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INDIAN UNION BUDGET

2016

1 The Indian Union Budget 2016 – Highlights

The Indian Union Budget 2016 - Foreword

• It is said that Third time is a charm and given that our honourable

Finance Minister Mr. Arun Jaitley was presenting the 3rd Annual

Budget under the Modi government he has done a great job of

addressing vast sections of our country in the current budget that he

presented on February 29, 2016. The foundation that was laid during

his first budget in July 2014 has been further cemented in the current

budget, showing that the government is not afraid to continue down

the same path that they had first spoken about when elected – Slow

and Steady inclusive progress

• The fiscal discipline shown by the government, coupled with a forward looking mind-set with a strong

focus on development of infrastructure, simplification and stability of the tax regime and progress in key

areas of education & skill development, job creation, healthcare and financial inclusion all bode well for

long-term success of India

• Our country is predominantly a rural and agrarian economy and without adequate support and

incentives given to these sectors the overall country cannot progress. The schemes announced under

the Rural & Agriculture segment are both positive and progressive and will continue to provide the much

needed impetus for growth in the sector which accounts for ~50% of our country’s employment

• For many years India has seen a severe brain drain having lost our best and brightest to the developed

world. Now, with the strong incentives announced in the budget for the start-up ecosystem and around

Digital India, we will retain our domestic talent within India, thereby creating world-class companies and

generating higher employment

The Indian Economy at a glance

2

The year that was

The Indian Union Budget 2016 – Highlights

3

Macro Overview

GDP Growth Rate1 Sector wise GDP Growth Rate

Rupee Vs Dollar GVA Growth Rate


Source : Economic Survey 2015-16 & Reserve Bank of India

5.6%

6.6%

7.2% 7.6%

2012-13 2013-14 2014-15 2015-16

1Based on constant 2011-12 market prices

4.9%

6.6% 7.1% 7.3%

2012-13 2013-14 2014-15 2015-16

58

60

62

64

66

68

70

L

H

H High during 15-16

(April – Feb) at Rs.

68.7775 per dollar

L Low during 15-16 (April

– Feb) at Rs. 62.1580

per dollar

4.20%

-0.20%

1.10%

5% 5.90%

7.30% 7.80%

10.30%

9.20%

2013-14 2014-15 2015-16*

Agriculture & Allied Industry Services

* Based on April 2016 to January 2016

GVA : Gross Value Added, GDP = Ʃ GVA at basic prices + product taxes – product subsidies

(calculated at factor price)

4

Macro Indicators

Inflation & Monetary Factors Industrial Performance


• The Average Headline WPI Inflation came down to a five

year low of -2.80% in 2015-16 after having significantly

stabilized in 2014-15

• CPI Inflation also came down to ~4.9% from 5.9% from

last year

• RBI reduced the Repo rate three times during the year

by 25 bps each to 6.75% from 7.75% last year on

account of decline in inflation rate

Our Views : The cooling in inflation is a result of falling global

commodity prices. Being a net importer and consumer of commodities,

India is reaping the dividends of a slump in global prices of coal, oil,

iron ore and other basic materials.

• IIP of 3.1% suggests that the industrial sector is

recovering at an increasing rate

• Growth of 3.1% can be attributed to a recovery in the

mining sector (2.3%) and manufacturing sector (3.1%)

• The mining sector growth was mainly on account of

higher coal production. The manufacturing sector was

propelled by the higher overall production

Our Views – IIP declined 1.3% y-o-y in December of 2015, following

an upwardly revised 3.4% contraction in the November, marking a

sharp reversal from a 5 year high of 9.9% growth in

October. Stability is still not in sight for the manufacturing sector.

Source : Economic Survey 2015-16, ** Data for month April - December

8.2

2.9

1.1

(0.1)

2.8 3.1

(2.0)

-

2.0

4.0

6.0

8.0

10.0

2010-11 2011-12 2012-13 2013-14 2014-15 2015-16*

IIP

Pe

rce

nta

ge %

Index of industrial Production %

7.4% 6.0%

2.0%

-2.8%

10.2% 9.5%

5.9% 4.9%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

2012-13 2013-14 2014-15 2015-16**

WPI CPI

5

Fiscal and Current Account Deficit

Fiscal Deficit (as a % of GDP) Current Account Deficit

Fiscal Deficit over the last 10 Years (as a % of GDP) Forex Reserves over the last 7 Years (in $ Bn)


3.9% 3.9% Budgeted vs. Actual

Our Views – As prescribed in the revised Fiscal Responsibility

and Budget Management (FRBM) Act, 2003, announced

during the last budget as part of the Medium Term Fiscal

Policy (MTFP) statement, the Central government fiscal deficit,

as a percentage of GDP, was fixed at 3.9% for FY16, and

3.5% (FY17) and 3.0% (FY18) as rolling targets. The road to

achieve 3.5% fiscal deficit in the Budget 2017 as per the

current road-map is hard, but not impossible, given the strain

on government finances.

1.3% 2014-15 vs. 2015-16*

Our Views – There are strong headwinds from the global

financial markets and persistent weak global growth. This is

reflected in the continued deceleration in India’s exports growth.

Based on April 2015 to January 2016 data, Indian exports have

declined by 17.6% and compared to a decline of 1.3% in FY15.

The same has been somewhat offset by a large 15.5% decline

in imports.

Source : Economic Survey 2015-16, *Budget Estimates * 2015-16 : Data is for April 2015- September 2015

279.1 304.8 294.4 292 304.2

341.6 349.6

0

100

200

300

400

2010 2011 2012 2013 2014 2015 2016*

4% 3.30%

2.50%

6% 6.50%

4.80%

5.70%

4.90% 4.50%

4.00% 3.90%

0%

1%

2%

3%

4%

5%

6%

7%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

1.4%

Sectoral Highlights


What does it mean for your business?

7

Agriculture & Farmer’s Welfare


• 6.54% of total plan expenditure is allocated for agriculture and

farmer’s welfare

• Focus on drought prone areas:

• 28.5 lakh hectares to be bought under irrigation

• 89 irrigation projects to be implemented on fast track basis

• A Long term Irrigation fund to be created in NABARD with a corpus of

about Rs. 2,000 Crores

• A Soil Health card scheme to be introduced which will provide soil and

seed testing facilities covering 14 Crore farmers nationwide

• Activities to be undertaken for promotion of organic farming

• Unified Agriculture Marketing e-Platform for wholesale markets to be

introduced

• Pradhan Mantri Gram Sadak Yojana to connect remaining 65,000

habitations by 2019

• In order to reduce the burden of loan repayment on farmers a

provision of Rs 15,000 Crores has been made towards interest

subvention

8

Social & Healthcare


• 27.5% of total planned expenditure is allocated for the social sector

including education and health care

• Rs 2,000 Crores allocated towards LPG connection to Below Poverty

Line families

• National Scheduled Caste and Scheduled Tribe entrepreneurship Hub

to be set up

• New Health protection scheme to cover Rs 1,00,000 per family with

an additional top-up up to Rs 30,000 for senior citizens

• National Dialysis Services Program to be started under PPP mode

• 3,000 medicine stores to be opened under Prime Minister’s Aushadhi

Yojana during 2016-17

9

Governance and Ease of doing Business


• Task Force for rationalization of Human Resource in various

ministries

• Introduction of DBT (Direct Benefit Transfer) on pilot basis for

fertilizer

• Automation facilities to be provided in 3,00,000 fair price shops

• Amendments in Companies Act to make a suitable environment for

start- ups

• Price stabilization fund with a corpus of Rs 900 Crores to help

maintain stable prices of pulses

• “Ek Bharat Shrestha Bharat” program to be launched to connect

people through exchanges in language and culture

10

Rural Sector Reforms

• Total allocation for Rural Sector for the Budget Year 2016-17

amounts to Rs. 87,765 Crores

• For strengthening Gram Panchayats and Municipal Corporations,

a sum of Rs. 2,87,000 Crores will be given

• Mahatma Gandhi National Rural Employment Guarantee Act has

been allocated Rs. 38,500 Crores

• A deadline of 1st March, 2018 has been set for the 100%

electrification of villages in India

• A digital literacy mission scheme for rural India has been launched

to cover around 6 crore additional households within the next 3

years

• Schemes such as Shyama Prasad Mukherjee Rurban scheme to

develop 300 Rurban Clusters have been launched

• National Land Record Modernisation Programme has been

revamped


11

Financial Sector Reforms

• Comprehensive code on Resolution of Financial Firms to be

introduced and Financial Data Management Centre to be set up

• Monetary Policy Framework has to be assigned a Statutory basis

and a Monetary Policy committee will be set up through the Finance

Bill 2016

• SEBI to formulate New Derivate Products

• SARFAESI Act 2002 to be amended to enable the sponsor of an

Asset Reconstruction Company (ARC) to have 100% stake in ARC

and also permit non-institutional investors to invest in Securitization

receipts

• To facilitate quick and effective litigation, the members and benches

of the Securities Appellate Tribunal to be increased

• Comprehensive Central Legislation to be brought to deal with the

menace of illicit deposit taking schemes

• Public Sector banks to be recapitalized by allocating Rs. 25,000

Crores and RBI to facilitate retail participation in Government

securities

• Amount Sanctioned under Pradhan Mantri Mudra Yojana has been

increased to reach a target of Rs. 1,80,000 Crores

• General Insurance Companies owned by the Government to be

listed in the stock exchanges


12

Education & Skill Development

• 62 new Navodaya Vidyalayas will be opened

• Sarva Shiksha Abhiyan for increasing focus on quality of education

• Regulatory architecture to be provided to 10 public and 10 private

institutions to emerge as world-class Teaching and Research

Institutions

• A Higher Education Financing Agency to be set-up with an initial

capital base of Rs. 1,000 Crores

• Digital Depository for School Leaving Certificates, College Degrees,

Academic Awards and Mark sheets to be set-up

• Total Allocation of Rs. 1,804 Crores for skill development

• 1,500 Multi Skill Training Institutes to be set-up

• National Board for Skill Development Certification to be setup in

partnership with the industry and academia

• Entrepreneurship Education and Training through Massive Open

Online Courses


13

Infrastructure and Investment

• Total investment in the road sector, including PMGSY (Pradhan

Mantri Gram Sadak Yojna) allocation, would be Rs. 97,000 Crores

during 2016-17

• Allocation of Rs.55,000 Crores in the Budget for Roads. Additional

Rs. 15,000 Crores to be raised by NHAI through bonds

• Action plan for revival of unserved and underserved airports to be

drawn up in partnership with State Governments

• Comprehensive plan, spanning next 15 to 20 years, to augment the

investment in nuclear power generation to be drawn up

• 100% FDI to be allowed through FIPB route in marketing of food

products produced and manufactured in India

• A new policy for management of Government investment in Public

Sector Enterprises, including disinvestment and strategic sale,

approved

Steps to revitalize PPPs:

• Public Utility (Resolution of Disputes) Bill will be introduced during 2016-17

• Guidelines for renegotiation of PPP Concession Agreements to be issued

• New credit rating system for infrastructure projects to be introduced


Direct and Indirect Tax Highlights


15

Changes in the Tax laws – affecting Individuals (Personal Taxation)


No increase in

basic exemption

limit for individual

taxpayers

Excise and Customs Service Tax

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assessees’ Personal Taxation

• Resident individual - whose total income does not exceed Rs.5 Lakh - Rebate of Income

tax enhanced u/s 87A from Rs.2,000 p.a. to Rs.5,000 p.a.

• Resident Individual - deduction u/s 80GG in respect of Rent paid - enhanced from Rs.

24,000 p.a. to Rs. 60,000 p.a. where HRA not received from employer.

• Housing Incentives -

• Section 80EE (Deduction for Interest on loan taken for residential house property) –

additional deduction allowed up to a limit of Rs 50,000, over and above the limit of

deduction already available of Rs 2,00,000 u/s 24 for a self-occupied property of interest

on loan subject to:

- where loan is up to Rs.35 Lakhs

- taken from a Financial Institution,

- sanctioned during the period 01-04-2016 to 31-03-2017

- for acquisition of a 1st time residential house

- whose value does not exceed Rs 50 lakhs.

• Sec 24 - For claiming deduction of interest on capital borrowed - time period for acquisition

and construction of a self occupied property increased from 3 yrs. to 5 yrs from the end of

F.Y. in which the capital was borrowed.

16

Changes in the Tax laws – affecting Individuals (Personal Taxation)


• The provisions of section 197A providing non-deduction/lower deduction of TDS by filing

self declaration form in 15G/15H extended to the benefit of recipient of rental income.

• Receipt of shares by individual or HUF as a consequence of demerger or amalgamation of

a company would not attract tax under section 56(2) of the Act

• Increase in surcharge on Taxable Income above Rs. 1 crore from 12% to 15% making

the maximum marginal tax rate from 34.61% to 35.54% causing a tax impact of Rs.

4,63,500 (approx.) on an income of Rs 5 cr.

• Exemption reduced from 100% to 40% in respect of withdrawal of accumulated balance

in recognized PF, NPS and approved superannuation fund.

• Dividend income u/s 10(34) was exempted from tax till A.Y. 16-17 for all class of

assessees. From A.Y. 17-18, such dividends, would be chargeable to tax @10% in the

hands of Resident Individuals, HUF or firms, if the aggregate dividend income is in

excess of Rs. 10 lakhs in a FY.

• Tax at source imposed @1% on purchase of cars exceeding value of Rs.10 Lakh and

purchase of goods and services in cash exceeding Rs.2 Lakh. This is effective from

01.06.2016.


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Changes in the Tax laws – affecting all assessees


• Special dispensation & exemption from levy of DDT on income distributed from SPV

to business trusts (REIT & Invits), subject to the condition of business trust holding

100% share capital of SPV and dividend out of current income. Effective from

01.06.2016.

• Investment Allowance - Sec 32AC(1A) - amended with a view of mitigating hardship in

cases in which assets acquired could not be installed in the same previous year:

- Acquisition of the plant and machinery of specified value and installation of the same

need not be in the same year. Installation may be made up to 31.03.2017 to avail the

benefit of investment allowance of 15%. Applicable for AY 2016-17 and AY 2017-18.

• The Income Declaration Scheme, 2016 - is proposed to enable persons to declare

undisclosed income :-

- On payment of 45% of such undisclosed income (tax @30%, surcharge @7.5% and

penalty @7.5%)

- From 1st June 2016 until a date to be notified by CG.

- Such person shall not be subject to scrutiny & enquiry

- They shall be immune from interest, penalty & prosecution under the Acts.


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• New Dispute Resolution Scheme – introduced:-

- No penalty in respect of cases with disputed tax up to Rs 10 lakh.

- Cases with disputed tax exceeding Rs 10 lakh to be subjected to 25% of the minimum of

the imposable penalty. Any pending appeal against a penalty order can also be settled

by paying 25% of the minimum of the imposable penalty, tax and interest on the

quantum addition.

• Time limits for providing appeal effects provided as 3 months:

- In respect of order passed u/s 250 / 254 / 260 / 262 / 263 / 264 / settlement order u/s

245D(4)

- The 3 months limitation is from the end of the month in which such order is received.

- It can further be increased up to 6 months by special permission of Principal CIT, on the

AO giving reasons in writing for such delay.

• An additional interest of 3% per annum u/s 244A will be provided if the there is delay in

giving appeal effects beyond limit prescribed i.e.3 months.

• Rectification time limit u/s 254(2) reduced - The time limit for rectification of mistake in

an Order passed by the ITAT was 4 years from the date of Order which is now revised to

6 months from the end of the month in which the order was passed.


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• Exemptions & deductions available to assessee’s to be phased out:-

o Profit linked, investment linked and area linked deductions to be phased out

o Sunset clause date will not be advanced

o Tax incentives with no terminal date, now have a sunset date of 31st March 2017

o There will be no weighted deductions from 1st April 2017

Accordingly:

• Weighted deductions u/s 35CCD - reduced from 150% to 100%

• Profit linked deduction u/s 80IA, 80IAB and 80IB - not available to new assessee

from 01.04.2017

• 10AA not available to new assessee from 01.04.2020.

• Incentive to tax Patent Income at lower than MMR - section 115BBF inserted - income

of a resident eligible assessee from royalty shall be taxable @10%(++). No expenditure or

allowance in shall be allowed respect of such royalty income. This amendment will be

applicable from A.Y. 17-18

• Incentive to Start-ups – Start-Ups Business that involves innovation development,

deployment or commercialization of new products or services driven by technology and

intellectual property (IP) given incentives:-

- deduction of 100% of profits for eligible start-ups

- exemption from capital gain tax u/s 54EE, subject to conditions

This amendment will be applicable from A.Y. 17-18


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• Presumptive Taxation extended to Professionals - section 54EE introduced for

resident individuals, HUF and partnership firms engaged in any profession u/s 44AA(1).

Where total gross receipts are upto Rs. 50 lakhs at 50%. No deduction under other

sections 30 to 38 shall be allowed. This amendment will be applicable from A.Y. 17-18

• Existing threshold limit u/s 44AB (Tax Audit) Enhanced for Professionals – with

turnover or gross receipts of Rs. 25 lakhs limit increased to Rs. 50 lakhs. This

amendment will be applicable from A.Y. 17-18

• Existing threshold limit u/s 44AD for Eligible Business Enhanced - with turnover or

gross receipts of Rs. 1 crore has been increased to Rs. 2 crore. This amendment will be

applicable from A.Y. 17-18

• In case of domestic corporate assessee, there are benefits extended to two new

categories of assesses:

• Small and medium assessee, whose turn over is less than 5 Crores in F.Y. 2014-

15, in those cases; the tax rate shall be 29% plus applicable surcharge and cess,

effective tax rate.

• Newly set up domestic companies, engaged in the business of manufacture, shall

be taxed @ 25% at the option of the company, subject to certain conditions.


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21



• Special provision for full value of consideration in certain cases - Section 50C

brought at parity with section 43CA - to provide that where the date of agreement in

which the consideration for transfer of immovable property has been fixed and date of

registration are not same, the stamp duty value on the date of agreement shall be

considered for computing the value of consideration. For this the payment should be made

in advance through cheque, draft or electronic transfer only. This now equates capital

assets (u/s 50C) and stock in trade (u/s43CA) scenarios.

This amendment will be applicable from A.Y. 17-18

• Transaction not regarded as transfer u/s 47(xiiib) - for Conversion of private

company or an un-listed public company to an LLP – additional condition imposed –

existing clause required that the turnover in the previous 3 years does not exceed Rs.

60 lakhs in any year. New condition imposed that the total value of the assets in the

books of accounts of the assessee in the 3 previous years preceding the year of

conversion, should not exceeds 5 crore rupees in any year.


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• Revision of ITR u/s 139(5) extended to belated returns filed u/s 139(4) –The provision

of 139(5) which is for the revision of return has been extended to include belated returns

u/s 134(4). The time period for such revision is one year from the end of relevant

assessment year.

• Integration of technology for processing of ITRs, facilitating paperless assessment &

reduction for manual representation in tax dept.

- Processing of return u/s 143(1) is mandatory before assessment u/s 143(3).

- E-notice to be sent by tax dept.

- E-Communication of data through electronic mode for E-hearing

- E-sahyog portal established for effective resolution of compliance mismatches

• ROI u/s 139(1) mandatory where assessee has exempt income u/s 10(38), even if such

income exceeds the maximum amount not chargeable to tax.

• ITR Filing – Due dates revised:-

- Reduction in time limit for filing ITR u/s 139(4) – when ITR is not filed by the due date

then period of filing available is reduced to the end of relevant assessment year for which

such return is being filed.

Example: For FY 2016-2017 the due date for filing of ITR u/s 139(1) is 30th Sept. 2017. If

ITR has not been filed by such due date, under the old provisions, it could be filed by 31st

March 2019. This time-limit is revised to 31st March 2018. Thus, the time has been reduced

by 12 months for filing of belated ITR.


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23



TDS provisions rationalized - The existing thresholds limit beyond which tax is required to

be deducted at source have been revised. Key amendments are:-

• Threshold u/s 194C for payment to contractors have been increased from aggregate

annual limit of Rs. 75,000 to Rs. 1 lacs

• Threshold u/s 194H for commission & brokerage increased from Rs. 5,000 to Rs. 15,000.

These amendment will take effect from 01.06.2016.

• Penalty Provisions rationalized to provide objectivity and certainty:

- Meaning of concealment done away with for under-reporting & inaccurate particulars

done away with for misreporting. Section 270A introduced in place of section 271(1)(c),

which provides levy of penalty in cases of under reporting and misreporting of income.

- Immunity from Penalty & Prosecution - Section 270AA is introduced providing the

immunity procedure from penalty u/s 270A and prosecution u/s 276C, provided the

assesse pays tax and interest as per notice of demand on the quantum addition and does

not prefer an appeal and makes an application within 1 month from end of the month in

which order is received. The AO is to grant immunity unless the assesse falls within any

of the 6 conditions prescribed. Incase the application is rejected the period of limitation for

filing of appeal before CIT(A) shall exclude the period in which the application is pending

before AO.


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24



Assessment Existing Time Limit Proposed Time Limit

Assessment u/s 143(3)

& 144

24 months from the end of A.Y. in

which income was 1st assessable.

21 months from the end of A.Y. in

which income was 1st assessable.

Assessment u/s 147 12months from the end of financial

year in which notice u/s 148 was

served.

9 months from the end of financial year

in which notice u/s 148 was served.

Fresh assessment in

respect to order u/s

254/263/264

12 months from the end of financial

year in which order u/s 254/263/264 is

passed.

9 months from the end of financial year

in which order u/s 254/263/264 is

passed.

• Schedule of Advance tax Installments equalized for all assesses – with effect from 1st

June 2016 all assesse’s (except eligible assesses) are required to pay Advance tax in 4

installments – as was required to be paid by corporate assesses – i.e. 15th June (15%), 15th

September (45%), 15th December (75%) and 15th March (100%). Corresponding

amendment has been made in sec 234C.

• Time limits for completing assessments has been revised as under:-

• Stay to be granted on 15% payment of demand by AO – The AO is to grant stay of the

demand on payment of 15% of the quantum demanded within 2 weeks from the date on

which such application is made. In certain cases where the AO feels that 15% of the

demand would not be sufficient, may make an application to The Principal CIT, who will

decide the quantum, within 2 weeks from the application of the AO.


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Changes in the Tax laws – affecting Cross Border Transactions & Transfer Pricing


No change in tax

rates & surcharge

for Foreign

Companies

• Deferment of POEM based resident test by one year in order to provide clarity regarding

guidelines and applicability of other provisions of the Act to foreign companies.

• Foreign companies assessable for the first time may be subjected to a simplified tax

regime as may be notified by Government.

• Exemption from the requirement of furnishing PAN under section 206AA to non-resident in

respect of payment of interest on LT bonds (S.194LC) and any other payment subject to

certain conditions as may be prescribed by the Government.

• AO’s right to file appeal to ITAT against directions of the DRP withdrawn.

• BEPS-Country by country reporting (CbyC) provisions proposed to apply on constituent

entity/Parent entity in India forming part of international group having consolidated revenue

above a threshold which is to be prescribed (Intl. consensus is €750 million or INR 5,395

Crores). Non-compliance to attract onerous penalties.

• E-commerce : A new tax namely ‘Equalization levy’ @ 6% proposed to be levied on

amount of consideration for specified services received or receivable by a non-resident not

having PE in India in certain cases. Payer to deduct the levy on consideration

paid/payable, failing which payment would suffer disallowance.

• General Anti-Avoidance Rule (GAAR) : No deferral of GAAR provisions i.e. GAAR

provisions will be applicable w.e.f. A.Y. 2018-19 (FY 2017-18)

• In the last budget, Government proposed to notify rules for giving foreign tax credit.

However no such rules notified till date.


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• Levy of Krishi Kalyan Cess on all services – Resulting in increase in the rate of

service tax from 14.5% to 15%. Applicable from 01.06.2016.

• Legal Service now removed from Reverse Charge and brought to Direct Service tax

would be levied @ 14%. Applicable from 01.04.2016.

• List of negative services has been extended.

• Exemption given to services provided by Employee’s Provident Fund Organization

(EPFO) to employees.

• Benefit of quarterly payment of Service tax extended to One Person Company and HUF.

• Point of Taxation Rules, 2011 is being amended – to determine the point in time when

service has been provided or agreed to be provided.

• Time limit for filing of application for refund of CENVAT Credit in case of export of

services has been amended.

• To reduce compliance cost – No. of Returns to be filed decreased from 27 to 13 i.e. 1

Annual & 12 monthly.

• Provision related to Input Service distributor changes – to improve credit flow and

reduce compliance burden and litigations.

• CENVAT Credit Rules amended to provide reversal on Input/Input Services.

• Increase the limitation period of Demand Notice from 18 to 30 months.

• No Service tax for housing construction of houses less than 60 sq. meter

Increase in the rate of

service tax to 14% from

12.36% effective from

01.06.2015

Swachh Bharat Cess

(SBC) is applicable @

0.5% w.e.f 15.11.2015

And now Krishi Kalyan

Cess of 0.5% w.e.f

01.06.2016

Effective rate of Service

Tax to be 15% on all

taxable services.

Changes in the Tax laws for Indirect Taxes


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• Customs Single Window Project to be implemented at major ports and airports starting

from beginning of next financial year.

• Customs Act to provide for deferred payment of customs duties for importers and

exporters with proven track record.

No change in Basic

rates of –

Excise Duty

Custom Duty

• To curb pollution Infrastructure Cess has been introduced in addition to Excise Duty

on:-

• Motor Vehicles –

• Petrol/LPG/CNG - length not exceeding 4m & engine capacity not exceeding

1200cc – 1%

• Diesel - length not exceeding 4m & engine capacity not exceeding 1500cc –

2.5%

• Other - higher engine capacity motor vehicles, SUVs & bigger sedans – 4%

• Categories exempt - Three wheeled vehicles, Electrically operated vehicles,

Hybrid vehicles, Hydrogen vehicles based on fuel cell technology, Motor vehicles

which after clearance have been registered for use solely as taxi, Cars for

physically handicapped persons and Motor vehicles cleared as ambulances or

registered for use solely as ambulance, No credit will be given for this cess



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Taxation – All


• Clean Energy Cess (now renamed as Clean Environment Cess) increased from RS.

200/ton to 400/ton on coal, lignite and peat

• Cigarettes (excluding bidis) - Increase in Excise Duty across all lengths filter and non

filter

• Refrigerated Containers – Excise duty reduced from 12.5% to 6%

• Mineral Water / Aerated Water containing added sugar or other sweetening matter or

flavor – Excise Duty reduced from 18% to 12%.

• Solar Lamps - Excise duty abolished

• Ready mix concrete manufactured at construction site - Excise duty abolished

• Sacks and bags of plastic - Excise duty rationalised from 12% to 15%


• Branded Readymade Garments - Excise Duty increased to 2% (without CENVAT credit)

or 12.5% (without CENVAT credit) in respect of retail sell price of Rs. 1000/- or more

• Articles of Jewellery [excluding silver jewellery, other than studded with diamonds or

other precious stones namely, ruby, emerald and sapphire] – Excise Duty of 1% [without

CENVAT credit] or 12.5% [with CENVAT credit]

• Plans, Drawings and Designs – Customs duty levied at 10%


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Cross Border

Taxation & Transfer

Pricing

Taxation – All



Other rationalization and ease of administration measures :-

• Monetary Limit of disputed amount before Single Member Benches (SMC) increased from

15 Lacs to 50 Lacs.

• Number of CESTAT Benches increased by 11

• Indirect tax Dispute Resolution Scheme, 2016 introduced – in cases pending before

Commissioner (Appeals), the assessee, after paying the duty, interest and penalty

equivalent to 25% of duty, can file a declaration such that the proceedings will be closed.

He will get immunity from prosecution (subject to certain conditions.

• Cenvat Credit Rules, 2004 - amended to effect better input tax credit flow including

apportionment of credit.

• Number of returns under Excise reduced from 27 to 13 – 12 monthly and 1 annual.

• Revised returns option available to manufacturers under Excise laws.


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Cross Border

Taxation & Transfer

Pricing

Taxation – All


Conclusion


India is a lone bright star today in the world economy having grown at 7.6% in 2015-16. Despite global

economic woes and two consecutive monsoon shortfalls, the Indian economy is chugging along quite well.

Our foreign exchange reserves are at an all time high, our current and fiscal account deficits are on target

and the government is taking strong measures to build infrastructure, encourage FDI and increase job

creation. The global scenario seems quite gloomy today, but India with its favourable demographic

dividend and strong focus on inclusive growth is on a long-term path of progress and prosperity.

Sources

Speech of Hon’ble Finance Minister Shri Arun Jaitely

Finance Bill, 2016

Memorandum to Finance Bill, 2016

Economic Survey of India 2016

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