India Budget 2016 Indirect Tax Proposals Sanjay Dwivedi

Advocate

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Duty Imposed

• Infrastructure Cess on Motor Vehicles (8703) – upto 4%

• Branded readymade garments having MRP of Rs. 1000 or more – 2% without Credit; 12.5% with Credit.

• Jewellery Articles – 1% without Credit; 12.5% with Credit

• Charger/adapter, battery and wired headsets/speakers for use in manufacture of mobile handsets – 2% without credit, 12.5% with Credit

• Routers, modems, set-top boxes, Video recorder, CCTV Camera, Lithium-ion batteries – 4% without credit, 12.5% with credit

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Duty Increased

• Clean Environment Cess increased from Rs. 200 to Rs. 400 pmt

• Pan masala – from 16% to 19% • Tobacco Products • Aerated water (2202 10) – from 18% to 21% • Plastic bags/ sacs – duty @15% • PSF / PFY manufactured from waste or scrap (including

waste PET bottles) – from 6% to 12.5% (with Cenvat); remains 2% without Cenvat

• Silver Bar – from 8% to 8.5%; Gold Bars/ coins - 9% to 9.5%

• Disposable Aluminium foil containers – from 6% to 12.5% (with Cenvat); remains 2% without Cenvat

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Duty Reduced

• Micronutrients [Schedule 1, Part A, Sr. 1(f) of FCO] – reduced from 12.5% to 6%

• Ready Concrete Mix – at site – Wholly exempted

• Specified parts required for the manufacture of centrifugal pump reduced from 12.5% to 6%, subject to actual user condition

• Tools and tool kits for maintenance, repair, and overhauling of aircraft - exempted.

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MRP Based Assessment

Description Classification Abatemen

t

Soap; OSAA; Paper Soap 3401, 3402 30%

Aluminium foils of thickness up to 0.2

mm)

7607 25%

Smart Watches 851762 35%

Accessories of Vehicles etc. Any Chapter 30%

Parts, components & accessories of Vehicles were already covered. Relates to

certain products of ch. 87, 8426, 8427, 8429, 8430. See sr. 108 & 109 of

notification 49/2008-CE (NT).

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Footwear – abatement increased from 25% to 30%

C. Excise – Law & Procedures

• Limitation to issue Show Cause Notice increased (cases not involving intentional evasion):

• C. Excise – 2 Years

• Service Tax - 30 months (effectively three years)

• End use based exemptions (Annexure II procedure) – Self Certification Allowed

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C. Excise Procedures

• Digitally signed invoice – Authenticated physical copy not required

• Revision of Returns allowed – ER-1 (same month); ER-4 (within one month)

• ER-5, ER-6 and ER-7 abolished

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Ready-Made Garments

• Duty imposed if:

• The goods bear a brand name (or are sold under a brand name); and

• Have RSP Rs. 1000 or more

• Rate 2% (without credit); 12.5% with credit

• Value = 60% of MRP

• Liability is of brand owner – who gets goods manufactured

• SSI Exemption – available (March 16 – Rs. 12.5 lakh)

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Jewellery (Except Silver …)

• Rate 1% (with credit); 12.5% without credit

• Liability: One who gets manufactured

• Registration – Centralised registration permitted

• SSI Exemption: 6 Crore in a year (Previous year 12 Cr)

• SSI Exemption in March 16: 50 Lakh

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Cenvat Credit

• Rule 6 revamped

• ISD provisions (rule 7) redrafted

• Credit can be distributed to ‘outsourced manufacturer’

• Removal of goods directly from job-worker’s premises – fresh permission to be valid for 3 years

• Tools can also be sent to job-worker – without bringing to factory.

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Capital Goods

• Railway Wagons (860692)

• ‘Equipments or appliance used in an office’

• Capital Goods used for pumping of water - even if the capital goods used ‘outside the factory’.

• Capital Goods having value upto Rs. 10,000/- per piece – shifted to ‘input’

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Rule 6

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Dutiable

Exempted

Based on item published at - http://www.taxindiaonline.com/RC2/print_story.php?newsid=25468

Sales

Rs. 2,000 (i.e. 20%)

Rs. 8,000 (i.e. 80%)

Rs. 10,000

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Cenvat Credit

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500

100

500

400

Rule 6 - Old System

• Don’t take credit on Tea Powder

• Pay back 20% of {Milk + Sugar}

• Also pay 20% of Coffee Powder

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Rule 6 - New System

• Take full credit: Rs. 1500

• Payback – Credit on Tea Powder: Rs. 100

• Credit on Coffee – Rs. 400 – fully eligible

• Common Credits {Milk + Sugar}: Rs. 500

• Divide it into ratio: Exempted/Total i.e. 1000/5000x500=100.

• Pay bak Rs. 100.

• Total paid back: Rs. 200

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Input Service Distribution

• Bills on office address

• Take entire credit & distribute

• Distribution would be vide Challans

• Apply rule 6 at unit’s location

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Example: Company having 3 Units

Unit X

• Dutiable • Exempted

Unit Y

• Outsourced manufacturing (job-worker)

Unit Z

• Trading • Taxable

Service

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Manner of Distribution

• If service relates to unit X – credit should be distributed only to X

• If service relates to units X & Y – Credit should be distributed to X & Y in the ratio of their turnover

• If the service relates to all – distribute to all

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Outsourced Manufacturer

• Separate record of credits received from each principle

• Credit of a principle – use only for that principle

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Service Tax – Effective immediately

• IT Software on media – if value determined on MRP basis (Sec 4A), Ser. Tax exempted.

• Construction for government – exempted if contract entered before 01/03/2015

• Housing Sector – Exemptions to various constructions under

• Housing for All (Urban) Mission

• Pradhan Mantri Awas Yojana

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Service Tax – Abatement (w.e.f. 01/04/2016) • Credit on input services allowed:

• Transport of Goods by rail

• Rail Container Operators – Abatement reduced to 60%

• Transport of passengers

• Transport of goods in Vessel

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Services received from Government

• Tax payable on all services (word ‘support’ deleted) except: Services by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution i.e.

(i) the preparation of plans for economic development and social justice;

(ii) Twelfth Schedule of constitution

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Service Tax (w.e.f. 01/06/2016) • Krishi Kalyan Cess @0.5% on all taxable services (making

effective rate as 15%)

• Assignment/ Trading of spectrum – declared to be a service.

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Value 1000

Service Tax @14% 140

Swachh Bharat Cess @0.5% 5

Krishi Kalyan Cess @0.5% 5

Total 1150

Lottery Distributors

• Third attempt

• [Future Gaming Pvt. Ltd. vs. U.O.I. ]

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Interest Rate: Service Tax

• Tax collected – but not paid: 24%

• Other cases: 15%

• 3% reduction – if turnover did not exceed Rs. 60 lakh

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Thank You

Sanjay Dwivedi

Advocate

9320 456 555

sanjay@srdlegal.in

512, Business Park, Citi of Joy,

Mulund (W), Mumbai - 80

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