• Economy

• Direct Taxes

– Corporate Tax

– International Tax

– Transfer Pricing

– Personal Taxation

– Other Amendments

• Indirect Taxes

– Service Tax

– Excise

– Customs

Agenda

2

Economy

• Growth – 7.6 %

– India Vs. Other Economies – Fared Well

– India Vs. its own Potential – Steady Progress – scope

• Increasing Correlation between global and Indian

Growth – Growing dramatically

• Long Term potential Growth Rate 8 – 10 %

• India – a relative haven of macro-stability in

turbulent times

Economy

4

• Inflation – CPI New Series Inflation ~ 5 ½ % and

WPI – Negative

• Forex Reserve – US $ 351.5 Billion; Net FDI US $

27.7 Billion

• Nominal Value of Rupee against basket of

currencies remained stable

• Fiscal Deficit 3.9 % of GDP

• Quality of spending shifted from Revenue to

Investment

Some Statistics

5

Quality of Spending

6

• Likely Downside

– Turmoil in Global Economy

– Strengthening of Oil Prices

– Both of the above

• Likely Upside

– Good Monsoon

Outlook

7

• 3 RBI Members and 3 Central Government

Independent Appointee

– RBI Governor to Chair

– Central Government in consultation with RBI to

decide CPI Inflation Targets

– Committee to determine Policy Rates

• Search Committee [RS to head]

• Reasoned Decision / Transparency / Reports

Monetary Policy Committee

8

Direct Tax

Corporate Tax

• New companies granted annual option to be taxed

at 25%

– Companies registered on or after March 1, 2016

– Engaged in business of manufacturing or production

– Income is computed without claiming benefit of

incentives / weighted – accelerated deductions except

80JJAA

– Depreciation is determined in the manner prescribed.

• Whether MAT applicable in such case?

New Corporate Tax Regime

11

• Tax Rate reduced to 29%* for SME

– SME means company having turnover up to Rs. 5

crore

• Tax Rate for other companies continue at

same level

– No change in surcharge or cess

• Tax on Buyback

– To cover buyback under any law for the time being

in force relating to companies

New Corporate Tax Regime

12

• New Eligible Start – Ups

– 100 % profits derived from eligible business deductible

– 3 consecutive years out of first 5 years of incorporation of the start up

– However, subject to MAT

• Eligible Start-up – a Company engaged in eligible business

– Incorporated between 1st April, 2016 and 31st March, 2019

– Turnover < Rs. 25.00 Crores in any of the PY between 1st April, 2016 and 31st

March, 2021

– Holds certificate of eligible business from Inter-Ministerial Board of Certification

• Eligible Business

– Involves innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property

Incentive for Start Ups

13

• Royalty income from ‘patent’ taxable at 10% of gross receipts

– Available to Indian Resident who is a patentee (true and first inventor)

– Royalty for patent developed and registered in India is only eligible

– Excluding income taxable as Capital Gains

• Income excluded from MAT

• Weighted deductions for R&D Phased out

– Focus on Tangible Results of R&D

Patent Box Regime

14

• Additional Depreciation to companies engaged in Transmission of power

• Highest rate of depreciation to be reduced to 40%

• De-linking ‘acquisition’ and ‘installation’ for the purpose of Investment Allowance

– Threshold of Rs. 25 crores applies to Year of Acquisition

– Deduction allowed in the year of Installation

• Expenditure on acquiring spectrum to be amortized over life of spectrum

• Disallowance U/s. 43 B for payment to Railways for use of Railway Assets

• Conversion of Company to LLP

– Book Value of asset < Rs. 5 crores in each of 3 years – Additional Condition

Corporate Tax

15

• Incentive for ‘Infrastructure Facility’ moved from ‘Profit-linked’ to ‘Investment-linked’

– Sunset for Sec. 80-IA and new introduction in Sec. 35AD

– Effective from commencement of business from April 1, 2017

• Loss in Specified Business u/s. 35AD

– Not carried forward unless Return filed in time

• Deduction of 100% Profit of ‘Affordable Housing Project’

– Approval 1.6.2016 to 31.3.2019

– Plot 1,000 M2 [Ch, Del, Kol, Mum] / 2,000 M2

– Each House 30 M2 / 60 M2

– 90 % / 80 % FSI Utilisation

Incentives for Infrastructure

16

• Original Section 80 JJAA Revamped

– Workmen - Employee

– Scope expanded from manufacturing in factory to all persons subject to tax audit

– New employee to qualify the days to be employed reduced to 240 from 300 days

– Wages – Total Emoluments [PF Contribution / Lump Sum Payment excluded]

• Absolute limits of 10 % / 50 Workmen removed

• Grants deduction of 30 % of total emoluments paid to additional employees

Incentives for Employment

17

Section Particulars Current

Deduction

Sunset Date for

commencing

Operations

10AA SEZ Units 100% / 50% with

conditions

March 31, 2021

80-IA Development, operation and

maintenance of Infrastructure

Facility [1.4.2017 in 35AD]

100% March 31, 2017

80-IAB Development of Special

Economic Zone

100% March 31, 2017

80-IB(9) Production of mineral oil and

natural gas

100% March 31, 2017

Sunset for Profit-linked Incentives

18

Phasing out Weighted Deductions

19

Section Payments made to / Expenses for Current

Deduction

Proposed

Deduction

Effective from

35(1)(ii) Research association / educational

institute with objective of scientific

research

175% 150% AY 2018-19

100% AY 2021-22

35(1)(iia) Company which has a business objective

of scientific research

175% 100% AY 2018-19

35(1)(iii) Research association / educational

institute with an objective of research on

social science or statistical research

175% 100% AY 2018-19

35(2AA) National Laboratory / University / IIT for

approved scientific research

200% 150% AY 2018-19

100% AY 2021-22

35(2AB) Weighted deduction for expenditure

incurred by Company engaged in bio-

technology / manufacturing (except

negative list as per Schedule XI)

200% 150% AY 2018-19

100% AY 2021-22

Phasing out Weighted Deductions

20

Section Particulars Current

Deduction

Proposed

Deduction

Effective

from

35AC Deduction for expenditure by way of

payment to public sector company / local

authority / or an approved association or

institution on eligible social development

project or scheme

100% 0% AY 2018-19

35CCC Weighted deduction for expenditure for

extension of agricultural project

150% 100% AY 2018-19

35CCD Weighted deduction for skill development

project

150% 100% AY 2021-22

International Tax

• POEM Test for residence of Foreign Company

– Deferred by a year – to be effective from AY 2017-18

– Computational Mechanism shall be notified in case where Foreign Company is considered ‘Resident’ for first year

• No MAT on Foreign Company in absence of PE

– With retrospective effect from AY 2001-02

• LTCG on shares of closely held companies taxed at 10%

– ‘Unlisted securities’ were already taxed at 10%,

– However, Bom HC decision in case of Dahiben UmedbhaiPatel & Others had unsettled the definition of ‘security’

22

Non-Resident Taxation

• Equalization Levy on Online Advertisement Income of NR

– Levy @ 6% of gross receipts w.e.f. date to be notified

– Online advertisement, provision for digital advertising space or any other facility / service for online advertisement

– Payer being resident carrying business / profession or NR having PE

– Not subject to levy if

• Income connected with Foreign Co.’s PE in India

• < INR 1 Lakh

• Payment is not for business / profession

– Obligation on payer to deduct TDS

• Disallowance u/s 40a(ib) on non-deduction + interest and penalty

– If subject to equalization levy, exempt from normal income tax

23

Non-Resident Taxation

Transfer Pricing

CbCR - Overview

• CBCR!!

– Country by Country Reporting

– Objective information to the tax authorities about the entire MNC

• CBCR requires MNC to declare:

– Countries in which it operates

– Country wise Financial Indicators

• Related and Unrelated party Revenue

• Pre Tax Profit

• No of Employees

• Income Tax: Actually Paid and Accrued

• Capital, Accumulated Earning and Tangible Assets, Description of business Activity

Interesting case for

Mauritius having

high accrued tax

but low cash tax

• Indian Parent / Alternate Reporting Entity (ARE) has to file it

• Consolidated Revenue Threshold: EUR 750 Million

• Indian sub/ Associate or JV (Constituent Entity) has to file if:

– Ultimate Parent is a non resident and

– No information exchange is possible and

– No ARE has been designated

• Reporting Entity’s jurisdiction will share it with the rest

– Only if information exchange exists

• Stringent penalties for non-compliance

CbCR – Filing Obligation

• Include entities otherwise included in

Consolidated Financial Statement

• Country of Tax Residence is relevant

– Location relevant in case of Permanent

Establishments

• Reporting Accounting year of the filing entity

• Consistency in data important

CbCR – Finer Points

• ALL Intra group transactions on record

• Significant collation of information with regard to various jurisdiction in which the Group operates

• Financial Indicators of all entities available across all jurisdictions

– Easy availability to tax authorities

– Detection of lack of substance

• BEPS recommendation on ‘Master File’ not explicitly included in Finance Bill 2016

– However, it could be prescribed in Rules

– In that case, entire Group Structure available across all jurisdictions

Implications

Personal Taxation

• No change in Tax Slabs

• Relief u/s. 87A increased to Rs. 5,000 from Rs. 2,000

– Available for Individual with income up to Rs. 500,000

• Surcharge increased from 12% to 15% for income > INR 1 crore

– Effective Tax Rate for HNI – 35.535%

• Dividend income > Rs. 10 Lakhs taxable @ 10%

– Applicable to Resident individual, HUF and Firms [Including LLPs] [14 A Implication]

Personal Taxation

30

• Employer contribution exempt up to Rs. 150,000 p.a.

– Beyond Rs. 150,000, taxable in the year of contribution

• Employee Contribution to PF now exempt only for 40%

– Applicable to contributions made after April 1, 2016

– However, transfer from PF to NPS would not be subject to tax

• Tax free withdrawal from NPS paid to employee up to 40%

• Commutation of Superannuation also exempt up to 40%

– Superannuation contribution exemption limit increased to Rs. 150,000

Social Security Taxation

31

• Presumptive Taxation for Business

– Threshold increased from Rs. 1 crore to Rs. 2 crores

– Deduction for salary or interest to partner now ‘not admissible’

– Once profits lower than 8% are declared, the Scheme cannot be opted for next 5 Years

• Presumptive Taxation for Specified Profession

– Applicable for gross receipts up to Rs. 50 Lacs

– Income presumed at 50% of gross receipts

– No other expense or allowance deductible

– Mandatory audit if income lower than prescribed margin

Presumptive Taxation

32

• Deduction for Housing Loan Interest

– In addition to deduction available u/s. 24 for Rs. 200,000

• Max. Deduction up to Rs. 50,000

• Loan sanctioned by FI during FY 2016-17

• Value of property < Rs. 50 Lacs & Loan < Rs. 35 Lacs

• Assessee does not own any residential house on date of loan

• Deduction for Rent increased from Rs. 24,000 to Rs. 60,000 u/s. 80GG

• Exemption from Capital Gains u/s. 54EE

– Up to Rs. 50 Lacs for Investment in Notified Unit [Similar to Sec. 54EC]

• Section 54 GB extended to 31st March, 2019 for Eligible Start up

Personal Taxation

33

Other Amendments

• Belated Return

– Can be filed only up to end of Assessment Year

• Revised Return

– Even Belated Return can be Revised

– Return filed u/s. 142(1) cannot be revised

• Mandatory Return to claim loss u/s. 35AD

• Threshold to mandatorily file Tax Return to

include LTCG exempt u/s. 10(38)

35

Return

• Enquiry u/s. 133C

– Information collected to be shared with AO

– Necessary actions to be taken by AO including re-assessment

• Mandatory Intimation u/s. 143(1) to be issued before issuance of order u/s. 143(3)

– Expansion in scope of adjustment in intimation

• Disallowance of expenditure reported in Audit Report

• Addition of income appearing in Form 26AS or Form 16A / 16

• Profit-linked Deduction disallowance if Return filed beyond due date

• Electronic Hearings to be introduced in 7 Mega Metros

36

Assessment

• Time limit for completion of assessment preponed by 3 months

• Order Giving effect to appellate order to be passed within 3 months

– Otherwise additional interest of 3% p.a. payable to the assessee

• Interest u/s. 244A also available in respect of excess Self Assessment Tax paid

• Order passed by DRP cannot be challenged by the Department before ITAT

• Rectification of ITAT order can be done only within 6 months [reduced from 4 years]

• Waiver / Compounding / Reduction in Penalty application to be disposed off within 12 months

37

Assessment & Appeals

• Budget Speech Announced

– Stay of Demand on payment of 15 % of disputed tax –

Automatic if appeal with CIT (A)

– No Requirement of giving bank guarantee for balance

– Order to be passed within 2 weeks

• Representation to the CIT / Pr. CIT

• Restricted reasons for not granting stay

– Subject to approval by CIT / Pr CIT

Stay of Demand

38

• Penalty @50% on ‘under-reported income’

– Difference between ‘assessed income’ and ‘returned income’

• Penalty @200% on ‘misreported income’

– Failure to record investment in books

– Claim of expenditure not substantiated by evidence

– Recording of false entry in books

– Failure to record receipt in books having bearing on total income

– Failure to report transaction covered by Transfer Pricing

• Penalty in Search Cases – Non-Specified PY from 100 % to 300 % - fixed to 200 %

39

Penal Provisions Revamped

• ‘Recording of satisfaction’ for initiation of penalty proceedings done away

• Penalty not to be levied in case of –

– Based on ‘bona fide belief’ to the satisfaction of AO

– Enhancement of disallowance based on estimate

– Transfer Pricing adjustment if Sec. 92D & 92E are complied and disclosed material facts

• AO can grant immunity from penalty & prosecution if –

– Tax and interest is paid within the prescribed period

– No appeal is preferred

• If immunity is granted, no appeal / revision can be preferred

40

Penal Provisions Revamped

• Deposits under Gold Monetisation Scheme 2015

– Not considered as ‘Capital Asset’ hence not subject to Capital Gains

– Income therefrom exempt u/s. 10(15)

• Redemption of Sovereign Gold Bonds not subject to Capital Gains

– Indexation allowed in case of transfer of Sovereign Gold Bonds

• Non-compete fees received by professionals subject to tax

• Cost of acquisition and improvement in ‘ self-generated goodwill’ of ‘profession’ shall be considered to be ‘Nil’

41

Other Amendments

• Value adopted for Stamp Duty purpose on date of

‘Agreement to Sale’ to be considered for Sec. 50C if –

• Amount of consideration fixed in the said Agreement

• Consideration or part thereof is received by cheque

– Similar provision exist for Sec. 43CA

• Rule 8D for the expense attributable to exempt income

to be amended

• Holding Period for the Unlisted Shares reduced to 2

Years

– No mention in Finance Bill

42

Other Amendments

• Advance tax due dates for non-corporate assessee synchronized with corporate

– 4 installments starting from 15th June

– Assessee covered by Sec. 44AD to pay Advance Tax by March 15 in single installment

• TDS Rates and thresholds rationalized

• Tax liable at Maximum Marginal Rate on -

– Accreted Income [FMV of Assets – Liabilities]

– In case where Trust loses Registration u/s. 12AA –

• Due to modification of objects and fails to file application

• Cancellation of Registration by CIT

43

Other Amendments

• International Financial Service Centres (IFSC)

– LTCG on transfer of company listed on stock exchange located in IFSC exempt

• Consideration to be in foreign currency

• Even if not subject to STT

– Units located in IFSC not subject to DDT

• Business Trusts (REIT and InvIT) – Pass through Dividends

– SPV not subject to DDT on distribution to Trust

– Dividend income exempt in the hands of Trust

– Distribution to unit-holders also exempt

44

Financial Sector

• NBFCs to be allowed provision for bad-debts

– Maximum - 5% of total income

• Mere presence of fund managers not to constitute Business Connection of Offshore Funds

– Finance Act 2015 - Offshore funds to be resident of treaty partner

– Funds incorporated / registered in notified jurisdiction would also be eligible, whether or not resident of treaty partner

• Pass through treatment for Asset Reconstruction and Securitisation Trusts

– Distributions from trust not subject to additional tax w.e.f. 1st

June 2016

45

Financial Sector

• Voluntary Scheme to declare ‘undisclosed income’ / ‘undisclosed asset’

– Investment in asset to be considered at FMV at beginning of the Scheme

– 1st June, 2016 to the date to be notified

• Tax @30% + KKC @7.5% + Penalty @ 7.5% of Income

– Effective outflow of 45% of Income

• Exclusions

– Person - Order of Detention under COFEPOSA or Covered by Section 3 of Special Court (Trial of Offences Relating to Securities) Act

– Offence - Chapter IX or Chapter XVII of the IPC, etc.

– Assessment Year - Pending Assessment / Re-Assessment / Search Assessment or Connected Cases, whether notice issued or otherwise

– Income / Asset - Foreign Income / Asset or about which information is received under Agrement U/s. 90 / 90 A

Income Declaration Scheme

46

• No Regular Income Tax / Wealth Tax, Interest /

Penalties, etc.

• Declaration shall not be admissible as an

evidence against the declarant

– Does not bar action based on independent

information – No Immunity only Confidentiality

• Benami Transaction Act not to apply, if asset is

transferred to the beneficial owner

IDS - Immunities

47

• Intends to settle the pending litigations

– Covers income-tax and wealth-tax

• Applicable for appeals pending before CIT(A) as on Feb 29, 2016

– Arrear Tax = Disputed Tax

– Specified Tax = Retrospective amendment related

• Case to be resolved by paying Tax & Interest till date of assessment order

– In case where tax & interest exceeds Rs. 10 Lacs, 25% of minimum penalty also payable to resolve

– In case where the Dispute is only of Penalty then 25 % of penalty to be paid

• Excludes all litigation except CIT (A)

Dispute Resolution Scheme

48

• Tax Arrear or Specified Tax

– For Search Assessments

– For Assessments / Reassessment on which a survey U/s. 133 A has a bearing [if it relates to tax arrear]

– If prosecution is launched before filing of declaration

– Assessment / Reassessment made consequent to information obtained U/s. 90 / 90 A

• Person in whose case

– Order of Detention under COFEPOSA or Covered by Section 3 of Special Court (Trial of Offences Relating to Securities) Act

– Prosecution under IPC, Unlawful Activities Act, Narcotics Act, PCA, etc. is launched

Exclusions

49

Indirect Tax

• The Indirect Tax Dispute Resolution Scheme 2016 is

designed to address the cases pending before

Commissioner (Appeals), the assesse, after paying the

duty, interest and penalty equivalent to 25% can file a

declaration. In such cases proceedings against the

assesse will be closed and an immunity will be given from

prosecution.

Indirect Tax Dispute Resolution

Scheme

51

Service Tax

• Kirshi Kalyan Cess of 0.5% introduced w.e.f 1 June, 2015

on all the taxable services. Cenvat Credit admissible.

• Effective Service tax rate will be 15% (14% Basic +0.5%

Krishi Kalyan cess + 0.5% Swachta Cess no credit ) from

1 June 2016

• Quarterly payment of service tax being extended to ‘One

Person Company’ (OPC) and HUF on receipt basis. (w.e.f

1 April, 2016) where turnover is less than Rs. 50 Lakhs

Legislative Changes

53

• List of services removed from Negative list (Section 66D of the Finance Act)

i) pre-school education and education up to higher secondary school or equivalent;

ii) education as a part of a curriculum for obtaining a qualification recognisedby any law for the time being in force;

iii) education as a part of an approved vocational education course

• Service of transportation of passengers, with or without accompanied belongings, by stage carriage (w.e.f. 1 June, 2016);

• By an air craft or a vessel from a place outside India up to the custom station of clearance in India (w.e.f. 1 June, 2016).

• Declared Services (Section 66E ) – assignment by the Government of the right to use the radio-frequency spectrum and subsequent transfers thereof

Taxable Services

54

• Services provided by mutual fund agent/distributor to a

mutual fund or asset management company, being tax

under forward charges. (w.e.f. 1 April, 2016)

• Any service provided by Government or a local authority to

business entities – service recipient is liable to pay service

tax. (w.e.f. 1 April, 2016)

Reversed Charge Mechanism

55

Exemption from 1 March, 2016

• Services provided by Indian Shipping Lines by way of transportation of goods to outside India (w.e.f 1 March,2016)

• Construction services

under Housing For All (HFA) (Urban) Mission/ Pradhan MantriAwas Yojana (PMAY)

under “Affordable housing in partnership” component of PMAY, subject to carpet area of dwelling units of such projects not exceeding 60 square metres;

low cost houses up to a carpet area of 60 square metres per house under any housing scheme of the State Government

• Specific services provided by Institutes of Management (IIM)

Exempted Services

56

Exemption from 1 April, 2016

• Service of life insurance business provided by way of annuity under

the National Pension System regulated by Pension Fund Regulatory

and Development Authority (PFRDA) .

• General insurance business provided under ‘Niramaya’ Health

Insurance scheme

• By Securities and Exchange Board of India (SEBI) and Insurance

Regulatory Development Authority (IRDA)

• By Employees’ Provident Fund Organization (EPFO) to employees

• For Skill /vocational training under Deen Dayal Upadhyay Grameen

Kaushalya Yojana

Exempted Services

57

Exemption from 1 April, 2016

• By Biotechnology Industry Research Assistance Council (BIRAC)

• By National Center for Cold Chain Development

• By Directorate General of Training, Ministry of Skill Development &

Entrepreneurship

Exempted Services

58

Exemption with retrospective effect

• Services provided by Government bodies by way ofconstruction, maintenance etc. of canal, dam or otherirrigation works, during the period from the 1st July, 2012 to29th January, 2014.

• Contracts which had been entered into prior to 01.03.2015 for services of: • construction provided to the Government, a local authority or a

governmental authority, in respect of construction of govt. schools, hospitals etc.

• construction of ports, airports.

Exempted Services

59

Exemption with retrospective effect

• Section 101, 102 and 103, are proposed to be inserted to remove the

litigations and difficulties arising from taxing the services provided to a

government or local body, port or airport, where the contract was

entered before the date on which these services became taxable.

Exempted Services

60

Exemption with retrospective effect

• The service receiver that are envisaged are enumerated as

under;

• Set up be an act of parliament or state legislature

• Established by government

• Government or local authority

• Port

• Airport

Exempted Services

61

Exemption with retrospective effect

• The services that are covered by these sections are as

under;

– by way of construction, erection, commissioning, installation,

completion, fitting out, repair, maintenance, renovation or alteration

of canal, dam or other irrigation works

– by way of construction, erection, commissioning, installation, completion, fitting out,

repair, maintenance, renovation or alteration of––

• a civil structure or any other original works meant

predominantly for use other than for commerce, industry or

any other business or profession;

Exempted Services

62

Exemption with retrospective effect

– a structure meant predominantly for use as

• an educational establishment;

• a clinical establishment; or

• an art or cultural establishment;

• a residential complex predominantly meant for self-use or for the use of

their employees or other persons specified in Explanation 1 to clause

(44) of section 65B of the said Act, under a contract entered into before

the 1st day of March, 2015 and on which appropriate stamp duty, where

applicable, had been paid before that date

Exempted Services

63

Exemption with retrospective effect

• services provided by way of construction, erection, commissioning or

installation of original works pertaining to an airport or port, under a

contract which had been entered into before the 1st day of March, 2015

and on which appropriate stamp duty, is paid before that date, subject to

the condition that Ministry of Civil Aviation or, as the case may be, the

Ministry of Shipping in the Government of India certifies that the contract

had been entered into before the 1st day of March, 2015

• For the tax collected by government on the service described above,

refund shall be made. The application of refund has to be made within 6

months from the date this bill receives assent of the President.

Exempted Services

64

Tax Structure

65

Nature of Services Earlier Latest

• A senior advocate to an advocate or partnership firm of

advocates providing legal service; (w.e.f. 1 April, 2016)

Nil 14%

• A person represented on an arbitral tribunal to an arbitral

tribunal. (w.e.f. 1 April, 2016

Nil 14%

• 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

Nil 5.6%

• Services of transport of passengers, by ropeway, cable car or

aerial tramway (w.e.f. 1 April, 2016)

Nil 14%

• Composition rate of service tax on single premium annuity

(insurance) policies

3.5% 1.4%

• Service provided by the Indian Railways to Container Train

Operators (CTOs) of haulage of their container train is a

service of ‘Transport of Goods by Rail’.

14% 4.2%

• Rate of Interest (Section 75)

• Time limit for issuance of notice for tax recovery of service tax

(other than fraud, collusion/ willful misstatement) is increased from

18 months to 30 months

• The ceiling of Rs. 50 Lakhs is increase to Rs. 200 lakhs for

offences and Penalties - Section 89

Legislative Changes

66

Particulars Rate

Service Tax collected but not deposited 24%

All Other dues 15%

Excise

• Chief Commissioners of Central Excise are being instructed to file

application for withdrawing prosecution in cases involving duty of

less than Rs. 5 lakhs which are pending for more than 15 years.

Instructions

68

• 0.5% Infrastructure cess, as a duty of excise, is proposed as levy on

motor vehicles. Credit not admissible

• Pollution cess of 1% on small petrol, LPG and CNG cars; 2.5 % on

diesel cars of certain specifications; 4 % on higher-end models

• Duty of 1% imposed on branded articles of jewellery, excluding silver

• Duty raised from 10 to 15 % on tobacco products other than beedis

Legislative changes

69

• Exemption of Excise duty, Customs duty, SAD on equipment used

for Dialysis

• New Rules and regulation for removal of goods at concessional rate

of duties for manufacture of excisable and other goods by

substitution of existing rules to simplify the procedure

• Rebate Claim – to be required a certificate from “Chartered

Engineer” for Standard Input Output Norms

Legislative changes

70

• Quarterly payment of Excise duty effective from 1st March,

2016

• Rate of interest payment is reduced from eighteen percentage

to fifteen percentage.

• Duplicate copy of Invoice issued with the digital signature is

now not required to be self-attested by the manufacturer

Regulation changes

71

Types of Industry Turnover

Jewellery 12 Crores

Other than Jewellery 4 Crores

• A monthly return (ER-1) and an annual return (ER- 4) are continued to

be furnished and all other returns are redundant.

• Due date of filing of Revised return (wef 1 April 2016)

• Amendments are made in rule 12 of Excise Rules, 2002 and

corresponding amendments are also made in Rule 9A of CENVAT Credit

Rules, 2004.

Regulation changes

72

Types of returns Due date

ER-1 by the end of the calendar month in which the original

return is filed

ER-4 within One month from the date of filing original return.

• Issuance of a single registration certificate for two manufacturing units,

located within jurisdiction and not claiming benefit of area exemption

• Time limit for recovery of the duty is increased from one year to two years

• MRP based assessment of excise duty being extended with abatement

Soap or Detergent and related Product

Organic Surface Active Agents, washing preparations

Foot wear

Aluminum Foil and related Product

Wrist wearable devices (commonly known as smart watches)

• Penal provisions are rationalized. This will be effective from 1st March,

2016. (Amendment made in rule 26)

Regulation changes

73

CENVAT Credit Rules

Amendment in CENVAT Credit Rules, 2004

• “Capital Goods” includes - any equipment or appliance used in an office

capital goods used outside the factory of the manufacturer for pumping of

water

Railway goods wagons

• “Input” includes - All goods used for pumping of water for captive use

All capital goods which have a value up to ten thousand rupees per piece

• “Exempted Services” excluded – the transportation services by a

vessel from custom station of clearance in India to a place outside

India

CENVAT Credit Rules

75

• CENVAT Credit admissible for direct delivery of tools (falling under

chapter 82) to other manufacturer or job-worker.

• Time limit for returning of tools from job-worker premises is

increased from one year to three years.

• Refund (under rule 5)

for a manufacture within One year from date of payment

for a service provide before expiry of one year

a) receipt of payment in convertible foreign exchange, where provision of service had been completed prior to receipt of such payment; or

b) issue of invoice, where payment for the service had been received in advance prior to the date of issue of the invoice.

CENVAT Credit Rules

76

Reversal of CENVAT credit (rule 6)

• A new formula is proposed for reversal of credit on exempted goods/service.

No credit is allowed on inputs/input services used exclusively in the manufacture of exempted goods / services.

Full credit is allowed on the inputs/input services used exclusively in the manufacture of dutiable goods / taxable services.

Credit on common inputs/input services is identified and the same is apportioned based on the turnover of the exempted/dutiable turnover. Credit on common inputs/input services is allowed only proportionately.

Thyssenkrup (I) Pvt. Ltd V/s CCE Pune

CENVAT Credit Rules

77

• Rationalized a rule 7 - Manner of distribution of services by input

service distributor allowing uniform distribution of credit

• Outsourced manufacturing unit is now included in the definition of

Input service distributor (rule 7)

• Insert a Rule 7B for distribution of Credit of inputs by warehouse of

manufacturer

CENVAT Credit Rules

78

Customs

• Baggage Rules, 1998 being substituted with Baggage Rules, 2016

Baggage declaration will have to be filed for carrying dutiable or prohibited goods.

• Duty free import allowance for bonafide gifts imported by post or air or by courier service being increased to Rs. 20,000

• Limit of Duty Free Allowances increased

for arriving from any country other than Nepal, Bhutan, Myanmar up to Rs.50,000 for Indian Residents and Foreigners residing in

India up to Rs. 15,000 of foreign origin

for arriving from Nepal, Bhutan, Myanmar up to Rs.15,000 by air Exemption withdrawal coming by road

Legislative changes

80

• Duty will have to be paid within two days from the date of bill of entry

and any default will attract interest

• Value of bond is increased from twice to three times of amount of

duty

• Proposed to increased the period of storage in Warehouse till

clearance for home consumption from three years to five years of

capital goods and other than capital goods

• Commissioner may extend the period for the goods up to one year

• Removed Section 62 related to the Control over warehouse

• Removed Section 63 related to the payment of rent and warehouse

charges

Legislative changes

81

This presentation is prepared exclusively for the benefit

and use of the clients of K. C. Mehta & Co. This should

not be used as a substitute for professional advice.

Reasonable care has been taken for ensuring the

accuracy and the authenticity of the contents of the

presentation. However, we do not take any responsibility

for any error or omission contained therein on any

account. It is recommended that the readers should take

professional advice before acting on the same. The

provisions contained in Finance Bill, 2015 are the

proposals and are likely to undergo amendments while

passing through the Houses of the Parliament before

being enacted.