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Foreword

India is hailed as a ‘bright spot’ amidst a slowingglobal economy by International Monetary Fund.This is the second full year budget presented bythe BJP Government after it came into power inMay 2014.

Fiscal prudence, lower inflation, lower currentaccount deficit and robust foreign exchangereserves point to macro-economic stability.

While there are no major announcements, certainsignificant ones have been made which will have along term impact on the Indian economy:

Focus on enhancing expenditure in priorityareas of farm, rural, social, infrastructuresectors, employment generation andrecapitalisation of banks. Focus on vulnerablesections through Crop insurance (PradhanMantri Fasal Bima Yojana), New healthinsurance scheme and Facility of cooking gasconnection for Below Poverty Line families

To ensure passage of the Goods and ServiceTax (GST) bill, Insolvency & Bankruptcy law

To free the transport sector from constraintsand restrictions

To incentivise gas discovery and explorationby providing calibrated marketing freedom

To provide legal framework for disputeresolution and re-negotiations in PPP projectsand public utility contracts

To undertake important banking sectorreforms, listing of government owned generalinsurance companies

To undertake significant changes in FDI policy.

New initiatives like Public Sector Banks RevampPlans, UDAY (Ujjwal DISCOM Assurance Yojana) forensuring financial turnaround of the ailing powerdistribution companies and Start-Up India fortapping budding entrepreneurial potential add tothe accelerated reform measures.

2

Table of Contents

Particulars Page No.

Overview of the economy 4

Policy Initiatives 6

` Comes from & ` Goes to 10

Direct Tax Proposals 11

Indirect Tax Proposals

Customs Duty 27

Excise Duty 44

Service Tax 52

Abbreviations 56

Disclaimer

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. The content provided here treats the

subjects covered here in condensed form. It is intended to provide a general guide to the subject matter and should not be relied on as a basis for business decisions. Although we

endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the

future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. Specialist advice should be sought with

respect to any individual circumstances. 3

Overview of the Economy

The growth rate of GDP has been 7.6% in 2015-16 as estimated against a growth rate of 8% to8.5% and compared to 7.42% in 2014-15, 6.6% in2013-14 and 5.6% in 2012-13.

Industrial growth improved to 7.3% in 2015-16 asagainst 5.9% in 2014-15. Growth in servicessector was 9.2% in 2015-16 as against 10.2% in2014-15 and there was lower growth inagriculture sector due to 14% lower monsoons,

2015-16 witnessed moderation in general pricelevels. CPI inflation was at 5.4% as against 9.4%over the last 3 years.

From the demand angle, growth in private finalconsumption was at 7.6% in 2015-16; which wasthe major driver of growth.

Fixed investments grew from 4.9% in 2014-15 to5.3% in 2015-16.

Exports and Imports declined by 6.3% in 2015-16due to subdued global demand and decline ininternational petroleum prices respectively.

Foreign exchange reserves touched highest everlevel of about 350 billion US dollars.

The ` depreciated by 7.1 per cent per US $ inJanuary 2016 when compared to March 2015

Trade deficit declined to US $ 71.6 Billion in Apr-Sep 2015 as compared to US $ 74.7 Billion in Apr-Sep 2014

4

Overview of the Economy (Contd….)

Current Account Deficit (CAD) was US $ 14.4billion in Apr-Sep 2015 as compared to US $ 18.4billion in Apr-Sep 2014.

External debts outstanding at end of Sep 2015was US $ 483.2 billion, increased by 1.7% ascompared to end of March 2015

India to plan for facing the challenges posed byfurther global slow down and the fiscal burdendue to 7th Central Pay Commissionrecommendations and implementation of OneRank One Pension Scheme.

5

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Policy Initiatives

GOOD GOVERNANCE

To introduce Bill for Targeted Delivery of Financialand Other Subsidies, Benefits and Services byusing the Aadhar framework

To introduce Direct Benefit Transfer (DBT) ofsubsidies for fertilizers on pilot basis

Price Stabilisation Fund with a corpus of ` 9Billion to help maintain stable prices of Pulses

To launch “Ek Bharat Shreshtha Bharat”programme to link States and Districts in anannual programme that connects people throughexchanges in areas of language, trade, culture,travel and tourism

To perform a comprehensive review andrationalise Autonomous Bodies

EASE OF DOING BUSINESS

Amendments in Companies Act to improveenabling environment for start-ups

AGRICULTURE AND FARMERS’ WELFARE

‘Pradhan Mantri Krishi Sinchai Yojana’ to beimplemented in mission mode

Fast track implementation of 89 irrigationprojects under Accelerated Irrigation BenefitsProgramme (AIBP)

A dedicated Long Term Irrigation Fund will becreated in NABARD

Soil Health Card scheme will cover all 140 Millionfarm holdings by March 2017

Promote organic farming through ‘ParmparagatKrishi Vikas Yojana’ and 'Organic Value ChainDevelopment in North East Region'

6

Policy Initiatives (Contd….)

AGRICULTURE AND FARMERS’ WELFARE (CONTD….)

Unified Agricultural Marketing e-Platform toprovide a common e-market platform forwholesale markets

To reduce the burden of loan repayment onfarmers, a provision of ` 150 billion has beenmade in the BE 2016-17 towards interestsubvention

SOCIAL SECTOR INCLUDING HEALTH CARE

New health protection scheme will providehealth cover up to ` 100,000 per family. Forsenior citizens an additional top-up package up to` 30,000 will be provided.

National Scheduled Caste and Scheduled TribeHub to be set up in partnership with industryassociations

3,000 Stores under Prime Minister’s Jan AushadhiYojana will be opened during 2016-17.

‘National Dialysis Services Programme’ to bestarted under National Health Mission throughPPP mode

“Stand Up India Scheme” to facilitate at least 2projects per bank branch to benefit atleast250,000 entrepreneurs.

RURAL SECTOR

300 Rurban Clusters will be developed under theShyama Prasad Mukherjee Rurban Mission

A new Digital Literacy Mission Scheme for ruralIndia to cover around 60 million additionalhouseholds within the next 3 years to beimplemented.

7


EDUCATION, SKILLS AND JOB CREATION

62 new Navodaya Vidyalayas will be opened

Digital Depository for School Leaving Certificates,College Degrees, Academic Awards and Marksheets to be set-up to avoid fakes

National Board for Skill DevelopmentCertification to be setup in partnership with theindustry and academia

Entrepreneurship Education and Training throughMassive Open Online Courses

Model Shops and Establishments Bill to becirculated to States to enable the small andmedium shops the choice to remain open on allseven days of the week on voluntary basis

FINANCIAL SECTOR

A comprehensive Code on Resolution of DisputeFinancial Firms to be introduced

A Financial Data Management Centre to be setup

RBI to facilitate retail participation inGovernment securities

General Insurance Companies owned by theGovernment to be listed in the stock exchanges

INFRASTRUCTURE AND INVESTMENT

Amendments to be made in Motor Vehicles Actto open up the road transport sector in thepassenger segment for private sector

8


INFRASTRUCTURE AND INVESTMENT (Contd…)

Action plan for revival of unserved andunderserved airports to be drawn up inpartnership with State Governments.

Steps to re-vitalise PPPs:

Public Utility (Resolution of Disputes) Bill willbe introduced during 2016-17

Guidelines for renegotiation of PPPConcession Agreements will be issued

New credit rating system for infrastructureprojects to be introduced

100% FDI to be allowed through FIPB route inmarketing of food products produced andmanufactured in India

9


24%

17%

19%

8%

10%

9%

4%4% 4%

1%

Central Plan Interest/Debt

States share of taxes Assistance to States & UT

Defence/police Subsidy

Other Non plan Pension

Grants to States - non plan Capital expenditure

` Comes from

10

` Goes to

17%

17%

12%14%

8%

11%

11%

8% 2%

0%

Debt receipts Corporation Tax

Income Tax Resources of Public Enterprises

Service Tax Non Tax Revenue

Excise Duty Customs Duty

Non Debt receipts Other Taxes

Direct Tax Proposals

All proposals are w.e.f 01.04.2017 except where specifically stated

INCOME TAX RATES

No change in the rates and slab limits for incometax for all assessees except as stated below

Company

Income tax @ 29% (plus surcharge and cess) fordomestic company having total turnover or grossreceipts not exceeding ` 50 Million in thefinancial year 2014-15

For domestic companies newly setup (on or afterMarch 1, 2016) engaged solely in the business ofmanufacture or production, income tax rate shallbe at 25% (plus surcharge and cess) at the optionof the company, if the company has not claimedany profit linked or investment linked deductions

and do not avail off investment allowance andaccelerated depreciation.

Surcharge

Surcharge to be raised from 12% to 15% onindividuals, AOP, BOI, HUF or any artificial judicialperson having income above ` 10 Miilion. Nochange in surcharge of companies.

Education Cess

No change in education cess and highereducation cess

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Direct Tax Proposals (Contd….)

EXEMPT INCOME

Rationalization of tax treatment of RecognizedPF, Pension Fund and National Pension Scheme

In respect of Contributions made after 1.4.2016,40% of accumulated balance on withdrawal fromRecognized PF, Pension Fund and NationalPension Scheme shall be exempt (earlier 100%was exempt).

Any payment in commutation of an annuitypurchased out of contributions made after1.4.2016 exceeding 40% of the annuity shall bechargeable to tax (earlier 100% was exempt).

On Payment from National Pension System Trustto an employee on closure or opting out isexempt upto 40% (Earlier fully taxable). However,whole amount received by nominee on death ofassessee is exempt from tax.

Exemption limit increased from `100,000 to`150,000 for annual contribution by an employerto a superannuation fund.

Exemption for one time portability fromrecognized PF to National Pension System.

INCOME FROM HOUSE PROPERTY

Deduction from Income from House Property

For availing higher deduction of interest u/s 24(b)the time period for acquisition or construction ofself-occupied house property for claiming higherdeduction of interest increased to 5 years(fromexisting 3 years) from the date of availing theloan

12


Rationalisation of unrealised rent and arrears ofrent

Arrears of Rent or unrealised rent received/realised subsequently shall be charged toincome-tax in the financial year in which suchrent is received or realised. Deduction of 30%allowed under Section 25A.

INCOME FROM BUSINESS OR PROFESSION

Presumptive taxation scheme for persons havingincome from profession (Section 44ADA)

Presumptive taxation scheme introduced forProfessionals (Individuals , HUF or Partnershipfirms but not to LLP) whose total gross receiptsdoes not exceed ` 5 Million. The total income insuch cases will be deemed to be equal to 50% of

gross receipts.

Increase in threshold limit for audit for personshaving income from profession

Threshold limit for audit u/s 44AB increased to `5Million (from `2.50 million)

Increase in threshold limit for presumptivetaxation scheme for persons having income frombusiness.

Threshold limit for presumptive taxation schemeu/s 44AD for “eligible business” increased to ` 20Million (from ` 10 Million), who will be requiredto pay Advance Tax in one installment within 15th

March. Section 234C not to apply in such casessubject to fulfillment of conditions. (Effectivefrom 1st June 2016)

13


INCOME FROM BUSINESS OR PROFESSION(CONTD….)

Salary, remuneration, interest etc paid topartners shall not be allowed as deduction.

On declaration of profits in accordance with thissection and the assessee declares profit for anyof the five consecutive assessment years relevantto the previous year succeeding such previousyear not in accordance with the presumptivebasis, assessee is not eligible to claim the benefitfor subsequent five assessment years.

Deduction in respect of provision for bad anddoubtful debts in the case of NBFC

Deduction of provision for bad and doubtfuldebts upto 5% of Total Income, extended toNBFC’s – Section 36(1)(viia).

Rationalisation of scope of tax incentive undersection 32AC

Where installation and acquisition of Plant andMachinery are in different years, deduction shallbe in the year in which asset is installed.(Retrospectively from 01.04.2016)

Phase out plan of incentives (AcceleratedDepreciation/Weighted Deduction)

Accelerated Depreciation reduced from present100% to 40% under Section 32 read with Rule 5of Income-tax Rules, 1962. Appendix IA amended

Weighted Deduction reduced from present levelsfor expenditure on scientific research undersection 35(1)(ii), 35(1)(iia), 35(1)(iii), 35(2AA),35(2AB), specified Business under section 35AD,notified agricultural extension project undersection 35CCC

14


INCOME FROM BUSINESS OR PROFESSION (CONTD….)

Phasing out of deductions and exemptions

Phase out plan of incentives (Profit linkedDeductions/weighted deduction)

Disallowance under Section14A – Rule 8D

Disallowance under Rule 8D will be limited to 1%of the average monthly value of investmentsyielding exempt income, but not exceeding theactual expenditure claimed under rule 8D ofSection 14A of Income Tax Act

Extension of scope of section 43B to include certainpayments made to Railways

Payments made to Indian Railways for use ofRailway assets included in Section 43B

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Section Proposed phase out measures/ Amendment

10AA No deduction for Profit linked deductionsfor units in SEZ commencing after01.04.2020

35AC No Deduction w.e.f 01.04.2017 forexpenditure to a public sector companyor a local authority or to an approvedassociation or institution etc

35CCD Deduction shall be restricted to100 percent from 01.04.2020

80IA, 80IAB and 80IB

No deduction if the specified activitycommences on or after 1st day April,2017


CAPITAL GAINS

The definition of the term 'unlisted securities' forthe purpose of Section 112 (1) (c) widened

The benefit of taxation @10% on Long-termcapital gains from transfer of shares is extendedto shares of a company not being a company inwhich the public are substantially interested.(Done to clarify the position of taxation w.r.t.definition of securities under Securities ContractsReg. Act,1956.) Period of holding for shares ofunlisted companies to qualify as LT capital assetproposed to be reduced to 2 years from 3 years.

Change in rate of Securities Transaction tax in casewhere option is not exercised

Increase in securities transaction tax rate from0.017 percent to 0.05 percent on sale of anoption in securities where option is not exercised.

(Effective from 1st June 2016)

Rationalization of Section 50C in case saleconsideration is fixed under agreement executedprior to the date of registration of immovableproperty

Stamp duty value on the date of the agreementmay be taken for the purposes of computing thefull value of consideration where date ofregistration is on a later date.

Conversion of a company into Limited LiabilityPartnership (LLP)

Additional condition for not consideringconversion of a private limited /unlisted publiccompany into LLP as transfer-the value of thetotal assets in any of the 3 preceding previousyears, should not exceed ` 50 Million.

16


DEDUCTIONS

Individuals

New deduction introduced for providingexemption of ` 50,000 for housing loans up to`3.50 Million, provided cost of house is notabove ` 5 Million.

Limit of rebate increased to ` 5,000 – Section 87A

Limit of deduction u/s 80GG for rent paidincreased from ` 24,000 to ` 60,000 p.a.

For Employment Generation – Section 80JJAA

Deduction under said provisions on cost incurredon employee whose emoluments < ` 25,000 peremployee per month.

Any increase in the number of employeesallowable. (Currently 10% increase required)

Minimum number of days required decreasedfrom 300 to 240.

First year of business - 30% of all emolumentspaid or payable to employees allowed asdeduction.

GOI to contributed 8.33% towards EPScontribution in respect of new enrolments toEPFO in formal sector whose salary is upto`15,000 p.m. for the first 3 years.

Sec. 80JJAA is now extended to all assessessubject to audit u/s 44AB of the Income Tax Act.

17


TAX DEDUCTED AT SOURCE

Rate of deduction of income tax at source

Increase in threshold limit of deduction of tax at source (Effective from 1st June, 2016)

18

Section Heads ExistingThreshold Limit (`)

ProposedThreshold Limit (`)

192A Payment of accumulatedbalance due to an employeein EPF

30,000 50,000

194BB Winnings from HorseRace

5,000 10,000

194C Payments to Contractors Annual limitof 75,000

Annual limitof 100,000

Section Heads ExistingThresholdLimit (`)

ProposedThresholdLimit (`)

194LA Payment of Compensation onacquisition of certainImmovable Property

200,000 250,000

194D Insurance commission

20,000 15,000

194G Commission on sale of lotteryTickets

1,000 15,000

194H Commission or brokerage

5,000 15,000


TAX DEDUCTED AT SOURCE (Contd….)

Revision in rates of deduction of tax at source (Effective from 1st June, 2016)

Exemption from requirement of furnishing PANunder section 206AA to certain non-resident.

Exemption from requirement of furnishing PANunder section 206AA to non-residents not beinga company, or to a foreign company, in respect ofany other payment, other than interest on bondswhere prescribed conditions satisfied.

Enabling of filing form 15G/15H for rentalpayments

Amendment to section 197A for making therecipient of payments under section 194-I eligiblefor filing self-declaration in Form No: 15G/15Hfor non-deduction of tax at source in accordancewith the provisions of section 197A (Effectivefrom 1st June, 2016)

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Section Heads ExistingRate ofTDS (%)

ProposedRate ofTDS (%)

194DA Payment in respect of Life InsurancePolicy

2% 1%

194EE Payments in respect of NSS Deposits

20% 10%

194D Insurance Commission

10% 5%

194G Commission on sale of lottery Tickets

10% 5%

194H Commission or brokerage

10% 5%


FOREIGN COMPANIES

Amendment related to POEM and provisions forCompany incorporated outside India

Applicability of Place of Effective Management(POEM) deferred to 01.04.2017

Transition mechanism to be provided for acompany which is incorporated outside India andhas not earlier been assessed to tax in India.

Applicability of Minimum Alternate Tax (MAT) onforeign companies

The provisions of section 115JB shall not beapplicable to a foreign company subject tospecified conditions retrospectively from the 1stday of April, 2001.

20



FILING OF RETURN OF INCOME AND ASSESSMENTPROCEDURES

Filing of Return of Income

Person earning long term capital gains exemptunder Sec. 10 (38) exceeding basic threshold limitto file return of income u/s 139(1).

Belated returns to be filed before the end of therelevant assessment year or before thecompletion of the assessment, whichever isearlier.

For Belated returns and return furnished inresponse to notice issued u/s 142(1) , Revisedreturn can be filed before the expiry of one yearfrom the end of the relevant assessment year orbefore the completion of the assessment,whichever is earlier.

Return not to be defective merely because self-assessment tax and interest payable thereon hasnot been paid on or before the date of furnishingof the return.

Payment of interest on refund (Effective from 1stJune, 2016)

Where return is filed after the due date, theperiod for grant of interest on refund underSection 244A may begin from the date of filing ofreturn.

Where a refund arises out of appeal effect beingdelayed beyond the time prescribed undersection 153(5), the assessee shall be entitled toreceive, an additional interest on such refundamount @ 3% p.a.

21


FILING OF RETURN OF INCOME AND ASSESSMENTPROCEDURES (Contd….)

Levy of Penalty u/s 271(1)(c) rationalised byspecifying the penalty rates to be 50% of tax incase of under reporting of income and 200% oftax where there is misreporting of facts.

Time limit for assessment, reassessment andrecomputation - the period, for completion ofassessment under section 143 or section 144 bechanged from existing two years to twenty-onemonths from the end of the assessment year inwhich the income was first assessable;

The period for completion of assessment undersection 147 be changed from existing one year tonine months from the end of the financial year inwhich the notice under section 148 was served

Processing under section 143(1) be mandatedbefore assessment

Processing of return u/s 143(1) mandatory beforemaking an assessment u/s 143(3).

Extension of time limit to Transfer Pricing Officerin certain cases (Effective from June 1, 2016)

Where assessment proceedings are stayed by anycourt or where a reference for exchange ofinformation has been made by the competentauthority, the time available to the TPO formaking an order after excluding the time forwhich assessment proceedings were stayed orthe time taken for receipt of information, as thecase may be, is less than sixty days, then suchremaining period shall be extended to sixty days.

Delay beyond 90 days in giving effect to appellateorders under the Income Tax Act, will fetchinterest @ 9% (earlier 6%) from GOI.

22


Stay of demand

Mandatory for the assessing officer to grant stayof demand once the assessee pays 15% of thedisputed demand, while the appeal is pendingbefore Commissioner of Income-tax (Appeals).

ADDITIONAL LEVY

Taxation of income by way of dividend

Any income received by way of dividend in excessof ` 1 Million shall be chargeable to tax on grossbasis in the case of an individual, HinduUndivided family or a firm who is resident inIndia @ 10%

Equalisation Levy

Equalization levy (EL) of 6% of gross amount forpayment made to non- residents (not having PEin India) by residents/ non residents having PEexceeding ` 100,000 a year in case of B2Btransactions. Expense disallowance if EL not paid(Effective date as per notification to be issued)

Tax on distributed income to shareholders(115QA)

To apply to all buyback of unlisted shares bycompanies in accordance with Companies Act(not restricted to Section 77A buybacks (Effectivefrom 1st June, 2016)

23


Tax Collection at Source (TCS) on sale of vehicles;goods or services

TCS to be collected on –

a) sale of vehicles @1% if sale valueexceeds ` 1 Million;

b) on sale in cash of any goods (other thanbullion and jewellery) or services (otherthan payments on which TDS is deducted )exceeding ` 200,000 except certain classof buyers (Effective from 1st June, 2016)

Levy of tax where the charitable institution ceasesto exist or converted into a non-charitableorganization

Tax at maximum marginal rates on accretedincome on conversion of charitable trust to noncharitable organization (Effective from 1st June,

2016)

OTHER PROPOSALS

Rationalization of section 56 of the Income-tax Act

Section 56(2) (vii) not applicable for sharesreceived by an individual/HUF fromamalgamation and demerger of company

Clarification regarding set off losses againstdeemed undisclosed income

No set off of any loss shall be allowable in respectof undisclosed income.

24


Taxation of Income from 'Patents'

Income by way of royalty in respect of a patentdeveloped and registered in India : Taxable at therate of 10% (plus applicable surcharge and cess)on the gross amount of royalty. Section 115BBF

No expenditure or allowance in respect of suchroyalty income shall be allowed under the Act.

Tax incentives for start-ups

100% deduction of the profits for an eligible startup before 01.04.2019. Deduction of profits for 3out of 5 years for startups setup during April,2016 to March, 2019. MAT will apply in suchcases.

Long Term Capital Gains exemption if investmentin units of specified fund upto ` 5 Million.Section 54EE. (3 years lock-in)

LTCG on transfer of residential property byindividual / HUF to be exempt, if such capitalgains are invested in shares of eligible start upCompany in which the individual/HUF holdsmore than 50% , provided the start up companyutilizes the amount so invested to acquire assetsbefore due date of filing return.

25


NEW SCHEMES INTRODUCED

The Income Declaration Scheme, 2016 (Effectivefrom 1st June, 2016)

The scheme is proposed to be made applicable inrespect of undisclosed income of any financialyear upto 2015-16.

Tax is proposed to be charged at the rate of 30%on the declared income as increased bysurcharge at the rate of 25% (to be called theKrishi Kalyan cess), i.e. 7.5% of declared income.

A penalty @ 25% of tax payable, i.e. 7.5% ofdeclared income.

Tax to be paid within 2 months of declaration.

No questions asked regarding source.

The Direct Tax Dispute Resolution Scheme, 2016introduced. (Effective date as per notification to beissued)

New Dispute Resolution Scheme to be introducedby withdrawing appeals pending disposal beforeCIT (Appeals). No penalty in respect of cases withdisputed tax up to ` 1 Million. Cases withdisputed tax exceeding ` 1 Million to besubjected to 25% of the minimum of theimposable penalty. Any pending appeal against apenalty order can also be settled by paying 25%of the minimum of the imposable penalty and taxand interest on quantum addition.

Amendment of Section 271AAB

Levy of penalty u/s 271AAB(1)(c) on undisclosedincome @ flat rate of 60%.

26

Indirect Tax Proposals – Customs Duty

Amendments

CVD on imported media with recordedInformation Technology Software is exempted,since it is leviable to Service tax under FinanceAct, 1994. Refer notification 11/2016-Customs

Customs duty exempted on bonafide giftsimported by post or air freight upto ` 20,000/-earlier the limit being ` 10,000/-. Refernotification 13/2016-Customs

Exemption to imports relating to Defence andInternal Security forces has been withdrawn andBCD and SAD on the same is applicable w.e.f 1-04-2016 vide notification no. 14/2016-Customs

In the Project Imports Regulations, 1986, coldchain including pre-cooling unit, pack houses,sorting and grading lines and ripening chambers”vide notification no. 20/2016-Customs

An additional condition has been inserted to availexemption for power generation projectsoriginally specified in notification no. 81/2005-Customs vide notification 22/2016-Customs

Customs- Non Tariff:

Notification no.32 Seeks to notify the Customs(Import of Goods at Concessional Rate of Duty forManufacture of Excisable Goods), Rules 2016.

The Central Government fixes the rate of interestat fifteen per cent per annum under Section28AA of the Customs Act, 1962 (52 of 1962)videnotification no. 33/2016-Customs (NT)

27

Indirect Tax Proposals – Customs Duty (Contd….)

Amendment of the Customs Baggage Declaration Regulations, 2013 to Customs Baggage Declaration(Amendment) Regulations, 2016. The Customs Duty Free Allowances are as under:

28

Eligible passenger Origin country Duty free allowance

Passengers of Indian origin and foreigners residing in

India, excluding infants

Tourists of foreign origin, excluding infants

Other than Nepal,

Bhutan,

Myanmar

` 50, 000/-

` 15,000/-

Passengers of Indian origin and foreigners residing in

India, excluding infants

Tourists of foreign origin, excluding infants

Nepal, Bhutan,

Myanmar By air ` 15,000/-

By land – Nil

Indian passenger who has been residing abroad for over

one year

Anywhere Gold jewellery:

Gentleman – 20 gms with a value cap of

` 50,000/-

Lady – 40 gms with a value cap of

` 100,000/-

All passengers Anywhere Alcohol liquor or wine: 2 litres

All passengers Anywhere Cigarettes: 200 numbers or Cigars upto 50 or

Tobacco 250 grams

Passenger of 18 years and above Anywhere One laptop computer (note book computer).

Indirect Tax Proposals – Increase in rates of Customs Duty

Items Existing Proposed

Balloons - BCD on Natural latex rubber made balloons 10% 20%

Jewellery - BCD on Imitation jewellery 10% 15%

Metals

a) Primary aluminium 5% 7.5%

b) Other aluminium products 7.5% 10%

c) Zinc alloys 5% 7.5%

Renewable Energy

BCD on Industrial solar water heater being increased. 7.5% 10%

BCD exemption on solar tempered glass / solar tempered (anti-reflective coated)

glass being withdrawn and 5% concessional BCD being imposed, subject to actual

user conditions.

Nil 5%

Automobiles

BCD on Golf cars being increased. 10% 60%

29

Indirect Tax Proposals – Increase in rates of Customs Duty (Contd….)


Capital goods

Tariff rate of BCD being increased on goods falling under 211 specified tariff lines in

Chapter 84, 85 and 90. Out of which:

(i) The effective rate of BCD on goods falling under 115 specified tariff lines in being

maintained at 7.5%.

(ii) The effective rate of BCD on goods falling under remaining 96 tariff lines is being increased

to 10%.

7.5%

7.5%

7.5%

10%

7.5%

10%

Paper, Paperboard and newsprint

BCD on Plans, drawings and designs

being increased.

Nil 10%

Electronics / Hardware

BCD on E-Readers being increased. Nil 7.5%

The exemption from basic customs duty, CV duty, SAD on charger/ adapter, battery and wired

headsets/speakers for manufacture of mobile phone being withdrawn.

BCD – Nil

CVD – Nil

SAD - Nil

Applicable

BCD CVD –

12.5% SAD – 4%

30



Basic Customs Duty exemption on Magnetic - Heads (all types), Ceramic/ Magnetic

cartridges and stylus, Antennas, EHT cables, Level meters/ level indicators/ tuning

indicators/ peak level meters/ battery meter/ VC meters/ Tape counters, Tone arms,

Electron guns being withdrawn.

Nil Applicable BCD

Specified telecommunication equipment [Soft switches and Voice over Internet

Protocol (VoIP) equipment namely VoIP phones, media gateways, gateway

Product/Switch (POTP/POTS), Optical controllers and session border controllers,

Optical Transport equipment; combination of one / more of Packet Optical Transport

Network(OTN) products, and IP Radios, Carrier Ethernet Switch, Packet Transport

Node (PTN) products, Multiprotocol Label Switching- Transport Profile (MPLS-TP)

products, Multiple Input / Multiple Output (MIMO) and Long Term Evolution (LTE)

Products on which 10% BCD was imposed in 2014-15 Budget] being excluded

from the purview of the other exemption also.

Nil 10%

Basic Customs Duty exemption on preform of silica for manufacture of telecom

grade optical fibre /cables being withdrawn.

Nil 10%

Exemption from SAD on populated PCBs for manufacture of personal computers

(laptop or desktop) being withdrawn.

Nil 4%

Exemption from SAD on populated PCBs of mobile phone/tablet computer being

withdrawn. Concessional SAD on populated PCBs for manufacture of mobile

phone/tablet computer imposed.

Nil 2%

31



Capital Goods

CVD exemption on specified machinery required for construction of roads being

withdrawn.

Nil 12.5%

Defence Production

Customs duties exemption on direct imports of specified goods for defence

purposes by Government of India or State Governments being withdrawn, with

effect from 01.04.2016.

BCD- Nil

CVD – Nil SAD – Nil

BCD – 5%

to 10% CVD –

12.5% SAD – 4%

BCD exemption on specified goods imported by contractors of Government of India

PSUs or sub-contractors of such PSUs for defence purposes being withdrawn, with

effect from 01.04.2016.

Nil 7.5% to

10%

32



Rationalization/anti avoidance

Concessional CVD on Gold dore bar being increased and concessional excise duty

on refined gold bars manufactured from such gold dore or gold ore /concentrate,

silver dore bar and copper ore or concentrate being increased. Excise duty

exemption under the existing area based exemptions on refined gold being

prospectively withdrawn.

Concessional CVD on silver dore bar and excise duty on refined silver being

increased.

CVD 8%

Excise duty 9%

CVD 7%

Excise duty 8%

CVD 8.75%

Excise duty 9.5%

CVD 7.75%

Excise duty 8.5%

Additional Resource Mobilization

BCD on Cashew nuts in shell being increased Nil 5%

33

Indirect Tax Proposals – Decrease in rates of Customs Duty


Mineral Fuels and Mineral oils

a) Coal; briquettes, ovoids and similar solid fuels manufactured from coal 2.5% /

10%

2.5%

b) Lignite, whether or not agglomerated, excluding jet 10% 2.5%

c) Peat (including peat litter), whether or not agglomerated 10% 2.5%

d) Coke and semi-coke of coal, of lignite or of peat, whether or not agglomerated;

retort carbon

5% /

10%

5%

e) Coal gas, water gas, producer gas and similar gases, other than petroleum gases

and other gaseous hydrocarbons

10% 5%

f) Tar distilled from coal, from lignite or from peat and other mineral tars, whether

or not dehydrated or partially distilled, including reconstituted tars

10% 5%

g) Oils and other products of the distillation of high temperature coal tar

similar products in which the weight of the aromatic constituents exceeds that of

the non-aromatic constituents

2.5% /

5%/

10%

2.5%

h) Pitch and pitch coke, obtained from coal tar or from other mineral tars 5% /

10%

5%

34

Indirect Tax Proposals – Decrease in rates of Customs Duty (Contd….)


Chemicals and Petrochemicals

BCD on all acyclic hydrocarbons and all cyclic hydrocarbons [other than para- xylene

which attracts Nil BCD and styrene which attracts 2% BCD] being rationalized.

5% /

2.5%

2.5%

BCD on denatured ethyl alcohol (Ethanol)

being reduced, subject to actual user condition.

5% 2.5%

SAD on Orthoxylene, being reduced, for the manufacture of phthalic anhydride

subject to actual user condition.

4% 2%

BCD on electrolysers, membranes and their parts required by caustic soda/

potash unit using membrane cell technology

2.5% Nil

Paper, Paperboard and newsprint

Basic customs duty on wood in chips or particles for manufacture of paper,

paperboard and news print

5% Nil

Textiles

Basic Customs Duty on specified fibres

and yarns

5% 2.5%

Basic customs duty on import of specified fabrics [for manufacture of textile

garments for export] of value equivalent to 1% of FOB value of exports in the

preceding financial year being exempted subject to the specified conditions.

Applicable rate Nil

35



Electronics and Hardware

BCD on polypropylene granules / resins for the manufacture of capacitor grade

plastic films.

7.5% Nil

BCD on parts of E-Readers. Applicable rate 5%

Nil Basic Customs Duty being extended on magnetron of capacity of 1 KW to 1.5

KW for use in manufacture of domestic microwave ovens, subject to actual user

condition.

10% Nil

Machinery, electrical equipment, instrument and parts thereof (except populated PCBs)

for semiconductor wafer fabrication/LCD fabrication units

Applicable

BCD SAD – 4%

Nil BCD

Nil SAD

Machinery, electrical equipment, instrument and parts thereof (except populated PCBs)

imported for Assembly, Test, Marking and Packaging of semiconductor chips (ATMP)

Applicable

BCD SAD – 4%

Nil BCD

Nil SAD

Inputs, parts and components, subparts for manufacture of charger / adapter, battery

and wired headsets /speakers, of mobile phone, subject to actual user condition

Applicable BCD,

CVD SAD

Nil BCD

Nil CVD Nil SAD

Parts and components, subparts for manufacture of Routers, broadband Modems, Set-

top boxes for gaining access to internet, set top boxes for TV, digital video recorder

(DVR)/network video recorder (NVR), CCTV camera/IP camera, lithium ion battery

[other than those for mobile handsets]

Applicable BCD,

CVD SAD

Nil BCD

Nil CVD Nil SAD

36



Basic Customs Duty on specified capital goods and inputs for use in manufacture of Micro

fuses, Sub-miniature fuses, Resettable fuses and Thermal fuses

Applicable rate Nil

Metals Glass and Ceramics

BCD on Silica sand 5% 2.5%

Basic Customs Duty on brass scrap 5% 2.5%

Automobiles

Nil BCD and 6% excise/CVD being extended on parts of electric vehicles and hybrid

vehicles, presently.

Available upto

31.03.2016

Without

any time limit

BCD on aluminium Oxide for manufacture of Wash Coats, which are used in the

manufacture of catalytic converters, being reduced subject to actual user condition

7.5% 5%

Description of “Engine for HV (Atkinson

cycle)” to “Engine for xEV (hybrid electric vehicle)” for the purposes of Nil Basic Customs

Duty and 6% CVD

Applicable BCD and

CVD

Nil BCD

6% CVD

Maintenance, repair and overhaul [MRO] of aircrafts

Tools and tool kits being exempted from Basic Customs duty, CVD and SAD when imported

by MROs for maintenance, repair, and overhauling [MRO] of aircraft subject to

certification by the Directorate General of Civil Aviation.

Applicable BCD, CVD

and SAD

Nil BCD

Nil CVD Nil SAD

37



Miscellaneous

BCD on import of Medical Use Fission Molybdenum-99 by Board of Radiation and

Isotope Technology (BRIT) for manufacture of radio pharmaceuticals

7.5% Nil

Concessional BCD on Pulp of wood for manufacture of sanitary pads, napkins &

tampons

5% 2.5%

Concessional BCD on Super Absorbent Polymer when used for manufacture of

sanitary pads, napkins & tampons

7.5% 5%

“Foreign Satellite data” on storage media when imported by National Remote

Sensing Centre (NRSC), Hyderabad.

Applicable BCD, CVD,

SAD

Nil BCD

Nil CVD Nil SAD

Textiles

The Tariff value for excise /CVD purposes on readymade garments and made up

articles of textiles being changed.

30% of retail sale price 60% of

retail sale price

Other Products

A number of assistive devices rehabilitation aids and other goods for disabled

persons attract Nil BCD. This exemption being extended to Braille paper.

BCD -10% BCD - Nil

Disposable sterilized dialyzer and micro barrier of artificial kidney being exempted

from Basic Customs Duty, excise duty / CVD and SAD

Applicable BCD, excise

/ CVD, SAD

Nil BCD

Nil excise/ CVD

Nil SAD

38



Promoting Agriculture and food processing

BCD on refrigerated containers 10% 5%

Basic Customs Duty on specified fibres and yarns 5% 2.5%

Textiles

Basic customs duty on import of specified fabrics [for manufacture of textile

garments for export] of value equivalent to 1% of FOB value of exports in the

preceding financial year being exempted subject to the specified conditions.

Applicable rate Nil

Electronics and Hardware

BCD on polypropylene granules / resins for the manufacture of capacitor grade

plastic films.

7.5% Nil

BCD on parts of E-Readers. Applicable rate 5%

Nil Basic Customs Duty being extended on magnetron of capacity of 1 KW to 1.5

KW for use in manufacture of domestic microwave ovens, subject to actual user

condition.

10% Nil

Machinery, electrical equipment, instrument and parts thereof (except populated

PCBs) for semiconductor wafer fabrication/LCD fabrication units

Applicable

BCD SAD – 4%

Nil BCD

Nil SAD

39



Machinery, electrical equipment, instrument and parts thereof (except populated

PCBs) imported for Assembly, Test, Marking and Packaging of semiconductor chips

(ATMP)

Applicable

BCD SAD – 4%

Nil BCD

Nil SAD

Inputs, parts and components, subparts for manufacture of charger / adapter,

battery and wired headsets /speakers, of mobile phone, subject to actual user

condition

Applicable BCD, CVD

SAD

Nil BCD

Nil CVD Nil SAD

Parts and components, subparts for manufacture of Routers, broadband Modems,

Set-top boxes for gaining access to internet, set top boxes for TV, digital video

recorder (DVR)/network video recorder (NVR), CCTV camera/IP camera, lithium ion

battery [other than those for mobile handsets]

Applicable BCD, CVD

SAD

Nil BCD

Nil CVD Nil SAD

Basic Customs Duty on specified capital goods and inputs for use in manufacture of

Micro fuses, Sub-miniature fuses, Resettable fuses and Thermal fuses

Applicable rate Nil

Metals Glass and Ceramics

BCD on Silica sand 5% 2.5%

Basic Customs Duty on brass scrap 5% 2.5%

40



Automobiles

Nil BCD and 6% excise/CVD being extended on parts of electric vehicles and

hybrid vehicles, presently.

Available upto

31.03.2016

Without

any time limit

BCD on aluminium Oxide for manufacture of Wash Coats, which are used in the

manufacture of catalytic converters, being reduced subject to actual user condition

7.5% 5%

Description of “Engine for HV (Atkinson cycle)” to “Engine for xEV (hybrid electric

vehicle)” for the purposes of Nil Basic Customs Duty and 6% CVD

Applicable BCD and

CVD

Nil BCD

6% CVD

Maintenance, repair and overhaul [MRO] of aircrafts

Tools and tool kits being exempted from Basic Customs duty, CVD and SAD when

imported by MROs for maintenance, repair, and overhauling [MRO] of aircraft

subject to certification by the Directorate General of Civil Aviation.

Applicable BCD, CVD

and SAD

Nil BCD

Nil CVD

Nil SAD

41



Miscellaneous

BCD on import of Medical Use Fission Molybdenum-99 by Board of Radiation and

Isotope Technology (BRIT) for manufacture of radio pharmaceuticals

7.5% Nil

Concessional BCD on Pulp of wood for manufacture of sanitary pads, napkins &

tampons

5% 2.5%

Concessional BCD on Super Absorbent Polymer when used for manufacture of

sanitary pads, napkins & tampons

7.5% 5%

“Foreign Satellite data” on storage media when imported by National Remote

Sensing Centre (NRSC), Hyderabad.

Applicable BCD, CVD,

SAD

Nil BCD

Nil CVD Nil SAD

Textiles

The Tariff value for excise /CVD purposes on readymade garments and made up

articles of textiles being changed.

30% of retail sale price 60% of

retail sale price

42



Other Products

A number of assistive devices rehabilitation aids and other goods for disabled

persons attract Nil BCD. This exemption being extended to Braille paper.

BCD -10% BCD - Nil

Disposable sterilized dialyzer and micro barrier of artificial kidney being exempted

from Basic Customs Duty, excise duty / CVD and SAD

Applicable BCD, excise

/ CVD, SAD

Nil BCD

Nil excise/ CVD

Nil SAD

Promoting Agriculture and food processing

BCD on refrigerated containers 10% 5%

43

Indirect Tax Proposals – Excise Duty

Section 5A - omitted, the requirement ofpublishing and offering for sale on the date ofissue, by the Directorate of Publicity and PublicRelations of CBEC, of notifications issued forpublication in the Official Gazette.

Section 11A - increase the limitation period fromone to two years in cases not involving fraud,suppression, etc.

Infrastructure Cess being levied on motorvehicles, of heading 8703, as under:

Petrol/LPG/CNG motor vehicles of length notexceeding 4m and engine capacity notexceeding 1200CC – 1%

Diesel motor vehicles of length notexceeding 4m and engine capacity notexceeding 1500CC – 2.50%

Other higher engine capacity and SUVs and

bigger sedans – 4%

3 wheeled, Electrically operated, Hybrid,Hydrogen vehicles based on fuel celltechnology, Motor vehicles which afterclearance have been registered for use solelyas taxi, Cars for physically handicappedpersons and Motor vehicles cleared asambulances or registered for use solely asambulance exempted from this Cess.

No credit of Infrastructure Cess will beallowed, and credit of no other duty can beallowed to pay this Cess.

44

Indirect Tax Proposals – Excise Duty (Contd….)

OTHER AMENDMENTS:

The procedure for availment of exemption fromexcise duty on parts, testing equipment, toolsand tool-kits for maintenance, repair andoverhaul of aircraft being simplified based onrecords.

“Valid agreement between importer / producerof power with urban local body for processing ofmunicipal solid waste for not less than ten yearsfrom the date of commissioning of project” beingprovided as an alternative condition for availingconcessional customs/excise duty benefits in caseof power generation project based on municipaland urban waste.

CENVAT Credit Rules, 2004 being amended, toimprove credit flow, reduce the compliance costand litigation, particularly those relating to

apportionment of credit between exempted andnon-exempted final products / services.

Changes also being made in provisions relating toinput service distributor, including extension ofthis facility to transfer input services credit tooutsourced manufacturers, under certaincircumstances.

Amendments will also enable manufacturers withmultiple manufacturing units to maintain acommon warehouse for inputs and distributeinputs with credits to the individualmanufacturing units. This will come into effectfrom 01.04.2016.

Interest rates on delayed payment of duty isreduced from 18% to 15%

45

Indirect Tax Proposals – Increase in rates of Excise Duty


Domestically mfd. charger/adapter, battery and wired headsets/speakers for supply

to mobile phone manufacturers as OEM

Nil 2% [without ITC] or

12.5% [with ITC]

Disposable containers made of aluminium foils 2% [without ITC] or 6%

[with ITC]

2% [without ITC] or

12.5% [with ITC]

Readymade garments and made up articles of textiles 30% of retail sale price 60% of retail sale price

PSF / PFY, mfd. from plastic scrap or plastic waste including waste PET bottles 2%[without ITC] or 6%

[with ITC]

2%[without ITC] or

12.5% [with ITC]

Unsaturated Polyester Resin (polyester based infusion resin and hand layup resin),

Hardeners/Hardener for adhesive resin, Vinyl Easter Adhesive EA) and Epoxy Resin

used for manufacture of rotor blades, and intermediates, parts and sub-parts of

rotor blades for wind operated electricity generators

Nil 6%

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

or other precious stones namely, ruby, emerald and sapphire] – exemption

withdrawn with a higher threshold exemption upto ` 60 Million in a year and

eligibility limit of ` 120 Million, along with simplified compliance procedure.

Nil 1% [without ITC] or

12.5% [with ITC]

The abatement rate from retail sale price (RSP) for the purposes of RSP based

assessment of excise duty, for all categories of footwear being revised

25% 30%

Concessional duty on refined gold bars mfd. from gold dore or gold ore/concentrate,

silver dore bar and copper dore or concentrate

9% 9.5%

46

Indirect Tax Proposals – Increase in rates of Excise Duty (Contd….)


Concessional duty refined silver 8% 8.5%

Waters including mineral waters and aerated waters, containing added sugar or

other sweetening matter or flavored

18% 21%

Aviation Turbine Fuel [ATF], other than for supply to Scheduled Commuter Airlines

(SCA) from the Regional Connectivity Scheme Airports, being increased. ATF for

supply to aircraft under the Regional Connectivity Scheme will continue to attract

8% excise duty.

8% 14%

Cigar and cheroots / Cigarillos 12.5% or ` 3,375/- per

thousand, whichever is

higher

12.5% or ` 3,755/- per


higher

Cigarettes of tobacco substitutes ` 3,375/- per

thousand

` 3,755/- per

thousand

47

Indirect Tax Proposals – Increase in rates of Excise Duty (Contd….)


Cigarillos of tobacco substitutes / Other forms of tobacco substitutes 12.5% or `3,375/- per


higher

12.5% or `3,755/- per


higher

Gutkha, chewing tobacco (including filter khaini) and jarda scented tobacco 70% 81%

Unmanufactured tobacco 55% 64%

Paper rolled biris [whether handmade or machine made] and other biris [other than

handmade biris]

Tariff rate `30 per

thousand. Effective

rate `21 per

thousand

Tariff rate`80 per

thousand. Effective

rate `21 per

thousand

Additional Duty of Excise

Cigarettes Filter / Non filter not exceeding 65 mm. `70 Per

thousand

`215 Per

thousand

Cigarettes Filter / Non-filter exceeding 65 mm but not exceeding 70 mm. `110 Per

thousand

`370 Per

thousand

Cigarettes Filter exceeding 65 mm but not exceeding 70 mm. `70 Per

thousand

`260 Per

thousand

Cigarettes -Other `180 Per

thousand

`560 Per

thousand

48

Indirect Tax Proposals – Decrease in rates of Excise Duty


Electric motor, shafts, sleeve, chamber, impeller, washer required for the

manufacture of centrifugal pump / Refrigerated containers / Micronutrients

[covered under S. No. 1(f) of Schedule 1 Part (A)of the Fertilizer Control Order, 1985

and manufactured by the manufacturers which are registered under the FCO, 1985]

12.50% 6%

Physical mixture of fertilizers, made out of chemical fertilizers on which duty of

excise has been paid, by Co-operative Societies, holding certificate of manufacture

for mixture of fertilizers under the Fertilizer Control Order 1985, for supply to the

members of such Cooperative Societies

1% (without ITC or 6%

(with ITC)

Nil

Concrete Mix manufactured at site for use in construction work at such site being

extended to Ready Mix Concrete manufactured at the site of construction for use in

construction work at such site / Solar lamps

12.50% Nil

Inputs, parts and components, subparts for manufacture of charger/adapter, battery

and wired headsets/speakers of mobile phone, subject to actual user condition

12.5% /

Nil

Nil

Routers, broadband Modems, Set-top boxes for gaining access to internet, set top

boxes for TV, digital video recorder (DVR) / network video recorder (NVR), CCTV

camera / IP camera, lithium ion battery [other than those for mobile handsets]

12.50% 4% [without ITC] or

12.5% [with ITC]

Parts and components, subparts for manufacture of Routers, broadband Modems,

Set-top boxes for gaining access to internet, set top boxes for TV, digital video

recorder (DVR) / network video recorder (NVR), CCTV camera / IP camera, lithium

ion battery [other than those for mobile handsets]

12.50% Nil

49

Indirect Tax Proposals – Decrease in rates of Excise Duty (Contd….)


“Engine for HV (Atkinson cycle)” changed to “Engine for xEV(hybrid electric vehicle)” 12.50% 6%

Tools and tool kits when procured by MROs for maintenance, repair, and

overhauling [MRO] of aircraft subject to a certification by the Directorate General of

Civil Aviation

Applicable

excise

duty

Nil

Capital goods and spares thereof, raw materials, parts, material handling equipment

and consumable for repairs of ocean-going vessels by a ship repair unit subject to

actual user condition

Applicable excise duty Nil

Parts of railway or tramway locomotives or rolling stock and railway or tramway

track fixtures and fittings, railway safety or traffic control equipment, etc

12.50% 6%

Improved cook stoves including smokeless chulhas for burning wood, agro waste,

cow dung, briquettes, and coal

12.50% Nil

Iron ore fines with Fe content below 58% 10.00% Nil

Iron ore lumps with Fe content below 58% / Chromium ores and concentrates, all

sorts

30.00% Nil

Bauxite 20.00% 15%

Branded readymade garments and made up articles of textiles of retail sale price of

`1000 or more

Nil [without ITC] or

6%/ 12.5% [with ITC]

2% [without ITC] or

12.5% [with ITC]

50

Indirect Tax Proposals – Decrease in rates of Excise Duty (Contd….)


Carbon pultrusions used for manufacture of rotor blades, and intermediates, parts

and sub-parts of rotor blades for wind operated electricity generators / Rubber

sheets & resin rubber sheets for soles and heels

12.5% 6%

51

Indirect Tax Proposals – Service Tax

No change in the rate of service tax

Krishi Kalyan Cess at the rate of 0.50% imposedon all taxable services w.e.f 1.6.2016

Services brought under tax net

Services provided by a senior advocate to anadvocate or firm of advocates providing legalservices and also to a person represented on anarbitral tribunal w.e.f 1.4.2016 @ 14%

Construction, erection, commissioning orinstallation of original work pertaining to monorail or metro rail in respect of contracts enteredinto on or after 1.3.2016 @5.6%

Service of transport of passengers, with orwithout accompanied belongings, by ropeway,cable car or aerial tramway- w.e.f 1.4.2016 @14%

Service Tax on transportation of passengers by airconditioned stage carriage @ 5.60% w.e.f June 1,2016

Activity carried out by a lottery distributor orselling agent in relation to promotion, marketing,organizing, selling of lottery or facilitating inorganizing lottery of any kind, in any othermanner, of the State Government.

Services Exempted

Services provided by IRDA, EPFO, regulatoryservices provided by SEBI , housing projectsunder HFA Mission, PMAY etc

Services provided by GIC under Niramaya HealthScheme, services provided by National Centre forCold Chain Development, Biotechnology IndustryResearch Assistance Council

52

Indirect Tax Proposals – Service Tax (Contd….)

Services Exempted (Contd….)

Services provided by way of skill/vocationaltraining by training partners under Deen DayalUpadhyay Grameen Kaushalya Yojana, Services ofassessing bodies empanelled centrally byDirectorate General of Training, Ministry of SkillDevelopment & Entrepreneurship

Service tax on the services of InformationTechnology Software on media bearing RSPexempted from Service Tax with effect from 1stMarch, 2016 provided Central Excise duty is paidon RSP in accordance with Section 4A of theCentral Excise Act.

Reduction in rate

The rate of Service Tax on single premiumannuity (insurance) policies is being reducedfrom 3.5% to 1.4% of the premium, in caseswhere the amount allocated for investment, orsavings on behalf of policy holder is not intimatedto the policy holder at the time of providing theservice, with effect from April 1, 2016

Change in rate of abatement w.e.f April 1, 2016

In respect of services by way of construction ofresidential complex, building, civil structure, or apart thereof- 70% (two existing rates 70% forhigh end flats and 75% for low end flats merged).

Services by a tour operator in relation topackaged tour and other than packaged tour isbeing rationalized at 70%.

53


Change in rate of abatement w.e.f 1.4.2016(Contd….)

Abatement on shifting of used household goods bya Goods Transport Agency (GTA) is beingrationalized at the rate of 60%, without CENVATcredit on inputs, input services and capital goods.

Time limit for filing application for refund ofCENVAT Credit

Time limit for filing application for refund ofCENVAT Credit under Rule 5 of the CENVAT CreditRules, 2004 w.e.f 1.3.2016 in case of export ofservices, is 1 year from the date of :

Receipt of payment in convertible foreignexchange, where provision of service hasbeen completed prior to receipt of suchpayment; or

Issue of invoice, where payment, for theservice has been received in advance priorto the date of issue of the invoice

Interest on delayed payment of tax

Interest rates on delayed payment of duty/tax -15%, except in case of Service Tax collected butnot deposited to the exchequer, in which casethe rate of interest will be 24% from the date onwhich the Service Tax payment became due

In case of assessees, whose value of taxableservices in the preceding year/years is less than`6 Million, the rate of interest on delayedpayment of Service Tax will be 12%

54


Indirect tax Dispute Resolution Scheme, 2016

In cases pending before Commissioner (Appeals),the assessee, after paying the duty, interest andpenalty equivalent to 25% of duty, can file adeclaration where the proceedings against theassessee will be closed and he will also getimmunity from prosecution. However, thisscheme will not apply in cases:

where prosecution has already beenlaunched

involving narcotics & psychotropicsubstances

involving detention under COFEPOSA

Period for issuing demand notices:

Section 73 of the Finance Act, 1994 is beingamended so as to increase the limitation periodfrom 18 months to 30 months for short levy/nonlevy/short payment/non-payment/erroneousrefund of Service Tax

Arrest on defaulters- threshold limit increased

The power to arrest under Service Tax provisionsis being restricted only to situations where thetax payer has collected the tax but not depositedit to the exchequer, and that too above athreshold of ` 20 Million. The monetary limit forlaunching prosecution is being increased from`10 Million to ` 20 Million.

Annual Returns

Requirement of filing annual returns

55

Abbreviations

AMT – Alternate Minimum Tax

ATF – Aviation Turbine Fuel

BCD – Basic Customs Duty

CBDT – Central Board for Direct Taxes

CENVAT – Central Value Added Tax

COFEPOSA – Conservation of Foreign Exchange and

Prevention of Smuggling Activities Act,

1974

CVD – Counter-Vailing Duty

CPI – Consumer Price Index

EPF – Employee Provident Fund

ESI – Employee State Insurance

FDI – Foreign Direct Investment

GST – Goods and Service Tax

GDP – Gross Domestic Product

LLP – Limited Liability Partnership

IRDA – Insurance Regulatory and Development

Authority of India

LTCG – Long Term Capital Gain

MAT – Minimum Alternate Tax

NBFC – Non Banking Financial Company

PAN – Permanent Account Number

PE – Permanent Establishment

PF – Provident Fund

PPF – Public Provident Fund

PoEM – Place of Effective Management

RBI – Reserve Bank of India

SEBI – Securities Exchange Board of India

STCG – Short Term Capital Gain

SCA – Scheduled Commuter Airlines56

Varma & VarmaChartered Accountants

Kochi "Arden Ivy Court" Thiruvananthapuram TC.4/647 H.No.17,

Building No.53/333 A, B, C & D Sreevilas Lane, Kowdiar.P.O,

Off. Subash Chandra Bose Road Thiruvananthapuram 695003Vytilla, Kochi 682019 [email protected]

[email protected]

Bengaluru #424, 4th C Main 6th Cross, Thrissur Marath Lane, M.G. Road,OMBR Layout, Banaswadi, Thrissur - 680001.Bengaluru 560043 [email protected]@varmaandvarma.com

Chennai Sreela Terrace, Kozhikode 19/1996, G, Sunlay Building, First Floor,Level-4,Unit-D,No.105, Opp: CSI English Medium School,First Main Road, Gandhi Nagar, Adyar, Madhavan Nair Road,

Chennai-600020 Chalappuram, Kozhikode – 673002

[email protected] [email protected]

Hyderabad No.104, Metro Palmgrove Appts, Kannur Fort Road,

Raj Bhavan Road, Somajiguda, Kannur - 670001.Hyderabad-500082 [email protected]

[email protected]

Mumbai Unit No. 101, Option PrimoPlot No. X-21, MIDC Road No. 21

Andheri East, Mumbai- [email protected]

57

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