CMA Ashok Nawal

Date : 3rd March 2016CMA Ashok NawalBizsolindia Services Pvt. Ltd.

BUDGET ANALYSIS 2016-17© All right Reserved with Bizsolindia Services Pvt. Ltd.


• Budget Overview

• Customs Act & Rules made thereunder

• Central Excise Act 1944

• Central Excise Rules, Cenvat Credit Rules & Other Rules underCentral Excise

• Service Tax

• Central Excise Tariff

• Customs Tariff

• Income Tax Act

Budget Analysis 2016-17



• Fiscal deficit remains to be 3.9% of GDP as planned for the year2015-16 and target for 2016-17 3.5%.

• Revenue Deficit target from 2.8% to 2.5% in RE 2015-16

• GDP Growth is 7.6%

• Highest Forex reserve 350 Billion.

• Sustainability of Indian Economy inspite World Wide recession

• If subsidy cut from 2.07% to 1.66% of the GDP

• No confirmed date for GST



• Difficult task in the continued Global recession tomaintain sustainability

• 7th Pay Commission forthcoming – Steep increased inthe expenditure

• Turbulent GST Road Map



» Agriculture : More than Rs. 1,15,000 Cr allocated fordevelopment of various schemes.

» Infrastructure : Total outlay for infrastructure Rs 2,21,246 crore

» Make in India : Changes in customs and excise duty rates oncertain inputs to reduce costs and improve competitiveness ofdomestic industry in sectors like Information technologyhardware, capital goods, defence production, textiles, mineralfuels & mineral oils, chemicals & petrochemicals, paper,paperboard & newsprint, Maintenance repair and overhauling[MRO] of aircrafts and ship repair.



» Startup & Stand Up : Income Tax Exemption forStartup Units & “Stand Up India Scheme” to facilitateat least two projects per bank branch. This will benefitat least 2.5 lakh entrepreneurs

» National Scheduled Caste and Scheduled Tribe Hub tobe set up in partnership with industry associations.



» Skill India :

˃ 62 new Navodaya Vidyalayas will be opened

˃ Sarva Shiksha Abhiyan to increasing focus on quality ofeducation

˃ Allocation for skill development – ` 1804. crore.

˃ 1500 Multi Skill Training Institutes to be set-up

» Digital India – Number of measures including :

˃ A new Digital Literacy Mission Scheme for rural India to coveraround 6 crore additional household within the next 3 years

˃ National Land Record Modernization Programme has beenrevamped and Mark sheet etc.



» Focus on Employment

˃ Income Tax benefit - Deduction under Section 80JJAA of theIncome Tax Act

˃ 100 Model Career Centres to operational by the end of2016-17 under National Career Service.

˃ Model Shops and Establishments Bill to be circulated toStates.



» Social Security : Number of Tax Measures

˃ Allocation for social sector including education and health care – Rs.1,51,581 crore.

˃ Rs 2,000 crore allocated for initial cost of providing LPG connections toBPL families.

˃ New health protection scheme will provide health cover up to Rs. Onelakh per family. For senior citizens an additional top-up package up to Rs.30,000 will be provided.

˃ 3,000 Stores under Prime Minister’s Jan Aushadhi Yojana will be openedduring 2016-17.

˃ ‘National Dialysis Services Programme’ to be started under NationalHealth Mission through PPP mode



» Addition of Textiles and Jewellery sector in the excise net,

» Increase in service tax rate by way of introduction of KrishiKalyan Cess (KKC),

» Increase in Excise duties by adding Infrastructure Cess,

» Annual return introduced for Service tax and Central Excise withthe provision of filing revised returns.

» Enhancing the definition of Cenvat Credit on Capital goods,inputs and also simplifying the Cenvat Credit Provisions w.r.t.reversal of Cenvat Credit in terms of Rule 6.

» Negative list of services has been reduced and exemption hasbeen provided.


13

Section 2 (43) : Definition of “Warehouse” :“warehouse" means a public warehouse licensed under section 57 or aprivate warehouse licensed under section 58 OR Special Warehouselicense u/s 58A

Section 2 (45) : Definition of “Warehousing Station” : Deleted“warehouse" means a public warehouse licensed under section 57 or aprivate warehouse

Section 9 : Power to declare places to be warehousing stations:Deleted : Relief for EOU

Section 25(4) & (5): Power to grant exemption from dutyNo Need to publish & print in Official Gazette


14

Section 28 : Recovery of duties not levied or short-levied or erroneouslyrefunded.

Any duty has not been levied or not paid or has been short-levied or short-paid or erroneously refunded – Error Corrected

Limitation period extended from 1 year to 2 years

Section 47(1) & (2) :Clearance of goods for home consumption

Deferment of Custom Duty for certain class of importer. Class of importer andthe deferment period / installment may be notified by separate rules.


15

Section 51(1) & (2): Clearance of goods for exportation.

Deferment of Export Duty for certain class of Exporter. Class of Exporter andthe deferment period / installment may be notified by separate rules.

Section 53 : Transit of certain goods without payment of duty

The proposed new section 53 seeks to empower the Board to make regulationsto provide for conditions subject to which the proper officer may allow thegoods & the conveyance to transit without payment of duty.

Proper Officer has been inserted, perhaps this may be for ease of doingbusiness and it may be given to the stage of appraiser.


16

Section 57 & 58 : Appointing of public warehouses & Licensing of privatewarehouses.

Upward delegation. Now Principal Commissioner / Commissioner will grant theLicense instead of AC / DC.

License under Section 58 will be record based control. Physical controlabolished. EOU beneficiary.

License under Section 58A will have physical control and will be granted onlyfor specified class of goods, mainly for sensitive goods. Provision ofCancellation. Any contravention noticed and duty will have to be paid within7 days. No operation during suspension period


17

Section 59 : Warehousing bond

Bond amount equivalent to 3 times of the duty instead of 2 times.

Payment of Rent and other charges not to be insisted, since it is the duty of thecustodian to recover.

No MOT charges

Section 60 : Permission for deposit of goods in a warehouse.

The provision has been made for transfer from warehouse to another customstation and rules will be prescribed subsequently.


18

Section 61 : Period for which goods may remain warehoused

Warehousing period for capital goods till the time EOU, EHTP, STP remainsunder bonded premises.

Warehousing period for inputs till it is consumed.

In other cases warehousing period is one year and can be extended byPrincipal Commissioner / Commissioner.

Section 62 : Control over warehoused goods : Omitted

This is a welcome step for ease of doing business. Now there will be a recordbased control on such warehouses except for warehouses setup under section58A and hence there is no need of payment of MOT charges by EOU except forclass of goods which is notified under section 58A.


19

Section 63 : Payment of rent and warehouse charges. : Omitted.

This is a welcome step for ease of doing business. Otherwise also this was the issue of the custodian i.e. owner of warehouse and not the custom officers.

Section 64 : Owner's right to deal with warehoused goods..

NO MOT Charges

No segregation of damaged or deteriorated goods

No change in container packing & not to take samples of goods withoutpayment of duty


20

Section 65(1): Manufacture and other operations in relation to goods in awarehouse

Principal Commissioner / Commissioner to grant the license

Section 68 : Clearance of warehoused goods for home consumption

Rent and other charges have been removed

It is a welcome step, since it is the issue of owner of the warehouse i.e. custodian and not the custom officer


21

Section 69(b) : Clearance of warehoused goods for exportation.

Rent and other charges have been removed

It is a welcome step, since it is the issue of owner of the warehouse i.e. custodian and not the custom officer

Section 71 : Goods not to be taken out of warehouse except as provided bythis Act.

Re-exportation has limited meaning whereas “export” word have wider meaning.

It will avoid litigation, since re-exportation may be considered as same party from which goods are exported


22

Section 72 : Goods improperly removed from warehouse, etc.

Since, samples cannot be taken in the warehouse as amended in Sec 64, corresponding provision has been deleted.

Similarly, fine & penalties has been added for payment before clearance andrequisite of payment of rent prior to clearance is dispensed with, since it is theduty of custodian and not the custom officer.

Section 73 : Cancellation and return of warehousing bond

When goods are transferred to other customs station or warehouse then bondgiven to earlier custom warehouse is allowed to be transferred


23

Section 73A : Custody and removal of warehoused goods.

The provision has been inserted so as to recover the duty either from custodian or importer as may be prescribed to protect the revenue.

Liability of duty interest fine will be on importer and or custodian, as the case may be. This will case more responsibility on custodian

Section 156 : General power to make rules

This provision was omitted by Sec 80 of the Finance Act 1988 and now further reinstated :(c) the due date and the manner of making deferred payment of duties, taxes, cesses or any other charges under sections 47 and 51.This amendment is necessary , since deferred payment of custom duty will be allowed for the certain class of the importer as explained in Sec 47 above


25

New baggage Rules 2016 replaced old Rules

Passengers arriving from countries other than Nepal Bhutan orMyanmar will be allowed clearances without payment of duty for usedpersonal effects excluding Jewellery, travel souvenirs other thanfollowings upto Rs.50,000/- per persons and Rs.15,000/- per infants forused personal effects.

• Fire arms.• Cartridges of fire arms exceeding 50.• Cigarettes exceeding 100 sticks or cigars exceeding 25 or tobacco

exceeding 125 gms.• Alcoholic liquor or wines in excess of two litres.• Gold or silver in any form other than ornaments.• Flat Panel (Liquid Crystal Display/Light-Emitting Diode/ Plasma)

television.


26

Passengers arriving from Nepal, Bhutan and Myanmar will be allowedclearances without payment of duty for used personal effects excludingJewellery, travel souvenirs other than followings upto Rs.15,000/- perpersons and used personal effects for infants

• Fire arms.

• Cartridges of fire arms exceeding 50.

• Cigarettes exceeding 100 sticks or cigars exceeding 25 or tobaccoexceeding 125 gms.

• Alcoholic liquor or wines in excess of two litres.

• Gold or silver in any form other than ornaments.

• Flat Panel (Liquid Crystal Display/Light-Emitting Diode/ Plasma)television.


27

Passenger residing abroad more than 1 year will be allowed to duty free

clearances upto 20 gm with value cap of Rs. 50,000/- for male passenger

and 40gm for with value cap of Rs. 1 lakh for lady passenger.

Person residing abroad and transferring the residence permanently are

allowed to carry articles duty free as allowed in the schedule.

Declaration is required to be filed by the passenger who come to India

and have anything to declare or carrying dutiable or prohibited goods


28

Earlier Rules are totally replaced. New Rules will be effective from 01st

April 2016

This Rule will be applicable when importer being manufacturer intends

to avail exemption on goods as notified under section 25(1) of the

Customs Act, 1962 for the manufacture of excisable commodity

Only information is required to be furnished to Deputy Commissioner of

central Excise giving details of name and address of the manufacturer,

excisable goods which are produced in the factory and having

registration under Rule 9 of the Central Excise Rule 2002 with the

description and nature of the imported goods to be used in the said

manufactured product and port of impotation.


29

Manufacturer needs to furnish yearly estimated quantity and value of to

be imported goods alongwith exemption notification number

Manufacturer needs to furnish the continuity bond with surety or

security with AC/DC of central Excise. Deputy Commissioner of central

Excise will forward the copy of information so received to Deputy

Commissioner of Customs

Manufacturer have to filed the information on receipt of goods in the

factory within two days


30

Manufacturer maintain the records w.r.t. quantity and value of goods

imported, goods consumed, goods re-exported and stock and produce

the same whenever require by AC/DC of central excise and also submits

quarterly return on or before 10th day of following quarter

Re-export or clearance of unutilized or defective goods will be allowed

to be re-exported within 3 months from the date of export subject of

value should not be lowered than of import. It is required to be cleared

for home consumption or violation of the provisions of the Rules,

differential duty alongwith interest will be paid.


31

Rate of Interest notified as 15% w.e.f. 1st April 2016


34

• Section 5A(5 & 6) : Power to grant exemption from duty ofexcise :

No Publication in the official Gazette & Sale – Digital India.

To overcome the judgement of Supreme Court in the case ofUnion of India Vs. Param Industries Ltd. (2015-321-ELT-192)

• Section 11A : Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded

Limitation period extended from one year to 2 years

• Section 37B : Instructions to Central Excise Officers. –

Circulars can be issued even for any provision of the Act & Rules.Circular issued u/s 37B is binding on Assessee as well asDepartment

From the date of Ascent


36

• Description of certain items has been harmonized in HSN (w.e.f.1st Jan 2017)

• Milt will also not cover under Chapter Heading 3. CirrhineusSpp, Catla catla, Labeo spp., Osteochilus hasselti, Leptobarbushoeveni, Megalobrama spp.) will fall under chapter heading0301 93 00.

• Similarly Chapter Heading 0302 has been substituted in theTariff as FISH, FRESH OR CHILLED, EXCLUDING FISH FILLETSAND OTHER FISH MEAT OF HEADING 0304

• Tariff Rate for certain items has been revised which is effectivefrom 1st March 2016.



37

• Special Additional Duty imposed on various itemsincluding automobiles, rubber, High tenacity polysteryarn and ceiling, floor, self-contained & “split-system AC



39

• It will be applicable for all the disputes pending beforeCommissioner (Appeals) as on 01.03.2016 and will be valid upto31.12.2016.

• Applicable for dispute related to Central Excise, Customs andService Tax matters.

• Assistant Commissioner / Deputy Commissioner will be designatedauthority under the scheme as notified.

• Declaration needs to be filed by the declarant (Appellant) optingfor such scheme in the prescribed format.

• Declarant (Appellant) will have to discharge duty liability alongwith interest and 25% penalty within 15 days after declaration isfiled and acknowledged.

w.e.f. 01.06.2016 upto 31.12.2016


40

• Submit the proof of payment within 7 days from the date ofpayment.

• Designated authority will pass an order of discharging the dues

• Provision of this scheme is not applicable if,

a. the impugned order is in respect of search and seizure proceeding; or

b. prosecution for any offence punishable under the Act has been instituted before the 1st day of June, 2016; or

c. the impugned order is in respect of narcotic drugs or other prohibited goods; or

w.e.f. 01.06.2016 upto 31.12.2016


41

d. impugned order is in respect of any offence punishable under theIndian Penal Code, the Narcotic Drugs and Psychotropic SubstancesAct, 1985 or the Prevention of Corruption Act, 1988; or

e. any detention order has been passed under the Conservation ofForeign Exchange and Prevention of Smuggling Act, 1974.

• After getting the discharge order, Appeals before Commissioner(Appeals) will be stand disposed and immunity from other proceedingswill be granted.

• No re-opening of discharge order is permitted.

• No refund also will be granted after the payment by the declarant.

• Such declaration & discharge order will not be considered merit and willnot have any binding effect.

• Central Govt will make necessary rules in this regard.

w.e.f. 01.06.2016 upto 31.12.2016


43

• No Infrastructural Cess on Ambulance, Taxi, Electrically operatedvehicles, including three wheeled electric motor vehicles, Hybridmotor vehicles, Three wheeled vehicles, Cars for physicallyhandicapped persons, Hydrogen vehicles based on fuel celltechnology

• Motor vehicle on LPG, CNG upto 1200 CC but length less than4000 mm – 1%

• Diesel driven Motor vehicles less than 1500 cc – 2.5%

• All other vehicles – 4%

w.e.f. 01.03.2016


46

• Increase in the scope of the definition of the capitalgoods (w.e.f. 1st April 2016):

Cenvat Credit on wagons brought by service providerscarrying the goods by rails will be available.

Capital goods used in office located within the factorypremises.

Capital Goods used outside office for pumping of the waterfor captive consumption


47

• Increase in the scope of the definition of the inputgoods (w.e.f. 1st April 2016):

Capital Goods having value Rs 10,000 or less will be treated as

Inputs Goods. Full cenvat credit will be allowed on those

goods on receipt of goods.

Goods used (other than Capital Goods) used outside office for

pumping of the water for captive consumption


48

• Change in Rule 6 of Cenvat Credit Rules

Applicable in case of manufacturer of taxable goods / Servicesand exempted goods / services.

Intimation to given to central excise for option to availed.

Payment on provisional basis (i.e. on the basis of previousyears turnover) to be paid on the monthly basis.

Final payment on the basis of current year turnover by 30th

June of succeeding year.

Steps to be followed w.e.f. 1st April 2016


49

• Steps to be followed..

Exclusive manufacturer / service provider of exempted services –No cenvat credit on any of the inputs and input services.

Both Exempted and Taxable goods / services

Option 1 : Pay amount equal to 6% of value of exempted goods and 7% of value of exempted goods

The amount in option 1 cannot exceed the amount of cenvat credit available at the end of the period to which the payment relates.

Option 2: Pay an amount as determined under sub-rule 3(A)


50

• Sub-Rule 3(A) of Rule 6

Credit availed during the period = T (Denoted as T)

Credit exclusively towards exempted goods / services = A

Credit exclusively related to taxable goods / services = B

C (Common Credit) = T- (A+B)

Allocation of Common Credit i.e. C to exempted and taxable goods on the basis of ration of turnover.


51

• Sub-Rule 3(A) of Rule 6

D (Credit pertaining to exempted goods / services) = (E/F) x C

E : Value of exempted Goods / Services during PY.

F : Sum of value of exempted goods / services + Sum of value of value of taxable goods / services during PY

G = C-D (Common eligible credit)

Total credit to be retained B + G and total credit to paid A + C


52

• Input Service Distributor

Change in formula of distribution of credit

o Credit not to exceed the amount of tax mentioned in thedocuments.

o Credit attributable to particular unit to be distributed tothe same unit.

o Credit attributable to more than one unit to distributed toall such unit based on turnover of those unit.

o Balance common credit to be distributed to all the unitson the basis of turnover.

Credit can be transferred to outsourced manufacturing unit.


53

• Input Service Distributor

(w.e.f. 1st April 2016)

Provisions of Rule 6 will not be applicable to ISD

No change in the basis to arriving the turnover

o Turnover as per Rule 5 of Cenvat Credit Rules, 2004

o Turnover of preceding financial year

o In case of new units turnover of last quarter to be taken


54

• Common Warehouse for all the manufacturing

Units (w.e.f. 1st April 2016)

Move towards GST..

A manufacturer can have common warehouse for inputs.

The warehouse needs to be registered as First Stage Dealer.

The warehouse can avail the credit of duties on the basis ofinvoices received from the supplier.

At the time of removal of goods the warehouse, invoice to beprepared by warehouse and credit can be availed by the Unitson the basis of the such invoice.


55

• Outsourced manufacturing Unit (Job worker)

w.e.f. 1st April 2016

Applicable to

o Job worker liable to pay CE duties under Rule 10A ofCentral Excise Valuation Rules, 2002 or

o a manufacturer manufacturing goods under brand nameof ISD.

The raw material supplier can transfer the credit to the jobworker by ISD mechanism.

Job worker is requirement to maintain separate records forthe credit received under ISD and utilization thereof.


56

• Restriction in availment of Cenvat Credit

Specific restriction on utilization of Cenvat Credit of other

duties for payment of NCCD on any goods have been placed.

(1st March 16)

No credit will be available Infrastructure Cess. (1st March 16)

Cenvat Credit on service tax paid on payment of right of

natural resources will be available proportionately over the

period of the right. (1st April 16)


57

• Rate of interest has been reduced from 18% to 15% perannum w.e.f. 1st April 2016

• Two or more premises of the same factory within theclose area and the manufacturing process undertakentherein are interlinked without any separation by publicroad, railway line or canal, The Commissioner of CentralExcise may allow single registration. (1st March 2016)

• Personal penalty on any other person cannot beimposed if the assessee pays duty with interest andpenalty under 11AC. (1st April 2016)


59

• Simplification in compliances

No need to file following returns (w.e.f. 1st April 2016),

o ER-5 (yearly return) related to principal inputs.

o ER-6 (monthly return) consumption of principal inputs.

o ER-7 (yearly return) Annual Installed Capacity Statement

Provision of revision of return filed under the Central Excise.The revised return can be filed by end of the respectivemonth during which the return was due to be filed. (1st April2016)


60

• Export of Services : Relevant date for exports

(w.e.f. 1st March 2016)

Relevant date for filing of Refund claim w.r.t. Services hasbeen prescribed as

o When service is completed - date of receipt of payment inconvertible foreign exchange,

o When Advance is received: date of issue of invoice.

This will be mainly applicable in case of deciding the relevantdate for refund of cenvat credit to service exporter.


61

• Permission can be given for clearance of finished goodsfrom job worker for a period of three years. Earlier itwas for a period of one year. (Rule 4 – Sub-rule6 ofCenvat Credit Rules) (w.e.f. 1st April 2016)

• Facility of sending Jigs/molds /dies directly to the jobworker. (Rule 4 – Sub Rule 5(b) of Cenvat Credit Rules).(w.e.f. 1st April 2016)


62

Output Rebate (1st March 2016)

• Indian market price of the excisable goods at the time ofexportation should not be less than the amount ofrebate of duty claimed. i.e. in case of FOC exportsrebate is not eligible.

• Limitation period for filing of Rebate Claim is specificallyprescribed as one year from the date of let export orderas per Section 11B.

Input Rebate (1st March 2016)

• Certificate from Chartered Engineer certifyingcorrectness of Input Output Ratio will be required.


64

• Centralized registration for all the units.

• No physical verification to be carried while granting theregistration

• Simplified Returns

• Valuation at transaction value instead of fixed tariffvalue.

• Quarterly payment of central excise duties for SSI Units(12 Cr turnover).


66

ProductsEntry No. Change

Soap 3930% abatement extended to all goods under CETH 3401

Organic surface active agents 4030% abatement extended to all goods under CETH 3402

Footwear 56 Rate of abatement increased from 25% to 30%

Aluminium foil of thickness not exceeding 0.2 mm. 64A New entry inserted specifying abatement of 25%

wrist wearable devices (smart watches) 87A New entry inserted specifying abatement of 35%

Part, Components and Assemblies ofVehicles 108

Proposed inclusion of “accessories” with existing rate of 30%

Part, Components and Assemblies of goods falling under CETH 8426 41 00,8427, 8429, 8430 10 with the proposed inclusion of accessories

109Proposed inclusion of “accessories” with existing

rate of 30%


Krishi Kalyan Cess- w.e.f 1st June 2016

• Krishi Kalyan Cess @ 0.5% is levied on all or any of the taxable services

• Purpose is to finance and promote initatives to improve agriculture or for any other purpose relating thereto.

• Credit of Krishi Kalyan cess paid on input services shall be allowed to be used for payment of the proposed cess on the service provided by a service provider

• unlike Swatch Bharat cess it is not a cost to a service provider

68


Lottery distributor or a selling Agent w.e.f. enactment of Finance Bill (sec 66D- Negative List)

• Betting, Gambling and Lottery removed from Negative list of Services Hence activity carried out by lottery distributor or selling agent of thestate Government is levilable to Service tax.

Right to use Spectrum services w.e.f. enactment of Finance Bill (sec 66 E)

• Right to use radio frequency spectrum proposed to be a declared service

• More clarity on taxability of such services• Cenvat Credit to be spread over a period of time for which the rights

have been assigned• Service tax levied on further assigning of such rights in favour of

another entity. 69


Transportation of passengers by stage carrier w.e.f. 1st June 2016 (Sec 66 D-Negative List)

• Services omitted from Negative list

• Exemption for Services only in case of non Air Conditioned Contract carriages

• Abatement of 60% available on taxable value subject to no Input tax credit

• Proposed tax rate works out to 5.6%

Transportation of passengers by rope way, cable car, aerial or tramway w.e.f. 1st April 2016

• Exemption withdrawn

• Effective basic rate 14% with no abatement

70


Transportation of household goods w.e.f. 1st April 2016

• Shifting of used Household goods by GTA is categorized separately

• Abatement to the extent of 60% instead of 70% in case of transportation of goods by GTA other than household.

• Effective rate 5.6% of the taxable value

• No input tax credit available

Original works to monorail or metro w.e.f. 1.03.2016

• Withdrawal of Exemption to construction, erection, commissioning or installation of original works pertaining to monorail or metro, in respect of contracts entered into on or after 1st March 2016 (60% abatement)

71


Services provided by foreman of Chit fund w.e.f. 01.04.2016

• The rate of service tax on the services of a foreman to a chit fund being rationalized with an abatement of 30%, without input tax credit

Services provided by Tour Operator w.e.f. 01.04.2016

• Abatement @ 40% will be allowed for transport of passengers, with or without accompanied belonging, service provided by tour operator other than services solely of arranging or booking accommodation for any person will be entitled for 70% abatement

• Service provided by Air travel Agents to Companies providing Computer reservation System is neither cover in the Negative List nor exempt by way of notification and hence taxable (clarification) 72


Transportation of goods by an aircraft or a vessel w.e.f. 1st March 2016 (Sec 66D - Negative List)

• Omitted from Negative List

• Exemption to continue for services by an aircraft for transportation of goods from a place outside India to the customs station of clearance

• Domestic shipping lines registered in India will pay service tax under forward charge and will be considered zero rated, hence entitled for Refund of Input Service tax being export of services.

• Services availed from Foreign Shipping lines will be taxed in the hands of entity located in India under Reverse charge Mechanism w.e.f.1st

June 2016

73


Service Tax exemption to canal, Dam or other irrigation works with retrospective effect (Sec 101)

• Exemption from Service Tax being extended to services provided by way of construction, errection, maintenance, etc of canal, dam or other irrigation works provided to bodies set up by the government w.e.f 31st January 2014

• Exemption period from 1st July 2012 to 29th January 2014 with retrospective effect.

• Refund application to be filled within a period of six months from the date of enactment of the Finance bill.

74


Restoration of certain exemptions withdrawn last year for projects, contracts in respect of which were entered into before withdrawal of the exemption (Sec 102)

• No Service Tax to be levied or collected during the period 1stApril 2015 upto 29th

Feb 2016 in respect of -• Taxable Services provided to the Government , a local authority or a governmental

authority by way of construction, erection, etc. of -(i) a civil structure or any other original works meant predominantly for use other

than for commerce, industry, or any other business or profession; (ii) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or

(iii) an art or cultural establishment; (iii) 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 65B of the said Act;

For contracts entered into before 1st march 2015. Exemption continued till 31st

March 2020• Since it was withdrawn with effect from 1.4.2015. The same is being restored• Refund application to be filled within six months from the date of enactment of the

Finance bill75


Exemption from Service Tax on services by way of construction, erection, etc. of original works pertaining to an airport or port (sec 103)

• Exemption from Service Tax on services by way of construction, erection, etc. of original works pertaining to an airport, port was withdrawn with effect from 1.4.2015.

• The same is being restored for the services provided under a contract which had been entered into prior to 01.03.2015 and on which appropriate stamp duty, where applicable, had been paid prior to that date subject to production of certificate from the Ministry of Civil Aviation or Ministry of Shipping, as the case may be, that the contract had been entered into prior to 01.03.2015.

• The exemption is being restored till 31.03.2020.• The services provided during the period from 01.04.2015 to 29.02.2016 under

such contracts are also proposed to be exempted from service tax• Refund application to be filled within six months from the date of enactment of

the Finance bill

76


Rebate of Service Tax paid on taxable services by exporter of goods with retrospective effect

• Notification No. 41/2012- ST, dated the 29th June, 2012 was amended vide notification No.1/2016-ST dated 3rd February, 2016 so as to allow refund of service tax on services used beyond the factory or any other place or premises of production or manufacture of the said goods, for export of the said goods.

• The said amendment is being given retrospective effect from the date of application of the parent notification, i.e., from 01.07.2012

• Time period of one month is proposed to be allowed to the exporters whose claims of refund were earlier rejected in absence of amendment carried out vide notification No.1/2016-ST dated 3rd February, 2016

77


Value of Renting a Motor car Service

value of renting of motor cab services will include fair market value of all goods (including that of fuel) supplied by service recipient to be added in the gross value by a stage carrier, subject to non-availment of cenvat credit.

78


Mutual Fund Agents/Distributors:

In respect of service provided by mutual fund agent/ distributor to a mutual fund or asset management company will be out of the purview of reverse charge and going forward agent/distributor will discharge Service Tax and also avail the threshold exemption of Rs.10 lakhs

One Person company/HUF:

One person company and HUF having taxable service turnover 50 Lakhs or

less will be entitled to pay service tax on quarterly basis.

The benefits of payment of service tax on receipt basis as available to

individual and partnership firms79


Single Premium Annuity

• The service tax liability on single premium annuity (insurance) policies is being rationalized and the effective alternate service tax rate (composition rate) is being prescribed at 1.4% of the total premium charged (brought down from 3.5%)

Annual return under Service Tax

• New annual return has been specified for the service provider to be filled by 30th November every year

• The class of service provider will be exempted from this compliance

• Annual return can be revised within one month from the date of submission

• Penalty of Rs.100 per day maximum upto 20,000/- will be levied for delay filing of annual return

80


Services Existing Proposed

Services provided by National Centre for Cold Chain Development under Department of Agriculture, Cooperation and Farmer’s welfare, Government ofIndia, by way of knowledge dissemination

14% Nil

Service of life insurance business provided by way of annuity under the National Pension System regulated by Pension Fund Regulatory and Development Authority (PFRDA) being exempted

3.5% Nil

Services provided by Employees’ Provident Fund Organization (EPFO) to employees, being exempted

14% Nil

Services of general insurance business provided under ‘Niramaya’ Health Insurance schemelaunched by National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disability being exempted

14% Nil

81

Service Tax Exemption w.e.f. 1.04.2016



Regulatory services provided by Securities and Exchange Board of India and Insurance Regulatory Development Authority

14% Nil

Services provided by Insurance Regulatory and Development Authority of India (IRDA)

14% Nil

Services provided by Biotechnology Industry Research Assistance Council (BIRAC) approvedbiotechnology incubators to incubates

14% Nil

82




Services of Information Technology software on media bearing RSP, being exempted, provided appropriate Central Excise duty is paid,with effect from 01.03.2016

Nil Nil

Services of assessing bodies empanelled centrally by Directorate General of Training, Ministry of SkillDevelopment & Entrepreneurship

14% Nil

Services provided by way of skill/vocational training by training partners under Deen Dayal UpadhyayGrameen Kaushalya Yojana

14% Nil

83



Exemption withdrawn on Senior Advocates w.e.f 1st April 2016

Exemption withdrawn on Services provided by-• Senior advocate to an advocate or partnership firm of advocates providing

Legal Services • A person represented on an arbitral tribunal to an arbitral tribunal Service Tax to be levied under Forward charge

Services provided by IIM exempted:

Services provided by the Indian Institutes of Management (IIM) by way of 2 year full time Post Graduate Programme in Management (PGPM) (other than executive development programme),

admissions to which are made through Common Admission Test conducted by IIMs,

5 year Integrated Programme in Management and Fellowship Programme in Management are being exempted from service tax

84


Exemption from Service tax on construction services w.e.f 1st march 2016

Service Tax on services in respect of-

• (i) construction services under Housing for All (HFA) (Urban) Mission/MantriAwas Yojana (PMAY);

• (ii) construction projects under “Affordable housing in partnership” component of PMAY subject to carpet area of dwelling units of such projects not exceeding 60 sq mtr

• (iii) low cost houses up to a carpet area of 60 square mtr per house in a housing project under any housing scheme of the State Government

85


Exemption to Artist:

• Consideration upto Rs One Lakh and Fifty Thousand by way of services by an artist by way of every performance in folk or classical art forms of music or dance or theater are exempt from service tax

86


Services provided by Government or Local Authority:

Earlier exemption from Service Tax under Reverse charge was

restricted to support services.

Going forward from 1st April 2016 any services provided by

government or local authority to business entities shall be liable

to service tax under reverse Charge to be discharged by the

service recipient.

87


Recovery of Service Tax

Section 73: The limitation period for recovery of service tax not levied or paid or short- levied or short paid or erroneously refunded, for cases not involving fraud, collusion, suppression etc. is proposed to be enhanced from eighteen months to thirty months

Substitution Interest on delayed payment of Service Tax

Section 75: Any person who collects Service Tax and fails to deposit with the Central Government will pay interest @ 24% or else 15% pa

Concessional rate of Interest for delayed payment- Small assesse

For assesses with taxable value during preceding year/years covered by the notice is less than Rs. 60 lakhs, rate of interest @ 12% on delayed payment of Service Tax will be charged w.e.f enactment of Finance bill

88


Penalty for Offences by Directors, etc. of Company

Section 78A: The penalty proceedings shall be deemed to be closed in cases where the main demand and penalty proceedings have been closed, if the Service Tax along with Interest and penalty is paid within a period of thirty days of the order

Offences and Penalty

Section 89: Imprisonment for a term which may extend to three yearsfor offences such as-• availment of Cenvat credit without receipt of taxable service, • maintaining false books of Accounts, • collects Service Tax but fails to pay to the Government

has been enhanced to 200 lakhs from 50 lakhs89


Power to Arrest

Section 91: The power to arrest in service tax is restricted only to situationswhere the tax payer has collected the tax but not deposited it with theexchequer and amount of such tax collected but not paid is above thethreshold of Rs 200 lakhs. Hence, Power to Arrest will be only in case ofamount exceeding 200 lakhs

90


Indirect tax Dispute Resolution Scheme 2016:

Indirect tax Dispute resolution Scheme 2016, wherein a scheme in respect ofcases pending before Commissioner (Appeals), the assess, after paying theduty, interest and penalty equivalent to 25% of duty, can file a declaration, isbeing introduced

In such cases the proceedings against the assesse will be closed and he will also get immunity from prosecution

91


93

Excise Duty on Pan Masala ( 2106 90 20) increased from 16% to 19%

Excise Duty on other tobacco products falling under heading 2402 as well asunmanufactured tobacco, and jarda scented tobacco, gutkha and chewingtobacco has been substantially increased.

Excise Duty on Paper rolled biris [whether handmade or machine made] andother biris [other than handmade biris] [2403 19 29] is increased from Rs.30per thousand to Rs.80 per thousand

Excise duty on “waters, including mineral waters and aerated waters,containing added sugar or other sweetening matter or flavoured” falling underChapter sub-heading 2202 10 is being increased from 18% to 21%.

The additional duty of excise levied under the Seventh Schedule to the FinanceAct, 2005 on non-filter and filter cigarettes of sub-heading 2402 20 is beingincreased.


94

Articles of Jewellery (excluding article of silver Jewellery, other than thosestudded with diamonds, ruby, emerald or sapphire)- Basic Excise Duty @ 1%has been levied subject to the condition of non availment of cenvat credit ofinputs or capital goods.

Basic Excise duty on Gold Bars manufactured from gold ore or concentrate;gold dore bar and silver dore bar is being increased from 9% to 9.5%.

Basic Excise duty on Gold bars and gold coins of purity not below 99.5%,produced during the process of copper smelting is being increased from 9% to9.5%.

Basic Excise duty on silver manufactured from silver ore or concentrate; silverdore bar and gold dore bar is being increased from 8% to 8.5%.

Basic Excise duty on silver in any form, except silver coins of purity below99.9%, produced during the process of copper smelting is being increasedfrom 8% to 8.5%.


95

Basic Excise duty on silver produced during the process of zinc or lead smeltingis being increased from 8% to 8.5%.

Basic Excise Duty rate on aviation turbine fuel [ATF] [2710 19 20] is beingincreased from 8% to 14%.

Basic Excise Duty on PSF / PFY manufactured from plastic scrap or plastic wasteincluding waste PET bottles is being changed from 2% without CENVAT creditor 6% with CENVAT credit to 2% without CENVAT credit or 12.5% with CENVATcredit.

7323 or 7418 or 7615- All goods other than disposable aluminium foilcontainers, parts and pressure cookers. The disposable aluminum foilcontainers are excluded from exemption notification. Now Duty @ 12.5% ispayable on the aluminium foil containers instead of 6%.


96

Basic Excise Duty on micronutrients falling under Chapter 28, 29 or 38, whichare covered under Sr. No. 1(f) of Schedule 1 Part (A) of the Fertilizer ControlOrder, 1985 and are manufactured by the manufacturers which are registeredunder FCO, 1985, is being reduced from 12.5% to 6%.

Basic Excise Duty on rubber sheets & resin rubber sheets for soles and heels[4008 29 10] is being reduced from 12.5% to 6%.

8413 91 or 8501 31 19- Basic Excise duty on following 5 parts required for usein manufacture of centrifugal pumps falling under tariff item 8413 70 10,namely:-

(i) Shafts (ii) Sleeve (iii) Chamber (iv) Impeller (v) Washer (vi) Electric motor isreduced to 6% subject to actual user condition.

8504- Charger or adapter for manufacture of mobile handsets includingcellular phones. Excise Duty Rate has been reduced to 2% subject to thecondition of non availment of cenvat credit of inputs or capital goods


97

8506, 8507-Battery for manufacture of mobile handsets including cellularphones. 8518 30 00-Wired headsets for manufacture of mobile handsetsincluding cellular phones. 8518- Speakers for manufacture of mobile handsetsincluding cellular phones. Excise Duty Rate has been reduced to 2% subject tothe condition of non availment of cenvat credit of inputs or capital goods.

8517 62 30-Broadband modem. Excise Duty Rate has been reduced to 4%subject to the condition of non availment of cenvat credit of inputs or capitalgoods.

8517 69 30- Routers. Excise Duty Rate has been reduced to 4% subject to thecondition of non availment of cenvat credit of inputs or capital goods.

Basic Excise duty on all goods falling under 8607 (parts of railway or tramwaylocomotives or rolling stock) and 8608 (railway or tramway track fixtures andfitting, etc.) is being reduced to 6%.

Basic Excise duty on refrigerated containers [8609 00 00] is being reduced from12.5% to 6%.


98

Articles of Silver Jewellery, other than those studded with diamond, ruby,emerald or sapphire. SSI exemption is available for value upto 6 crores for thefinancial year 16-17 and subject to clearance in last year is not exceeding 12crores.

Basic Excise Duty on mixture of fertilizers, made by physical mixing of chemicalfertilizers on which appropriate duty of excise has been paid, by Co-operativeSocieties, holding certificate of manufacture for mixture of fertilizers under theFertilizer Control Order 1985, for supply to the members of such Co-operativeSocieties, is being fully exempted.

Ready Mix Concrete [3824 50 10] manufactured at the site of construction foruse in construction work at such site is being fully exempted from excise duty.Also, the expression “site” is being defined in the exemption notification


99

85 or any other Chapter. (a) Inputs or parts for manufacture of charger oradapter of mobile handsets including cellular phones (b) Inputs or sub-partsfor manufacture of parts mentioned at (a) above. Excise Duty has beenexempted subject to actual user condition.

85 or any other Chapter. (a) Parts, components, and accessories formanufacture of routers (b) Sub-parts for manufacture of items mentioned at(a) above. Excise Duty has been exempted subject to actual user condition.


100

Basic Excise Duty on sacks and bags of polymers of any plastics is beingrationalized at 15%.

61, 62 and 63(except 63090000 and 6310)- All goods of cotton, not containingany other textile material, other than those bearing a brand name or soldunder a brand name and having a retail sale price (RSP) of Rs.1000 and above-Concessional rate of duty of 6% is applicable only to branded garments havingRSP less than Rs. 1000.

The validity period of concessional excise duty of 6% granted to specifiedgoods for the use in the manufacture of electrically operated vehicles andhybrid vehicles is being extended without time limit.

89 or any other Chapter. Excise duty on Capital goods and spare thereof, rawmaterials, parts, material handling equipment and consumable for repairs ofocean-going vessels by a ship repair unit is being exempted subject to actualuser condition.


101

90 or 84 - Excise duty has been exempted on Disposable sterilized dialyzer andmicro barrier of artificial kidney.

Solar lamp [tariff item 9405 50 40] is being exempted from excise duty.

Excise duty exemption on remnant kerosene, presently available formanufacture of Linear alkyl Benzene [LAB] and heavy alkylate [HA] is beingextended to N-paraffin arising in the course of manufacture of LAB and HAalso.

The excise duty exemption under the existing Area Based Exemptions for

production of gold and silver from gold dore, silver dore or any other rawmaterial is being prospectively withdrawn. Thus no more excise duty benefitfor existing unit (even for expansion) or new unit on or after 01.03.2016


103

No change in slab and slab rate for Individuals, HUF and Partnership Firms, Co-operative Societies and Local Authorities

Rebate for Individual u/s 87A increased from Rs. 2,000 to Rs. 5,000 w.e.f AY2017-18.

Surcharge has been increased from 12% to 15% for assesses having TotalIncome more than Rs. 1 Crore.

Dividend received by Individual and HUF exceeding Rs. 10 lakhs taxable @ 10%u/s 115BBDA w.e.f AY 2017-18

Section 80GG limit for deduction for rent paid increased from Rs. 2,000 to Rs.5,000 pm where HRA is not received.

Tax exemption on withdrawal of 40% from national pension Scheme at thetime of retirement u/s 10(12A)

40% Withdrawal from Super Annotation Funds proposed to be tax exempt u/s10(13)(ii)


104

Domestic Companies having Total Turnover or Gross Receipts exceeding Rs. 5crores , the Tax rate is proposed at 29% (w.e.f 1.4.2016)

Domestic Companies engaged in manufacture and set up on or after 1st March,2016 , the Corporate Tax rate is 25% (w.e.f 1.4.2017) & does not claim anydeduction, allowances, additional depreciation except 80JJAA & the option isfurnished before due date of furnishing of income.

Other Companies shall be taxed @ 30%.


105

U/s 44AB – TAX Audit :

• Limit of gross receipts for professional increased from Rs. 25 lakhsto Rs. 50 lakhs

• Limit of Turnover u/s 44AD for presumptive Taxation has beenincreased from Rs. 1 crore to Rs. 2 crores.

U/s 44ADA :

• Presumptive Taxation introduced for Professional @ 50% of theGross receipts

• Applicable to Individual, HUF, Firm and not to LLP & Corporates

`


106

U/s 44AD : Presumptive Taxation

Limit exceeded from Rs. 1 Crore to Rs. 2 crores

Salary, remuneration to partner shall not be deductible

TDS provisions shall not apply

Advance tax is required to be paid by 15th March

In case the assesse declares profit less than specified in thesection, he shall not be eligible to claim the benefit of the saidprovisions for five subsequent assessment years.


107

Revised return cannot be filed In case notice is issued under Sec 142 (1).

Belated Return can be revised.

Return filed where tax & interest shown as payable will not beconsidered as defective return under Sec 139 (9).

furnish the return for any previous year at any time before the end ofthe relevant assessment year or before the completion of theassessment, whichever is earlier.


108

Phasing out Deductions and Exemptions :

Section Incentive currentlyavailable

Proposed phased outamendment

10AA- Special provisionin respect of newlyestablished units inSpecialeconomic zones (SEZ).

Profit linked deductions forunits in SEZ for profit derivedfrom export of articles orthings or services

No deduction shall be available tounits commencing manufacture orproduction of article or thing orstart providing services on or after1st day April,2020. (from previousyear 2020-21 onwards).

35AC-Expenditure oneligible projectsor schemes.

Deduction for expenditureincurred by way of payment ofany sum to a public sectorcompany or a local authorityor to an approved associationor institution, etc. on certaineligible social developmentproject or a scheme.

No deduction shall be available witheffect from 1.4.2017 (i.e fromprevious year 2017-18 andsubsequent years).


109

Phasing out Deductions and Exemptions :Section Incentive currently available Proposed phased out

amendment

35CCD-Expenditure on skilldevelopment project.

Weighted deduction of 150per cent on any expenditureincurred (not beingexpenditure in the nature ofcost of any land or building) onany notified skill developmentproject by a company.

Deduction shall be restrictedto100 per cent from 01.04.2020(i.e. from previous year 2020-21onwards).

Section 80IA; 80IAB, and 80IB -Deduction in respect of profitsderive froma) development, operation andmaintenance of aninsfrastructure facility (80-IA)(b) development of specialeconomic zone (80-IAB)(c) production of mineral oil andnatural gas [80-IB(9)]

100 per cent profit linkeddeductions for specifiedperiod on eligible businesscarried on by industrialundertakings or enterprisesreferred in section 80IA;80IAB, and 80IB.

No deduction shall beavailable ifthe specified activitycommenceson or after 1st day April,2017. (i.e from previous year2017-18 and subsequentyears).


110

Phasing out Deductions and Exemptions :Section Incentive currently available Proposed phased out amendment

32 read with rule 5 of Income-tax Rules, 1962- AcceleratedDepreciation.

Accelerated depreciation is provided to certain Industrial sectors in order to give impetus for investment. The depreciation under the Income-tax Act is available up to 100% in respect of certain block of assets.

To amend the new Appendix IA read with rule 5 of Income-tax Rules, 1962 to provide that highest rate of depreciation under the Income-tax Act shall be restricted to 40% w.e.f01.4.2017. (i.e from previous year 2017-18 and subsequent years).The new rate is proposed to be made applicable to all the assets (whether old or new) falling in the relevant block of assets.

35(1)(ii)- Expenditureon scientific research.

Weighted deduction from the business income to the extent of 175 per cent of any sum paid to an approved scientific research association which has the object of undertaking scientific research. Similar deduction is also available if a sum is paid to an approved university, college or other institution and if such sum is used for scientific research.

Weighted deduction shall be restricted to 150 per cent from 01.04.2017 to 31.03.2020 (i.e. from previous year 2017-18 to previous year 2019-20) and deduction shall be restricted to 100 per cent from 01.04.2020 (i.e. from previous year 2020-21 onwards).


111


Section Incentive currently available Proposed phased outamendment

35(1)(iia)-Expenditure onscientific research.

Weighted deduction from the business income to the extent of 125 per cent of any sum paid as contribution to an approved scientific research company.

Deduction shall be restricted to 100 per cent with effect from 01.04.2017 (i.e. from previous year 2017-18 and subsequent years).

35(1)(iii)-Expenditureon scientific research.

Weighted deduction from the business income to the extent of 125 per cent of contribution to an approved research association or university orcollege or other institution to be used for research in social science or statistical research.

Deduction shall be restricted to 100 per cent with effect from 01.04.2017 (i.e. from previous year 2017-18 and subsequent years).


112



35(2AA)- Expenditureon scientific research.

Weighted deduction from the business income to the extent of 200 per cent of any sum paid to a National Laboratory or a university or an Indian Institute of Technology or a specified person for the purpose of approved scientific research programme.

Weighted deduction shall be restricted to 150 per cent with effect from 01.04.2017 to 31.03.2020 (i.e. from previous year 2017-18 to previous year 2019-20). Deduction shall be restricted to 100 per cent from 01.04.2020 (i.e. from previous year 2020-21 onwards).

35(2AB)- Expenditureon scientific research.

Weighted deduction of 200 per cent of the expenditure (not be ing expenditure in the nature of cost of any land or building) incurred by a company, engaged in the business of bio-technology or in the business of manufacture or production of any article or thing except some items appearing in the negative list specified in Schedule-XI, on scientific research on approved in-house research and development facility.

Weighted deduction shall be restricted to 150vper cent from 01.04.2017 to 31.03.2020 (i.e. from previous year 2017-18 to previous year 2019-20).

Deduction shall be restricted to 100 per cent from 01.04.2020 (i.e. from previous year 2020-21 onwards).


113



35AD- Deduction inrespect of specifiedbusiness.

In case of a cold chain facility, warehousing facility for storage of agricultural produce, anaffordable housing project, production of fertiliserand hospital weighted deduction of 150 per cent of capital expenditure (other than expenditure on land, goodwill and financial assets) is allowed.

In case of a cold chain facility, warehousing facility for storage of agricultural produce, hospital, an affordable housing project,production of fertilizer, deduction shall be restricted to 100 per cent of capital expenditure w.e.f. 01.4.2017 (i.e. from previous year2017-18 onwards).

35CCC- Expenditureon notified agriculturalextension project.

Weighted deduction of 150 per cent of expenditure incurred on notified agricultural extension project.

Deduction shall be restricted to 100 per cent from 1.4.2017 (i.efrom previous year 2017-18 onwards).


114

Increase in threshold limit of deduction of tax at source on various payments mentioned in the relevant sections of the Act:

Present Section

Heads Existing Threshold Limit (Rs.)

Proposed Threshold (Rs.)

192A Payment of accumulated balance due to an employee

30000 50000

194BB Winnings from Horse Race 5000 10000194C Payments to Contractors Aggregate annual limit

of Rs. 75000Aggregate annual limit of Rs. 100000

194LA Payment of Compensation on acquisition of certain immovable property

200000 250000

194D Insurance commission 20000 15000194G Commission on sale of

lottery tickets1000 15000

194H Commission or brokerage 5000 15000


115

Revision in rates of deduction of tax at source on various payments mentioned in the relevant sections of the Act:

Present Section

Heads Existing Rate of TDS (%)

Proposed Rate of TDS (%)

194DA Payment in respect of Life Insurance Policy

2% 1%

194EE Payments in respect of NSS Deposits

20% 10%

194D Insurance commission 10% 5%194G Commission on sale of

lottery tickets10% 5%

194H Commission or brokerage 10% 5%


116

Revision in rates of deduction of tax collection at source:

Certain non-operational provisions to be omitted:

Present Section

Heads Existing Rate of TCS (%)

Proposed Rate of TCS(%)

206C Motor Vehicle, value exceeding ten lakh rupees

NIL 1%

Present Section

Heads Proposal

194 K Income in respect of units To be omitted w.e.f01.06.2016

194 L Payment of compensation on acquisition of capital asset

To be omitted w.e.f01.06.2016


117

206C - Tax Collection at Source w.e.f 1.6.2016 :

• Seller shall collect Tax from Purchaser @ 1% on sale of motorvehicles exceeding Rs. 10 lacs

• Sale in cash of any goods (other than bullion and jewellery)

• Providing of any services (other than payments on which tax isdeducted at source under Chapter XVII-B) exceeding two lakhrupees.

• Certain class of buyers may be excluded


118

Sec 115BBF -- Taxation of Patents - w.e.f 1.4.2017

• To encourage Research and Development in India and create“R&D” Hub in India

• Patents to be developed and registered in India• Royalty Income from such patents to be taxed @ 10%• No Deduction of Expenditure or Allowance would be allowed• To be considered while computing MAT u/s 115JB i.e

Expenditure to be added and Income to be reduced from theBook Profits.


119

Incentives for Start Up Action Plan :• Sec 80 IAC w.e.f 1.4.2017• Newly introduced to allow deduction for unit set up on or

before 1.4.2019• “Eligible business” means a business which involves

innovation, development, deployment or commercializationof new products, processes or services driven by technologyor intellectual property

• Deduction can be claimed in any three years out of Five yearsfrom year the unit is incorporated

• Total turnover of its business does not exceed Rs. 25 crores infive years from 2016 to 2021

• Eligibility Certificate from Inter-Ministerial Board ofCertification


120

Incentives for Start Up Action Plan :• Sec 54 EE – w.e.f 1.4.2017

• Exemption from Capital Gains of long term capital Assets, ifthe consideration is invested in specified units notified byGovernment

• Maximum amount of Investment can be Rs. 50 lacs

• U/s 54 GB, capital gains on transfer of residential property canbe exempted if they are invested in acquiring shares of MSME


121

u/s Sec 80JJAA, deduction @ 30% of additional wages for three

years

Benefit is available in case there is increase of 10 % in the

workmen employed

The emoluments of employee shall not exceed Rs. 25000/- p.m.

The employees shall work for minimum 240 days in a year


122

Sec 80 IBA - w.e.f 1.4.2017 Deduction for Housing Project if the project is approved before

31.3.2019 subject to conditions :• Project to be completed within 3 years from the date of approval• Project is built on plot more than 1000 sq meters where project is

within 25 kms from limits of Municipal Corporation of Metros andthe size of residential unit is less than 30 sq meters.

• In other areas, the project is built on plot more than 2000 sqmeteres and size of residential unit is less than 60 sq. meters

• In case a residential unit is allotted to an individual, no such unitshall be allotted to him or any member of his family,

• Separate maintainence of Books of Accounts


123

Sec 80EE – w.e.f 1.4.2017 Deduction for First home buyers for interest of Rs. 50,000/- subject to :

• Loan to be sanctioned by Financial Institution between1.4.2016 to 31.3.2017

• The Loan amount of loan sanctioned for acquisition of theresidential house property does not exceed Rs. 35 lacs ;

• The value of residential house property does not exceed Rs. 50lacs

• The assesse does not own any residential house property onthe date of sanction of loan.

Deduction of interest u/s 24 upto Rs. 2 lacs can also be claimed onthe same.


124

Scheme to come into force from 01.06.2016.

An opportunity is proposed to be provided to persons who have not paid full taxes in the past to come forward and declare the undisclosed income

Pay tax, surcharge and penalty in all to 45% of such undisclosed income declared. (Tax @ 30% + 25% of the tax as Krishi Kalyan Cess + 25% of the Tax as penalty )

The scheme is proposed to be made applicable in respect of undisclosed income of any financial year upto 2015-16.


125

Following cases shall not be eligible for the scheme:

Where notices have been issued under section 142(1) or 143(2) or 148or 153A or 153C, or

Where a search or survey has been conducted and the time for issuanceof notice under the relevant provisions of the Act has not expired, or

Where information is received under an agreement with foreigncountries regarding such income,

Cases covered under the Black Money Act, 2015, or Persons notified under Special Court Act, 1992, or Cases covered under Indian Penal Code, the Narcotic Drugs and

Psychotropic Substances Act, 1985, the Unlawful Activities (Prevention)Act, 1967, the Prevention of Corruption Act, 1988


126

Declarations made under the scheme shall be exempt from wealth-tax inrespect of assets specified in declaration.

No scrutiny and enquiry under the Income-tax Act and Wealth-tax Act beundertaken in respect of such declarations and immunity from prosecutionunder such Acts be provided.

Immunity from the Benami Transactions (Prohibition) Act, 1988 is alsoproposed for such declarations subject to certain conditions.

Where a declaration under the scheme has been made by misrepresentationor suppression of facts, such declaration shall be treated as void.


127

THE DIRECT TAX DISPUTE RESOLUTION SCHEME , 2016 :

• Scheme to be applicable to "tax arrear" which is defined as the amountof tax, interest or penalty determined under the Income-tax Act or theWealth-tax Act, 1957 in respect of which appeal is pending before theCommissioner of Income-tax (Appeals) or the Commissioner of Wealth-tax (Appeals) as on the 29th day of February, 2016.

• The pending appeal could be against an assessment order or a penaltyorder.

• The declarant under the scheme be required to pay tax at theapplicable rate plus interest upto the date of assessment.

• In case of disputed tax exceeding rupees ten lakh, twenty-five percentof the minimum penalty leviable shall also be required to be paid.


128

THE DIRECT TAX DISPUTE RESOLUTION SCHEME , 2016 :• In case of pending appeal against a penalty order, twenty-five percent of

minimum penalty leviable shall be payable along with the tax and interestpayable on account of assessment or reassessment.

• Consequent to such declaration, appeal in respect of the disputed incomeand disputed wealth pending before the Commissioner (Appeals) shall bedeemed to be withdrawn

• The declarant under the scheme shall get immunity from institution of anyproceeding for prosecution for any offence under the Income-tax Act or theWealth-tax Act.

• In case of specified tax the declarant shall also get immunity from impositionof penalty under the Income-tax Act or the Wealth-tax Act.

• The scheme provides waiver of interest under the Income-tax Act or theWealth-tax Act in respect of specified tax.


129

THE DIRECT TAX DISPUTE RESOLUTION SCHEME , 2016 :In the following cases a person shall not be eligible for the scheme:-

Cases where prosecution has been initiated before 29.02.2016.

Search or survey cases where the declaration is in respect of tax arrears.

Cases relating to undisclosed foreign income and assets.

Cases based on information received under Double Taxation AvoidanceAgreement under section 90 or 90A of the Income-tax Act where thedeclaration is in respect of tax arrears. (iv) Person notified under SpecialCourts Act, 1992.

Cases covered under Narcotic Drugs and Psychotropic Substances Act, IndianPenal Code, Prevention of Corruption Act or Conservation of ForeignExchange and Prevention of Smuggling Activities Act, 1974.


130

Digital Growing Economy and Challenges

6% of amount of consideration for specified services received orreceivable by non-resident not having PE in India from a residentwho carries out business or from non-resident having permanentestablishment in India.

Levy to be made when amount exceeds Rs. 1 lac

To avoid double taxation, it is proposed to provide exemptionunder section 10 for such services

TDS & disallowances in case of failure to deducted tax areapplicable.

Appropriate rules shall be made in this regard.


131

U/S 92D, records have been prescribed such as master file, localfile & country by country report to be maintained.

New Penalty of Rs. 500000/- payable in case of non-furnishing ofinformation and documents required under Sec 92D (4).


132

• U/s 24, to claim deduction of Interest, Time limit for investmentpurchase or construction of house property has been increasedfrom 3 years to 5 years.

• Place of Effective Management (POEM) to decide the residentialstatus has been Deferred by one year.

• 43B shall include payments made to Railways• Exemption to Foreign Companies from Storage and sale of Crude

oil as part of Strategic Reserves• Special Notified Zone to be created to exempt Display of Uncut

diamonds• Benefit of Additional Depreciation to be allowed on assets used

for transmission of Power• Gold Deposit Bonds - Capital Gains shall not be applicable and

Interest shall be exempt


133

• U/s 24, to claim deduction of Interest, Time limit for investmentpurchase or construction of house property has been increasedfrom 3 years to 5 years.

• Place of Effective Management (POEM) to decide the residentialstatus has been Deferred by one year.

• 43B shall include payments made to Railways• Exemption to Foreign Companies from Storage and sale of Crude

oil as part of Strategic Reserves• Special Notified Zone to be created to exempt Display of Uncut

diamonds• Benefit of Additional Depreciation to be allowed on assets used

for transmission of Power• Gold Deposit Bonds - Capital Gains shall not be applicable and

Interest shall be exempt


134

• NBFC can claim deduction @ 5% of the Total Income as provisionfor Bad and Doubtful debts u/s 36(1)(viia)

• U/s 206AA, PAN is not required for Non residents where interestis paid on Long term bonds.

• No Compete Fees received / receivable shall be included forprofession as well.

• Deduction for spectrum fees for auction of Airwaves introduced• Form 15H / G can be filed for Rent Payments• Incase, the date of agreement and date of registration for

immovable property is different, then date of agreement shall beconsidered for deriving value.

• Rationalisation of Penalty provisions


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CMA Ashok Nawal

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