BUDGET 2014 INDIRECT TAX PROPOSALS

INDIRECT TAX PROPOSALS

·         To boost domestic manufacture and to address the issue of inverted duties, basic customs duty (BCD) reduced on certain items.

·         To encourage new investment and capacity addition in the chemicals and petrochemicals sector, basic customs duty reduced on certain items.

·          Steps taken to boost domestic production of electronic items and reduce our dependence on imports. These include imposition of basic customs duty on certain items falling outside the purview of IT Agreement, exemption from SAD on inputs/ components for PC manufacturing, imposition of education cess on imported electronic products for parity etc.

·         Color picture tubes exempted from basic customs duty to make cathode ray TVs cheaper and more affordable to weaker sections.

·         To encourage production of LCD and LED TVs below 19 inches in India, basic customs duty on LCD and LED TV panels of below 19 inches reduced from 10 percent to Nil.

·         To give an impetus to the stainless steel industry, increase in basic customs duty on imported flat-rolled products of stainless steel from 5 percent to 7.5 percent.

·         Concessional basic customs duty of 5 percent extended to machinery and equipment required for setting up of a project for solar energy production.

·         Specified inputs for use in the manufacture of EVA sheets and back sheets and flat copper wire for the manufacture of PV ribbons exempted from basic customs duty.

·         Reduction in basic customs duty from 10 percent to 5 percent on forged steel rings used in the manufacture of bearings of wind operated electricity generators. Exemption from SAD of 4 percent on parts and raw materials required for the manufacture of wind operated generators.

·         Concessional basic customs duty of 5 percent on machinery and equipment required for setting up of compressed biogas plants (Bio-CNG).

·         Anthracite coal, bituminous coal, coking coal, steam coal and other coal to attract 2.5 percent basic customs duty and 2 per cent CVD to eliminate all assessment disputes and transaction costs associated with testing of various parameters of coal.

·         Basic customs duty on metallurgical coke increased from Nil to 2.5 percent in line with the duty on coking coal.

·         Duty on ship breaking scrap and melting scrap of iron or steel rationalized by reducing the basic customs duty on ships imported for breaking up from 5 percent to 2.5 percent.

·         To prevent misuse and avoid assessment disputes, basic customs duty on semi processed half cut or broken diamonds, cut and polished diamonds and colored gemstones rationalized at 2.5 percent.

·         To encourage exports, pre-forms of precious and semi-precious stones exempted from basic customs duty.

·         Duty free entitlement for import of trimmings, embellishments and other specified items increased from 3 percent to 5 percent of the value of their export, for readymade garments.

·         Export duty on bauxite increased from 10 percent to 20 percent.

·          For passenger facilitation, free baggage allowance increased from Rs.35,000 to Rs.45,000.

·         To incentivize expansion of processing capacity, reduction in excise duty on specified food processing and packaging machinery from 10 percent to 6 percent.

·         Reduction in the excise duty from 12 percent to 6 percent on footwear of retail price exceeding Rs 500 per pair but not exceeding Rs 1,000 per pair.

·         Withdraw concessional excise duty (2 percent without Cenvat benefit and 6 percent with Cenvat benefit) on smart cards and a uniform excise duty at 12 percent.

·         To develop renewable energy, various items exempted from excise duty.

·         Exemption to PSF and PFY manufactured from plastic waste and scrap including PET bottles from excise duty with effect from 29th June, 2010 to 7th May, 2012.

·         Prospective levy of a nominal duty of 2 percent without Cenvat benefit and 6 percent with Cenvat benefit on such PSF and PFY.

·         Concessional excise duty of 2 percent without Cenvat benefit and 6 percent with Cenvat benefit on sports gloves.

·         Specific rates of excise duty increased on cigarettes in the range of 11 per cent to 72 percent.

·         Excise duty increased from 12 percent to 16 percent on pan masala, from 50 percent to 55 percent on unmanufactured tobacco and from 60 percent to 70 percent on gutkha and chewing tobacco.

·         Levy of an additional duty of excise at 5 percent on aerated waters containing added sugar.

·         To finance Clean Environment initiatives, Clean Energy Cess increased from Rs.50 per tonne to Rs.100 per tonne.

SERVICE TAX

·          To broaden the tax base in Service Tax, sale of space or time for advertisements in broadcast media, extended to cover such sales on other segments like online and mobile advertising. Sale of space for advertisements in print media however would remain excluded from service tax. Service provided by radio-taxis brought under service tax.

·          Services by air-conditioned contract carriages and technical testing of newly developed drugs on human participants brought under service tax.

·          Provision of services rules to be amended and tax incidence to be reduced on transport of goods through coastal vessels to promote Indian Shipping industry.

·          Services provided by Indian tour operators to foreign tourists in relation to a tour wholly conducted outside India to be taken out of the tax net and Cenvat credit for services of rent-a-cab and tour operators to be allowed to promote tourism.

·          Service tax exempted on loading, unloading, storage, warehousing and transportation of cotton, whether ginned or baled.

·          Services provided by the Employees State Insurance Corporation for the period prior to 1st July 2012 exempted, from service tax.

·          Exemption available for specified micro insurance schemes expanded to cover all life micro-insurance schemes where the sum assured does not exceed Rs.50, 000 per life insured.

·          For safe disposal of medical and clinical wastes, services provided by common biomedical waste treatment facilities exempted.

·          Tax proposals on the indirect taxes side are estimated to yield Rs.7525 crore.

·          24X7 customs clearance facility extended to 13 more airports in respect of all export goods and to 14 more sea ports in respect of specified import and export goods to facilitate cargo clearance.

·          ‘Indian Customs Single Window Project’ to facilitate trade, to be implemented.

·          The scheme of Advance Ruling in indirect taxes to be expanded to cover resident private limited companies. The scope of Settlement Commission to be enlarged to facilitate quick dispute resolution.

·          Customs and Central Excise Acts to be amended to expedite the process of disposal of appeals.

This article has been shared by CA Gaurav Mittal. He can be reached at mittalgaurav05@gmail.com

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Highlights of Interim Union Budget 2014-15

Highlights of Interim Union Budget 2014-15

Dear Professional Colleague,

The Hon’ble Finance Minister P. Chidambaram presented the Interim Budget for the fiscal year 2014-15 on Monday, February 17, 2014 to cover expenditure until the Government's term ends in May, 2014. While presenting the Interim Budget 2014 in Parliament, the Hon’ble Minister proposed no major changes in tax laws. He even expressed disappointment over delay in introduction of two of India’s biggest tax reform initiatives - the Direct Taxes Code (DTC) and the Goods and Services Tax (GST). The Government appealed to all political parties to resolve to pass the GST Laws and DTC in 2014-15. However, the Hon’ble Minister announced some changes in Indirect Tax Rates.

We are sharing with you important changes in Indirect Taxes, Interim Union Budget 2014:-

CHANGES IN SERVICE TAX:

·      Exemption on handling, storage or warehousing of rice: The definition of ‘agricultural produce' in section 65B(5) of the Finance Act, 1994, leads to a differential treatment between paddy and rice. Paddy is covered by the definition of agricultural produce which loses its essential characteristic after milling into rice. Notification 25/2012 dated June 20, 2012 (“the Mega Exemption Notification”) has been amended to insert an entry at Sl. No. 40 which reads as “services by way of loading, unloading, packing, storage or warehousing of rice” to exempt levy of service tax on handling, storage and warehousing of rice.

[Amended vide Notification No.4/2014-ST dated 17th February 2014].

·       Exemption on transportation of rice: A clarification has been issued vide Circular No. 177/3/2014 dated 17^th February 2014 (“the Circular”) that “food stuff” includes rice and hence service tax on transportation of rice by rail or a vessel or by a Goods Transport Agency by way of transport in a goods carriage, is exempt vide Sl. Nos. 20(i) and 21(d) of the Mega Exemption Notification.

·      Exemption on milling of rice: Para 1.2 of the Circular clarifies that milling of paddy into rice carried out as job work is covered by the exemption at Sl. No.30 of the Mega Exemption Notification since such milling of paddy into rice is an intermediate production process.

·       Services provided by cord blood banks: Entry no. 2A has been inserted in the Mega Exemption Notification, which reads as “Services provided by cord blood banks by way of preservation of stem cells or any other service in relation to such preservation”. Therefore, services provided by cord blood banks, such as collection of umbilical cord blood, processing the same for segregation of stem cells, testing and cryo-preservation of stem cells will be exempt from levy of service tax.

[Amended vide Notification No.4/2014-ST dated 17th February 2014]

CHANGES IN CENTRAL EXCISE:

·      Excise duty on mobiles reduced: The excise duty structure on mobile handsets has been restructured so as to provide that all mobile handsets will attract 1% excise duty, if CENVAT benefit is not availed of and 6% if CENVAT benefit is availed of. Consequently, all imported mobile handsets shall attract 6% CVD.

[Amended vide notification No.4/2014-Central Excise dated 17.02.2014].

·      Reduction in Excise duty on capital goods falling under Chapter 84 & 85: The general excise duty on all machinery & equipment, appliances such as washing machine, air conditioner, refrigerators, computers, colour televisions, LCD, microwave oven, etc., and parts thereof falling under Chapters 84 and 85 of the Central Excise Tariff has been reduced from 12% to 10%. It may be noted that the duty rates notified for the above goods are valid up to 30-06-2014 only.

[Amended vide notification No.4/2014-Central Excise dated 17.02.2014].

·    Reduction in Excise Duty on automobile items: The excise duty on following automobile items have been reduced as under:

S. No.	Automobile Item	Existing Excise Duty	Excise Duty after amendment
	Small cars, cycles, scooters, commercial vehicles and trailers	12%	8%
	SUVs	30%	24%
	Large and mid-segment cars	27%	24%
		24%	20%

Further, in line with the duty reduction on commercial vehicles, the excise duty on chassis has been reduced appropriately. Duty has also been reduced on hybrid motor vehicles, hydrogen vehicles, etc. It may be noted that the duty rates notified against Sl.Nos.347 to 369 of Table of Notification No. 12/2012-CE dated 17.3.2012 for the automobile items are valid up to 30-06-2014 only.

[Amended vide notification No.4/2014-Central Excise dated 17.02.2014].

CHANGES IN CUSTOMS:

·                     Extension of full exemption from customs duty on pulses: Full exemption from Customs duty on pulses valid till 31.03.2014 has been extended by another 6 months i.e. up to 30.09.2014

[Amended vide notification No.5/2014-Customs dated 17.02.2014].

·                     Withdrawal of CVD exemption on specified road construction machinery: CVD exemption hitherto available on specified road construction machinery has been withdrawn. These specified machinery will henceforth attract CVD and SAD. Exemption from the basic customs duty will however continue.

[Amended vide notification No.5/2014-Customs dated 17.02.2014]

·                     Rationalisation of basic customs duty structure on certain items: The basic customs duty structure on non-edible grade industrial oils and its fractions, palm stearin, fatty acids and fatty alcohols has been rationalised at 7.5%.

[Amended vide notification No.5/2014-Customs dated 17.02.2014].

·                     Exemption from BCD and CVD on LNG consumed in ONGC SEZ and cleared into DTA: LNG consumed in the authorized operations in the ONGC SEZ unit at Dahej and the remnant LNG cleared into the domestic tariff area (DTA) has been exempted from basic customs duty and CVD.

[Amended vide notification No.5/2014-Customs, dated 17.02.2014].

·                     Concessional basic customs duty on capital goods imported by or on behalf of Bank Note Paper Mill India Private Limited: A concessional basic customs duty of 5% [CVD (Nil) + SAD (Nil)] has been provided to capital goods imported by or on behalf of Bank Note Paper Mill India Private Limited. The exemption is valid up to 31.12.2014.

[Amended vide notification No.5/2014-Customs, dated 17.02.2014 and notification No.6/2014-Customs dated 17.02.2014].

·                     Human embryo has been fully exempted from customs duty.

[Amended vide notification No.5/2014-Customs dated 17.02.2014].

Hope the information will assist you in your Professional endeavours. In case of any query/ information, please do not hesitate to write back to us.

Bimal Jain
FCA, FCS, LLB, B.Com (Hons)

F-30/31/32, Pankaj Grand Plaza

1st Floor, Mayur Vihar, Phase–I,

Delhi – 110091 (India)

Mobile: +91 9810604563

E-mail: bimaljain@hotmail.com

Website: www.a2ztaxcorp.com

Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the authors nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this document nor for any actions taken in reliance thereon.

Readers are advised to consult the professional for understanding applicability of this newsletter in the respective scenarios. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. No part of this document should be distributed or copied (except for personal, non-commercial use) without our written permission.

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