessee, dependents or HUF members are not very senior citizens.

Further, the requirement of obtaining a certificate from a specialist doctor working in a Government hospital has been done away with and certificate from any such specialist is enough for claiming the above benefit.

(f) The deduction for a person with disability has been proposed to be increased from ₹ 50,000 to ₹ 75,000 and such deduction for person with severe disability has been increased to ₹ 125,000 from ₹ 75,000.

BUDGET PANORAMA 7

Corporate Taxation► Rate of taxation

(a) No change in tax rates for FY 2015-16. However, FM has proposed to reduce the tax rates to 25% over a period of 4 years starting from FY 2016-17.

(b) Rate of Surcharge for FY 2015-16 onwards

Income Domestic Company Foreign CompanyLess than ₹ 1 crore Nil NilBetween ₹ 1 crore and ₹ 10 crores

7% 2%

More than ₹ 10 crores 12% 5%

► Depreciation

(a) Additional depreciation @ 20% is allowed on new plant and machinery installed by a manufacturing unit or a unit engaged in generation and distribution of power. However, if the asset is installed after 30th September of the previous year only 10% of the additional depreciation is allowed. It is proposed to allow the remaining 10% of the additional depreciation in the subsequent previous year.

(b) The additional depreciation rate on plant and machinery will be 35% instead of 20% where an assessee, sets up an undertaking or enterprise for manufacture or production of any article or thing, on or after the 1st day of April, 2015 but before 1st April 2020 in any backward area notified by the Central Government in this behalf, in the State of Andhra Pradesh or in the State of Telangana.

► The Finance Bill has proposed to allow a deduction of a sum equal to fifteen percent of new plant and machinery installed by an assessee who sets up an undertaking or enterprise for manufacture or production of any article or thing, on or after the 1st day of April, 2015 but before 1st April 2020 in any backward area notified by the Central Government in this behalf, in the State of Andhra Pradesh or in the State of Telangana. This deduction may be deemed to be income subject to certain conditions on sale of the new asset within five years from the date of its installation.

► Minimum Alternate Tax(a) It is proposed to exclude the income and expenditures towards Company’s

BUDGET PANORAMA8

share of income from AOP or BOI, for computation of Book profit, if the same is not taxable under the Act in the hands of the Company for general purposes of the Act.

(b) It is proposed to exclude expenditures and incomes related to Capital gains arising in transaction in securities (other than short term gains on which STT is not paid) accruing or arising to Foreign Institutional Investors (FIIs) in computation of their book profits.

Tax Deduction at Source (TDS)► It is proposed to amend the provision relating to TDS on salary to make it

mandatory for employers to collect proof of claims made in a particular form and manner which is to be prescribed later.

► A new section 192A is proposed to be added to enable TDS on payments made by trustees of the Employees’ Provident Fund Scheme, 1952, framed under section 5 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 or any person authorised under the scheme to make payment of accumulated balance due to employees, at 10% if the sum of payment is not less than ₹30,000.

► With effect from (w.e.f) 01st June 2015, it is proposed to amend section 194A on TDS on Interest to extend the provision of TDS for payments made by not only Banking companies but also Co-operative banks. Only exclusion that is proposed is co-operative societies. Further, interest on recurring deposits has also been proposed to be captured under the provisions of 194A for TDS purposes.

► TDS exclusion under section 194C for transport contractors is made available only where such contractors own 10 or less goods carriages at anytime during the previous year and they furnish a declaration to that effect alongwith furnishing their PAN.

► The time threshold for lower withholding of tax at 5% on interest paid on rupee denominated bonds of India companies or Government securities paid to FII or Qualified Foreign Investor has been extended till 01st July 2017.

► The requirement for furnishing information while making foreign remittance as specified u/s 195 has been proposed to be extended to all payments irrespective of whether chargeable to tax or not. A penalty of ₹100,000 is proposed to be levied for non furnishing or inaccurate furnishing of details as required u/s 195 in connection with foreign remittances.

BUDGET PANORAMA 9

International Tax► Finance Bill has proposed to amend section 6 in connection with determination

of residential status of Companies. For this purpose the following are considered as residents:

(a) An Indian Company

(b) Its Place of Effective Management (PoEM) is at anytime in that year is in India.

Further, the term PoEM has been defined as a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance made.

► Indirect Transfer:

(a) After the ruling of Apex Court in the case of Vodafone International Holdings B.V. v. Union of India & Anr, the revenue was prompted to insert Explanation 5 to section 9(1)(i) to clarify that an asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be situated in India if the share or interest derives, directly or indirectly, its value substantially from the assets located in India. However, the Act did not explain the term substantial interest and created a lot of ambiguity.

(b) To clarify the meaning of substantial interest, the Finance Bill 2015 has proposed to introduce Explanation 6 whereby it is clarified that the interest or share in an Indian company to be deemed to derive value substantially from India, if the fair market value of Indian assets (without reduction of liabilities) exceeds ₹ 10 crore and represents at least 50% of the value of all assets owned by transferor entity. Further the value for taxation would only be that proportionate of the value of assets located in India.

(c) The Bill also proposes that a transaction will not be taxed if the transferor (along with associate enterprises) neither holds right of control or management nor holds voting power or share capital or interest exceeding 5%.

(d) Further the Bill also proposes to exempt such Indirect transfer on account of group reorganization (like amalgamation and demerger) subject to meeting specified conditions.

(e) Further, the bill also proposes to make it mandatory for Indian entity due to

BUDGET PANORAMA10

which such substantial interest gets created to furnish information relating to transaction which might result in indirect transfer. Failure to report may attract a penalty up to 2% of transaction value.

► In an attempt to clarify the position on the term ‘business connection’, the Finance Bill has proposed to introduce section 9A. Whereby, in case of an investment fund incorporated or registered outside India, the fund management activity carried out through an eligible fund manager acting on behalf of such fund shall not constitute business connection in India of the said fund merely because eligible fund manager undertaking fund management activities on its behalf, is situated in India subject to fulfillment of certain other prescribed conditions.

► Rate of withholding tax on royalty and Fees for Technical Services payable to non residents have been proposed to be reduced from 25% to 10% w.e.f 01.04.2016.

► In section 115ACA concerning definition of Global Depository Receipts for the purpose of capital gains, the Finance Bill has proposed to widen the benefit to all investors and not only non-resident investors as was available earlier. Further, the scope of security for which the receipt or certificate that can be issued has been limited to only listed shares.

► The application of General Anti Avoidance Rules (GAAR) has been deferred to 01st April 2018.

Trust► The Finance Minister has proposed to include yoga in the definition of

charitable purpose under Section 2(15), which will enable eligible entities carrying out the activities of yoga to claim tax exemptions.

► Generally, an entity carrying on Charitable activity cannot do any other activity in the nature of trade, commerce or business. However, to provide certain relief to incidental activities which might be in the nature of trade or commerce, the Act provided that receipts from activities cannot exceed ₹25 lakhs. Finance Bill 2015 has done proposed to do away with ₹25 lakhs threshold and has proposed to fix the limit of such receipts to 20% of the total receipts.

► The FM has proposed to curtail the benefit of accumulation and utilization of receipts for 5 years in case of a registered charitable or religious institution, if the prescribed form in which the details for the proposed utilization and income tax return is not submitted to Assessing Officer within the due date of furnishing returns or actual date of filing returns whichever is earlier.

BUDGET PANORAMA 11

► Order passed by Chief Commissioner or Director General in connection with approval or otherwise for exemption for Educational Institutions or Hospital is now appealable before Income Tax Appellate Tribunal. Such an appeal route was not there in the Act earlier.

Administrative Provisions ► In order to rationalize the reassessment proceedings and obtaining

requisite approvals for the same, the FM has proposed to substitute Section 151 with the below provisions:

Years Reassessment ProcedureUpto 4 Years Assessment can be reopened by an AO of the

rank below Joint Commissioner (JC) with the approval of Joint Commissioner (JC)

Beyond 4 years

Assessment can be reopened by an AO with the approval of Principal Chief Commissioner or Chief Commissioner

► It is proposed to insert a new section 158AA so as to provide where any question of law arising in the case of an assessee for any assessment year is identical with a question of law arising in his case for another assessment year which is pending before the Supreme Court, in an appeal or in a special leave petition under Article 136 of the Constitution filed by the revenue, against the order of the High Court in favour of the assessee, the Commissioner or Principal Commissioner may, instead of directing the Assessing Officer to appeal to the Appellate Tribunal, direct the Assessing Officer to make an application to the Appellate Tribunal in the prescribed form within sixty days from the date of receipt of order of the Commissioner (Appeals) stating that an appeal on the question of law arising in the relevant case may be filed when the decision on the question of law becomes final in the earlier case. And it also provides that the same has to be accepted by the assessee. However, this option was earlier available only to the assessee.

► The threshold for total income computed where the President or any other member of the Appellate Tribunal authorized may, sitting singly, dispose of any case has been proposed to be increased from ₹ 5,00,000 to ₹ 15,00,000.

BUDGET PANORAMA12

General Provisions► Under section 80JJAA a deduction of an amount equal to 30% of additional

wages paid to new regular workmen employed by the assessee, being an Indian Company was allowed for three Assessment Years including the year in which such employees were hired. The Finance Minister has proposed to allow this deduction for all assesses by removing the restriction which existed only for Indian Company and the number of employees to be hired has been decreased from 100 to 50 for availing such a deduction.

► The deduction under Section 80G is proposed to be allowed to contribution made to Swach Bharath Kosh and Clean Ganga Fund.

► The threshold of ₹ 5 crore for applicability of provisions of Domestic Transfer Pricing has been increased to ₹ 20 crores.

► Section 269SS lays a restriction on accepting certain loans and deposits in cash above ₹ 20,000. This provision is proposed to be extended to acceptance of money receivable as advance or otherwise in relation to transfer of an immovable property, whether or not the transfer takes place. Consequently, the penalty of 100% of money so received for contravention of section 269SS has also been extended to advances received as stated above.

► Section 269T which lays a restriction on repayment of certain loans and deposits in cash above ₹ 20,000. This provision is proposed to be extended to payment of money payable as advance or otherwise in relation to transfer of an immovable property, whether or not the transfer takes place. Consequently, the penalty of 100% of money so received for contravention of section 269T has also been extended to advances repaid as stated above.

► The Finance Minister has proposed to amend Section 288 of the Act, which defined the term ‘accountant’ for the purpose of appointing as auditor and representative to appear before tax authorities. Consequent to such a proposed amendment, a few relationships have been prescribed, who are not entitled to be appointed as auditors or for signing any report/certificate under any provisions of the Act. However, such disqualification is not to be counted for the purpose of appointing a person to represent before tax authorities.

► The Finance Minister has proposed to repeal the Wealth Tax Act from 1st April, 2016.

BUDGET PANORAMA 13

Taxation Regime for Real Estate Investment Trusts (REIT) and Infrastructure Investment TrustsThe Finance (No.2) Act, 2014 had amended the Act to put in place a special taxation regime in respect of business trusts. The business trust as defined in section 2(13A) of the Act includes a Real Estate investment Trust (REIT) or an Infrastructure Investment Trust(InviT) which is registered under regulations framed by Securities and Exchange Board of India (SEBI). Further amendments have been made to the provisions applicable business trusts as captured below:

►The listed units of a business trust, when traded on a recognised stock exchange, would be liable to securities transaction tax (STT), and the long term capital gains shall be exempt and the short term capital gains shall be taxable at the rate of 15%. However, the preferential capital gains regime (consequential to levy of STT) available to other unit holders of business trust, is not available to the sponsor in respect of these units at the time of their transfer. The Finance (No. 2) Act, 2004 is proposed to be amended to provide that STT shall be levied on sale of such units of business trust which are acquired in lieu of shares of SPV, under an Initial offer at the time of listing of units of business trust on similar lines as in the case of sale of unlisted equity shares under an IPO. The benefit of concessional tax regime of tax @15 % on STCG and exemption on LTCG under section 10(38) of the Act shall be available to the sponsor on sale of units received in lieu of shares of SPV subject to levy of STT.

►On similar lines of interest or dividend gets passed on by SPV to REITs, it is proposed to provide pass through for rental incomes earned by REITs.

►TDS provisions u/s 194I not apply for tenants paying rental incomes to REIT►The distributed income or any part thereof, received by a unit holder from the REIT,

which is in the nature of income by way of renting or leasing or letting out any real estate asset owned directly by such REIT, shall be deemed to be income of such unit holder and shall be charged to tax.

►The REIT shall effect TDS on rental income allowed to be passed through. In case of resident unit holder, tax shall deducted @ 10% under a new proposed Section 194LBB, and in case of distribution to non-resident unit holder, the tax shall be deducted at rate in force as applicable for deduction of tax on payment to the non-resident of any sum chargeable to tax .

These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.

BUDGET PANORAMA14

INDIRECT TAX PROPOSALS

SERVICE TAX : Effective date : Amendments :

Rate of tax : With effect from a date to be notified after the enactment of the Finance Bill, 2015

Rate of service tax to be increased from 12.36% to 14%

Education cess and secondary higher education cess to be done away with Provision for levy of Swach Bharat Cess at 2% of value of taxable services – may be notified at a later date (if notified effective rate shall be 16%).

Widening of taxable base : With effect from a date to be notified after the enactment of the Finance Bill, 2015

All services rendered by Government now taxable other than few specified (currently only “support services” are taxable). [Shall be continued to be paid by recipient under reverse charge]. Services which result in manufacture of alcoholic liquor for human consumption to be made taxable Entertainment events and amusement facilities - out of negative list. [However, exemption continues for exhibition of cinematographic film, circus, dance, or theatrical performance including drama or ballet, recognised sporting event, admission to a museum, national park, wildlife. Exemption also available for award function, concert, pageant, musical performance or any sporting event other than a recognised sporting event, where the consideration for admission is not more than Rs 500 per person].

GST Commitment shown towards implementation of GST from 1 April 2016. Several measures understood to be towards such implementation including increase in rate of service tax, widening of tax base, digitally signed invoices and electronic records.

BUDGET PANORAMA 15

With effect from 1-4-2015

Brought under tax net – 1. Services rendered TO government, local authority or government authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of - (a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession; (c) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment; (f) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause 44 of section 65 B of the said Act. 2. Services rendered by artists in classical or folk art forms now taxable if consideration for performance is more than Rs. 1 lakh. 3. Services by mutual fund agents / distributors and distributors of lottery tickets to be taxable; 4. Services by way of construction, erection, commissioning, or installation of original works pertaining to airport or port. Exemption provided to – 1. Services by operator of Common Effluent Treatment Plant by way of effluent treatment; 2. Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labelling of fruits and vegetables which do not change or alter the essential characteristics of the said fruits or vegetables; 3. Service provided by way of exhibition of movie by an exhibitor to the distributor or an association of persons consisting of the exhibitor as one of its members. [Exemption continues for exhibition of cinematographic film, circus, dance, or theatrical performance including drama or ballet, recognised sporting event, admission to a museum, national park, wildlife. Exemption also available for award function, concert, pageant, musical performance or any sporting event other than a recognised sporting event, where the consideration for admission is not more than Rs 500 per person].

BUDGET PANORAMA16

Amendments to reverse charge – With effect from 1-4-2015

100% reverse charge – Web aggregators for services under common brand name, now required to pay reverse charge on services received irrespective of whether they have presence in India or not.

100% reverse charge – Services to mutual fund or AMC by agent/distributor, and to selling or marketing agent by agent / distributor of lottery tickets. 100% reverse charge – for support services by government to business entities now applies for any services by government to business entities. 100% reverse charge – for security or manpower supply services provided by non-corporates to corporate. Increased from 75%.

Changes in abatements – With effect from 1-4-2015

Abatement for business class air travel reduced, taxable portion is now 60% as opposed to earlier rate of 40%. GTA services – taxable portion to be increased from 25% to 30%.Abatements to chit funds to be removed (currently taxable portion is 70% without credit). Transport of goods in vessel – taxable portion to be reduced from 40% to 30%.

CENVAT credit - Effective from 1 March 2015

Time limit for available of credit from date of invoice increased from 6 months to 1 years. Credit now available even if goods are directly sent to jobworkers’ premises. Time limit for receiving “capital goods” back from jobworkers’ premises now increased to 2 years. Provision continues to pay and reavail in case of receiving back beyond the time period.

BUDGET PANORAMA 17

Exports to include only physical export for the purpose of refund of CENVAT under rule 5. Non-excisable goods also included as exempted goods for the purpose of reversal under rule 6.

Other changes – Effective 1-3-2015 – Advanced rulings - firms, LLPs, proprietorships, one person

companies allowed being applicants. Valuation – effective on enactment of Finance Bill

The term consideration amended to specifically include reimbursements.

Refund cases – effective on enactment of Finance Bill

Appeal against order of Commissioner (Appeals) in matters relating to refund / rebate of service tax shall be by way of revision application to Central Government and not Tribunal.

[Effective upon enactment of finance bill, transitional provisions also provided]

Penalty provisions modified. 10% penalty shall apply even if there is no intent to evade tax. Reduced penalty of 25% of proposed penalty if payment of duty, interest and reduced penalty made within 30 days from date of order; similarly nil penalty if payment of tax and interest is made within 30 days from date of notice.

Registration To be provided within 2 days in case of SINGLE PREMISES, with post facto verification of documents.

Records Provisions to digital sign invoices and authenticate records has been introduced.

CENTRAL EXCISE : Effective date : Amendments :

General rate of duty: Effective immediately – 1 March 2015

Standard rate of service tax to be increased from 12.36% to flat 12.50%. Education cess and secondary higher education cess to be done away with.

Specific rates of duty : From Nil to 2% without credit or 6% with credit

Condensed milk put up in unit containers [0402 91 10 and 0402 99 20]

From Nil to 2% without credit or 6% with credit

Peanut butter [2008 11 00]

BUDGET PANORAMA18

From 12.36% to 18% Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured [2202 10] – the heading covers, aerated waters, lemonade and other [additional duty of excise @ 5% on these goods is being omitted]

Increased For cigarettes, tobacco and pan masala. Increased from Rs. 900 to Rs. 1000 per tonne

Other hydraulic cements [2523 90].

Rs. 100 to Rs. 300 per tonne

Clean Energy Cess, levied on coal, lignite and peat

From 12.36% to 15% Sacks and bags including cones of polymers of ethylene [3923 21]

From 12.36% to 18% Sacks and bags including cones of other plastics [3923 21]From 12.36% to 6% Leather footwear [6403 or 6405] [Note : currently, footwear

upto RSP of Rs. 500 is exempt and upto Rs. 1000 is at 6%. Hence this exemption impacts leather footwear with RSP more than Rs. 1000].

2% without CENVAT credit

Tablet computer [8471 30]

Exemption Parts, components, accessories, sub-parts for manufacture of Tablet computer [any chapter]

6% to 12.50% with credit Mobile handsets including cellular phones [8517] Extension of 6% lower rate Specified goods used in the manufacture of electrically

operated vehicles and hybrid vehicles MRP based abatement – changes thereto – effective 1 March 2015 30% abatement Condensed milk put up in unit containers [0402 91 10,

0402 99 20] 30% abatement Extracts, essences and concentrates of tea or mate and

preparations with a basis of these extracts, essences or con-centrates or with a basis of tea or mate [2101 20]

35% abatement All goods falling under 2202 other than mineral water and aerated water which are already covered under MRP based assessment. These include lemonade and all non-alcoholic beverages

Reduced from 35% to 25% All footwear [chapter 64]

BUDGET PANORAMA 19

Other changes CENVAT credit Please refer service tax section above Penal provisions Penalty provisions modified. 10% penalty shall apply even

if there is no intent to evade tax. Reduced penalty of 25% of proposed penalty if payment of duty, interest and reduced penalty made within 30 days from date of order.

Effective 1-3-2015 – Advanced rulings - firms, LLPs, proprietorships, one per-son companies allowed being applicants.

Registration To be provided in 2 days with post facto physical verifica-tion of premises.

Records Provisions to digital sign invoices and authenticate records has been introduced.

CUSTOMS : Effective date : Amendments :

General rate of duty : Effective immediately – 1 March 2015

Standard rate of service tax to be increased from 12.36% to flat 12.50%. Education cess and secondary higher education cess to be done away with.

Specific rates of duty (selected amendments only) : Chapters 1 to 30 Several changes, not included here Chapters 31 to 71 No change

BUDGET PANORAMA20

BCD reduced from 7.50% to 2.50%

[8483 40 00] Ball screws for use in the manufacture of CNC Lathes (tariff item 8458 11 00, 8458 91 00) or Machining Centres (tariff item 8457 10 10, 8457 10 20); [8466 93 90] Linear Motion Guides for use in the manufacture of CNC Lathes (tariff item 8458 11 00, 8458 91 00) or Machining Centres (tariff item 8457 10 10, 8457 10 20); [8537 10 00] CNC Systems for use in the manufacture of CNC Lathes (tariff item 8458 11 00, 8458 91 00) or Machining Centres (tariff item 8457 10 10, 8457 10 20)

Exemption from BCD and CVD

Parts, components, accessories, sub-parts for manufacture of Tablet computer [any chapter]

Exemption from BCD [8525 80 20] Digital Still Image Video Cameras capable of recording video with minimum resolution of 800 x 600 pixels, at minimum 23 frames per second, for at least 30 minutes in a single sequence, using the maximum storage (including the expanded) capacity

SAD exemption On many goods used for manufacture of specified goods including those specified under ITA bound goods (except PCBs) such as ATMs, microphones, speakers, Digital Still video cameras

BCD increased from 10% to 40%

Commercial vehicles falling under chapter 8702 and 8704

Full exemption from duties

Artificial hearts (left ventricular assist device)

Other changes - Penal provisions Penalty provisions modified. 10% penalty shall apply even

if there is no intent to evade tax. Reduced penalty of 25% of proposed penalty if payment of duty, interest and reduced penalty made within 30 days from date of order.

BUDGET PANORAMA 21

Disclaimer

The content of this alert is intended solely for the purpose of information. This should not be treated as a technical tax advice for making decisions. You would have to contact your tax advisor to seek specific applicability of the contents of the alert for your case. We bear no responsibility of any loss occasioned to any person acting or refraining from action as a result any material in this alert.

© All rights reserved

CA Krishna Upadhya SNo.72/1, II Floor, Jnanodaya School Road Shankarapark, ShankarpuramBengaluru - 560 004, Karnataka State

Phone 080 2242 6483, 2242 6484 email krishna@upadhyaassociates.com

BUDGET PANORAMA22

Budget Panorama Analysis of key proposals in Finance Bill 2015

The king should take wealth from his subjects at the proper time... Like an intelligent man milking his cow every day, the king should milk his kingdom every day. As the bee collects honey from flowers gradually, the king should draw wealth gradually from his kingdom for storing it.

-Bhishma counsels Yudhishthira in MahabharataBook 12: Santi Parva: Rajadharmanusasana Parva of the epic