For Private Circulation Only

Varma & VarmaChartered Accountants

1

FOREWORD

2

This is the first full year budget presented by the BJP Government after it got a landslide victory in the last general elections held in May 2014

Expectations were very high and the stock market had already factored this in the stock market boom seen in the last few months

While there are no big bang announcements, certain significant ones have been made which will have a long term impact on the Indian economy• Date has been announced for the much awaited

GST rollout from 1 Apr 2016• Intention to reduce corporate income tax rates

from 30% to 25% over the next 4 years• Abolition of wealth tax with consequent increase

of surcharge of 2% on taxes for all assesses with income over `10 million

• Funding in a big way of infrastructure through long term tax free bonds and micro industries with specific funds created for the purpose

• Intention to reduce litigations all round including merger of certain tribunals to reduce the number of forums where litigations can go on

• Deferment of GAAR by 2 years and clarifying it will be applicable only for investments made after 1 Apr 2017

• Proposed Direct Taxes Code given a quiet burial• Thrust on creating financial security for

individuals• Employees given choice to:

• Opt for medical insurance over ESI• Opt out of mandatory contribution to PF

(employers’ contribution to continue)• Concept of common effluent treatment facilities

for industries encouraged Specific measures taken to encourage “Make in

India” New Bankruptcy Code of Global Standards

Proposed to make exit from business easier

Table of Contents

DisclaimerThe 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 treatsthe 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 continueto be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. Specialistadvice should be sought with respect to any individual circumstances.

Particulars Page No.Overview of the economy 4Policy Initiatives 5Rupee Comes from & Rupee Goes to 8Direct Tax Proposals 9Indirect Tax Proposals 19 Customs Duty 19 Excise Duty 24 Service Tax 27

Abbreviations 31

3

Overview Of The Economy The growth rate of GDP (computed on revised

basis) has improved from 5.1% in 2012-13 to 6.9% in 2013-14 and estimated to be 7.4% for 2014-15. This is projected to grow between 8% to 8.5% in 2015-16

The growth in services sector expected to accelerate from 9.1% in 2013-14 to 10.6% in 2014-15

Fiscal deficit proposed to be brought down as under: 4.1% of GDP for 2014-15, 3.9% for 2015-16, 3.5% for 2016-17 and 3% for 2017-18

Current Account Deficit estimated at about 1.3% of GDP in 2014-15 and less than 1.0 % of GDP in 2015-16

Responsibility for public debt management moved from the Reserve Bank of India to a new agency

Lower volatility in the foreign exchange market resulted in the rupee remaining relatively stable in 2014-15 compared to 2013-14 and the rupee has

gained over most currencies except the USD. The Exports grew by 4.7% (YOY) and Imports

declined by 8.3% (YOY) primarily on falling crude oil prices.

The Trade deficit for 6 months reduced from USD 83.8 to USD 73.2 billion.

Forex reserves stood at USD 340 billion CPI Inflation reduced from 11.2% in Nov 2012 to

5.6% currently. Wholesale inflation is currently negative

The transfer of subsidies directly to beneficiaries has been commenced resulting in subsidies reaching targeted population more effectively.

125 million new bank accounts opened with RuPay debit Card facility will encourage cashless transactions

4

Policy InitiativesGOOD GOVERNANCE Government committed to the process of

rationalizing subsidies To cut the subsidy leakages, but not the subsidies. Direct transfer of subsidy benefits to bank

accounts to be extendedFUNDING THE UNFUNDED MUDRA (Micro Units Development Refinance

Agency) to be created to finance/refinance lending to small entities through Pradhan Mantri Mudra Yojana.

A Trade Receivables discounting System (TReDS) will be an electronic platform for facilitating financing of trade receivables of MSMEs to be established.

PENSION / INSURANCE SCHEMES Universal Social Security to be provided through:

• Pradhan Mantri Suraksha Bima Yojna to provide accidental insurance coverage of ` 200,000 at a premium of only ` 12 per year.

• ATAL PENSION YOJANA - Based on amount and period of contribution, the government will contribute 50% of the beneficiaries’ premium limited to ` 1,000 per year for five years, for the accounts opened before 31st December, 2015.

• The unclaimed deposits of PPF and EPF corpus will be appropriated and used to subsidize the premiums on the social security schemes through Senior Citizen Welfare Fund.

EASE OF DOING BUSINESS Comprehensive Bankruptcy Code of global

standards to be brought in fiscal year 2015-16 E-biz portal setup and operational as single

window for 14 regulatory permissions Exclusive commercial divisions to be set up in

various courts in India for quick resolution of commercial disputes

Law for resolution of disputes of public contracts to be introduced to streamline resolution of disputes in Public Contracts 5

Policy Initiatives (Contd….)INFRASTRUCTURE Issue of tax free infrastructure bonds to finance the

projects in the rail, road and irrigation sectors Corporatisation of Ports encouraged National Investment and Infrastructure Fund to be

established with an annual flow of ` 200 billion Sharp increase in outlays for roads and railways 5 new Ultra Mega Power Projects, each of 4000

MWs in plug-and-play mode with all clearances and linkages in place before the project is awarded

AGRICULTURE ` 53 billion to support micro irrigation, watershed

development and drip irrigation ` 250 billion in 2015-16 as corpus of rural

infrastructure development fund set up in NABARD ` 150 billion for long term rural credit fund ` 450 billion for short term cooperative rural credit

refinance finance fund ` 150 billion for short term RRB refinance fund

GREEN INDIA Faster Adoption and manufacturing of Electric /

Hybrid Vehicles Target of renewable energy revised to 175,000

MW by 2022, comprising 100,000 MW Solar, 60,000 MW Wind, 10,000 MW Biomass and 5000 MW Small Hydro

FINANCIAL MARKET The Public Debt Management Agency (PDMA) will

bring external and domestic borrowings to be under one roof to be set up this year.

The forward markets commission to be merged with the SEBI.

India Financial Code to be introduced Regulations for Gujrat International Financial Tec-

city (GIFT) to be issued in March 2015 to create an international financial hub on the lines of Singapore / Dubai

6

Policy Initiatives (Contd….)MONETISING GOLD Introduction of a Gold Monetisation Scheme, which

will replace both the present Gold Deposit and Gold Metal Loan Schemes.

Interest bearing Sovereign Gold Bond, as an alternative to purchasing metal gold scheme to be developed.

An Indian gold coin with Ashok Chakra on its face will be developed.

FOREIGN INVESTMENT Foreign investments in Alternative Investment

Funds to be allowed. Separate caps for different types of foreign

investments being replaced with Composite Caps. FEMA to be amended to provide control on foreign

capital flows as equity will be exercised by Government in consultation with RBI.

TOURISM Visas on arrival to be provided to visitors from 150

countries in stages from the current 43 countries Improving the facilities and restoration of 9 out of

the 25 Cultural World Heritage Sites to be taken up with additional fund allocation

SKILL INDIA National Skill Mission to be launched to

consolidate skill initiatives of different ministries An autonomous Bank Bureau to be set up to

improve the governance of public sector banks. A student financial aid authority to administer and

monitor all scholarship and educational loan schemes being set up

Additional IITs, AIIMSs, Institute for Horticultural Research & Education and Institutes of pharmaceutical education and research

7

` Comes From ` Goes To

21%

18%

13%12%

8%

8%

9%

8% 3%

0%

Debt receipts Corporation TaxIncome Tax Resources of Public EnterprisesService Tax Non Tax RevenueExcise Duty Customs DutyNon Debt receipts Other Taxes

22%

18%

20%

8%

11%

9%

4%3% 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

8

Direct Tax Proposals

9

All proposals are effective from Assessment Year commencing 1 Apr 2016 (Financial Year commencing 1 Apr 2015) except where specifically statedIncentives for the State of Andhra Pradesh and the State of Telangana Additional Investment Allowance (Section 32AD) of

an amount equal to 15% of the cost of new asset acquired and installed by an assessee on compliance with specified conditions.

Additional Depreciation u/s 32(1)(iia) at the rate of 35% instead of 20% for new plant and machinery acquired and installed between 1 Apr 2015 and 1 Apr 2020

Deduction for employment of new workmen under section 80JJAA Deduction now available to all assessees (Earlier

only corporate) having manufacturing units. Deduction can be claimed by units employing 50

(Earlier 100) regular workmen.Allowance of balance 50% additional depreciation 50% of the additional depreciation on new plant or

machinery acquired and used for less than 180 days which has not been allowed in the year of acquisition and installation of such plant or machinery, shall be allowed in the immediately succeeding previous year.

Direct Tax Proposals (Contd….)

10

Clarity regarding source rule in respect of interest received by the non-resident in certain cases Tax to be deducted on interest payable by PE of

non-resident, being a person engaged in the business of banking, to the head office or any PE or any other part of such non-resident outside India.

Changes proposed in computation of book profit under 115JB Benefit available under section 86 relating to

income pertaining to the share of member of an AOP now extended to cover income computed under section 115JB

Income earned from specified transactions in securities by FIIs excluded for computation of Tax under 115JB

Computation of Interest for defaults in payment of advance tax in case of re-assessment under 147 / 153A (Effective from 1st June, 2015) The period for which the interest is to be computed

will begin from the 1st day of April next following the financial year and end on the date of determination total income under section 147 or section 153A.

Amendments to the Conditions for Determining the Residency Status In Respect Of Companies Section 6 amended to provide that a person being

a company shall be said to be resident in India in any previous year, if it is an Indian company or it is a Place of Effective Management (POEM), at any time in that year, is in India.

Direct Tax Proposals (Contd….)Prescribed conditions relating to maintenance of accounts, audit etc. to be fulfilled by the approved in-house R&D facility Section 35(2AB) is amended to introduce

additional compliance requirement for claim of deduction for in-house R&D facility.

Certain Accountants Not to give reports/Certificates (Effective from 1Jun 2015) In order to ensure independence in the audit

function, the definition of an “accountant” as per the explanation below 288(2) is amended.

Amendment Of Penalty Clause u/s 271(1)(c) MAT/AMT (where applicable) shall also to be

included for determining penalty U/s 271(1)(c)

DEDUCTIONSTax benefits under section 80C for the girl child under the Sukanya Samriddhi Account Scheme (With retrospective effect from 1 Apr 2015) Investment in Sukanya Samriddhi Scheme to be

eligible for deduction under section 80C of the Income-tax and any payment from the scheme to be exempt.

Amendment in section 80D relating to deduction in respect of health insurance premia Limit of deduction of health insurance premium

increased from `15,000 to `25,000, whereas for senior citizens limit increased from `20,000 to `30,000.

Very Senior citizens above the age of 80 years, who are not covered by health insurance, to be allowed deduction of `30,000 towards medical expenditure.

11

Direct Tax Proposals (Contd….)Raising the limit of deduction under section 80DDB Limit of deduction increased from `60,000 to

`80,000 in the case of very senior citizens above the age of 80 years with respect to expenditure on account of specified diseases.

Raising the limit of deduction under section 80DD and 80U for persons with disability and severe disability Limit of deduction raised in respect of a person

with disability from `50,000 to `75,000 and in respect of a person with severe disability from `100,000 to ` 125,000.

Raising the limit of deduction under 80CCC Limit on deduction on account of contribution to a

pension fund of LIC or a pension scheme increased from `100,000 to ` 150,000.

Additional deduction under 80CCD Additional deduction of `50,000 for contribution to

the new pension scheme u/s 80CCD.100% deduction for National Fund for Control of Drug Abuse Donations made to National Fund for Control of

Drug Abuse (NFCDA) to be eligible for 100% deduction under section 80G.

Swachh Bharat (Effective from 1st April 2015) 100% exemption under section 80G for

contributions to 'Swachh Bharat Kosh’ and 'Clean Ganga Fund' other than by way of CSR contribution.

100% tax exemption under section 10(23C) for the income received by any person on behalf of ‘Swachh Bharat Kosh’ and ‘Clean Ganga Fund’ set up by the Central Government from income-tax.

12

Direct Tax Proposals (Contd….)TRANSFER PRICINGRaising the threshold for specified domestic transaction Aggregate of specified transactions entered into

by the assessee in the previous year should exceed a sum of ` 200 million (earlier `50 million) for such transaction to be treated as ‘specified domestic transaction’

CAPITAL GAINSClarity relating to Indirect transfer provisions of Section 9 The share or interest of a foreign company or

entity shall be deemed to derive its value substantially from the assets (whether tangible or intangible) located in India, if on the specified date, the value of Indian assets, exceeds the amount of ` 100 million; and represents at least 50%. of the value of all the assets owned by the company or entity.

Amendment to cost of acquisition definition u/s 49(1)(iii)(e) Transfer of Capital Asset by demerged Company

to resulting Indian Company in a scheme of demerger inserted u/s 49(1)(iii)(e) for the purpose of determining the cost of acquisition.

13

Direct Tax Proposals (Contd….)INCOME TAX RATESRates of Income tax No change in the basic tax rates and slab limits

for income tax for all assessee. Surcharge

TRUSTS, FUNDS AND INSTITUTIONSRationalisation of definition of charitable purpose Any other object of general public utility shall not

be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business and the income from such activity, exceeds 20% of the total receipts (earlier `2.50 million), of the trust or institution.

Charitable purpose now includes ‘Yoga’.

Pass through status to Category –I and Category –II of Venture Capital Company (VCC) or a Venture Capital Fund (VCF) A special tax regime is proposed to introduce for

taxation of income of Category I & Category II AIFs and their investors.

14

Particulars Particulars ExistingRate

NewRate

Domestic company

Income between `10 million and `100 million

5% 7%

Income above `100 million

10% 12%

Other assessee excluding Foreign

company

Income above `10 million

10% 12%

Direct Tax Proposals (Contd….)Fund Managers in India not to constitute business connection of offshore funds under section 9A Fund management activity carried through an

eligible fund manager acting on behalf of eligible investment fund shall not constitute business connection in India of eligible investment fund.

Taxation Regime for Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts (Invit) The benefit of concessional tax regime of tax

@15 % on STCG and exemption on LTCG under section 10(38) of the Act shall be available to the sponsor on sale of units received in lieu of shares of SPV subject to levy of STT.

Any income of a business trust, being a real estate investment trust, by way of renting or leasing of any real estate asset owned directly by

REIT shall be exempt. Such rental income distributed by REIT will be

taxable in the hands of unit holder and section 194-I shall apply.

No Tax deduction shall be made under the section 194-I where the income by way of rent is credited or paid to a business trust, being a real estate investment trust, in respect of any real estate asset, referred to in clause (23FCA) of section 10, owned directly by such business trust.

Exemption to income of Core Settlement Guarantee Fund (SGF) of the Clearing Corporations Exemption in respect of any specified income of

Core Settlement Guarantee Fund under section 10(23EE).

15

Direct Tax Proposals (Contd….)Accumulation of Income by charitable trusts and institutions Benefit of accumulation would be available only if

Form 10 is filed before the due date of filing return of income.

Entities covered under 10(23C)(iiiab/ac) to mandatorily file return of income : Exemption available to Entities covered under

clauses (iiiab) and (iiiac) of clause (23C) of section 10 for filing the return of income withdrawn.

TAX DEDUCTED AT SOURCERate of deduction of income tax at source For Payments made to a non-resident (other than

a company) or a foreign company, in the nature of income by way of royalty or fees for technical services, TDS rate reduced from 25% to 10% of such income.

Extension of eligible period of concessional tax rate under section 194LD (Effective from 1st June 2016) Concessional rate of 5% withholding tax extended

to interest payable upto 30th June, 2017Relaxing the requirement of obtaining TAN for certain deductors (Effective from 1st June 2015) Requirement of obtaining TAN withdrawn for

persons notified by the Central Government such as deductors of tax in respect of acquisition of immovable property under Section 194IA.

Deduction of tax from payments made to transporters (Effective from 1st June, 2015) TDS exemption on transportation charges now

only applicable to payments to entities filing return under section 44AE (provided PAN details are furnished) .

16

Direct Tax Proposals (Contd….)Provisions relating to TDS on interest (other than interest on securities) no longer to be determined with reference to branch where core banking is followed (Effective from 1st June, 2015) The computation of interest income for the

purposes of deduction of tax under section 194A of the Act should be made with reference to the income credited or paid by the banking company or the co-operative bank or the public company which has adopted core banking solutions.

Definition of ‘time deposits’ expanded to include recurring deposits for the purpose of deducting tax on interest (Effective from 1st June, 2015) The existing threshold limit of `10,000 for non-

deduction of tax shall now be also applicable in case of interest payment on recurring deposits.

Amendments in Provisions of Tax Collection at Source (Effective from 1st June, 2015) In order to bring rationalisation in provisions

relating to Tax Deduction at Source (TDS) and Tax Collection at Source (TCS), section 206C now allows for the collector to furnish TCScorrection statement.

Processing of TCS Statement similar to TDS statement and intimation generated shall be subject to Rectification u/s 154, appealable u/s 246A and deemed as notice of demand u/s156.

Amendments in TDS for Salary U/S 192 (Effective from 1st June, 2015) Form and manner for obtaining evidence or proof

or particulars of the claims, deductions, allowances from employee by employer to be prescribed. (Section 192(2D))

17

Direct Tax Proposals (Contd….)Furnishing of Information U/S 195 (Effective from 1st June, 2015) The person responsible for paying any sum u/s

195 shall be required to furnish the information of the prescribed sum in the form and manner prescribed whether chargeable to tax or not. Penalty of `100,000 shall be levied for non-compliance.

Tax Deduction on Pre-Mature Withdrawal from Employees Provident Fund Scheme (EPFS) (Effective from 1st June, 2015) Tax shall be deducted @ 10% on pre-mature

withdrawal from EPFS of `30,000 and above.Section 269SS & 269 T (Effective from 1st June 2015) Loan or deposit or any sum of money of `20,000

or more, whether as advance or otherwise, in relation to transfer of an immovable property to be covered under Section 269SS & 269T.

OTHER PROPOSALSEnabling the Board to notify rules for giving foreign tax credit (Effective from 1st June 2015) CBDT to make rules to provide the procedure for

granting relief or deduction of any income-tax paid in any country outside India, under section 90/90A/91.

Abolition of levy of wealth-tax under Wealth-tax Act, 1957 Wealth-tax replaced with additional surcharge of

2% on super rich with a taxable income of over `10 million annually.

Corporate tax is proposed to be reduced from 30% to 25% over a period of 4 years.

Direct Tax Code shelved since most of the provisions have been incorporated in the Act.

Implementation of GAAR deferred by two years and GAAR provisions be made applicable to the income of the financial year 2017-18.

18

Indirect Tax Proposals – Customs Duty No change in basic custom duty of 10%. Basic Custom duty on certain inputs, raw

materials, inter mediates and components are reduced to minimise the impact of duty inversion.

SAD is reduced/ exempted on import of certain inputs and raw materials.

Concessions on basic custom duty , CVD and SAD available to electrically operated vehicles and hybrid vehicles is extended upto 31.03.2016.

Artificial heart exempt from basic custom duty of 5% and CVD.

CHANGES IN TARIFF RATE Tariff rate iron and steel and articles of iron and

steel has been increased from 10% to 15% Tariff rate on motor vehicle for transportation of

goods has increased from 10% to 40% Tariff rate on motor vehicle for transportation of 10

or more persons has increased from10% to 40% Tariff rate on bituminous coal is reduced from 55%

to 10%

19

Indirect Tax Proposals – Customs Duty (Contd….)EXEMPTION FROM BASIC CUSTOMS DUTY (BCD): Ulexite ore Parts / subparts, components and accessories for

use in manufacture of tablet computers for use in manufacture of parts, components and accessories from BCD, SAD & CVD..

Magnetron of upto 1 KW for use in the manufacture of domestic microwave ovens

HDPE used in manufacture of telecommunication grade optical fibre cables

Black Light Unit Module for use in the manufacture of LCD/LED TV panels

Organic LED (OLED) TV panels.

Digital Still Image Video Camera capable of recording video with minimum resolution of 800x600 pixels, at minimum 23 frames per second, for at least 30 minutes in a single sequence, using the maximum storage (including the expanded) capacity and parts and components used in manufacture of such cameras

Evacuated Tubes with three layers of solar selective coating for use in the manufacture of solar water heater and system.

BCD and CVD are fully exempted on artificial heart (left ventricular assist device)

20

Indirect Tax Proposals – Customs Duty (Contd….)EXEMPTION FROM SPECIAL ADDITIONAL DUTY (SAD): All goods except populated printed circuit boards

falling under any customs tariff used in manufacture of ITA bound items subject to actual user condition.

On inputs for use in the manufacture of LED drivers and MCPCB for LED lights, fixtures and lamps

OTHER CHANGES SAD on Naphtha ethylene dichloride, vinyl

chloride monomer, styrene monomer used in manufacture of excisable goods reduced from 4% to 2%.

The additional duty of customs (road cess) on imported motor spirit and high speed diesel oil has increased from ` 2 to ` 6 per litre.

SAD on melting scrap of iron and steel including stainless steel scrap for melting, copper scrap, brass scrap and aluminium scrap has been reduced from 4% to 2%

Specified raw materials [battery, titanium, palladium wire, eutectic wire, silicone resins and rubbers, solder paste, reed switch, diodes, transistors, capacitors, controllers,coils (steel), tubing (silicone)] for use in the manufacture of pacemakers are exempt from SAD & CVD

Concessional customs duties of Nil Basic Customs Duty, 6% excise/CVD and Nil SAD on specified goods for use in the manufacture of Electrically operated vehicles and Hybrid motor vehicles, presently available upto 31 Mar 2015, are being extended upto 31 Mar 2016.

21

Indirect Tax Proposals – Customs Duty (Contd….)OTHER CHANGES (Contd….) No penalty shall be imposed and proceedings

shall deemed to be concluded, in case of evasion of duty (other than by fraud , wilful mis-statement etc) if the amount of duty along with interest leviable under section 28AA or the amount of interest, if any is paid in full within 30 days from the date of receipt of the notice.

In cases involving fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Act with the intent to evade tax the amount of penalty payable shall be 15%.

CUSTOM DUTY INCREASED FOR

Particulars New Rate Old Rate

Metallurgical coke 5% 2.5%Motor vehicle for transportation of goods 20% 10%

Motor vehicle for transportation of 10 or more persons 20% 10%

Specified telecommunication products outside the purview of the Information Technology Agreement

10% Nil

Flat-rolled products of stainless steel

7.5% 5%

Semi-processed, half cut or broken diamonds

2.5% Nil

Cut and polished diamonds and colored gemstones

2.5% 2%

22

Indirect Tax Proposals – Customs Duty (Contd….)

Particulars New Rate

Old Rate

Isoprene and liquefied butane 2.5% 5%Ethylene dichloride, vinyl chloridemonomer and styrene monomer 2% 2.5%

Butyl acrylate 5% 7.5%Anthraquinone 2.5% 7.5%Antimony metal and antimony waste and scrap 2.5% 5%

Sulphuric acid for manufacture of fertilisers 5% 7.5%

Upgraded ilmenite (export duty) 2.5% 5%Metal parts used in manufacture of electrical insulators 7.5% 10%

Specified inputs used in manufactureof flexible medical video endoscope 2.5% 5%

CUSTOMS DUTY REDUCED FOR

Particulars New Rate Old Rate

Ethylene-Propylene-non-conjugated-diene Rubber (EPDM), Water blocking tape & Mica glass tape, used in mfr. of insulated wires and cables

7.5% 10%

Zeolite, ceria zirconia compounds and cerium compounds used in mfr. of washcoats / catalytic converters

5% 7.5%

Specified components for use in the mfr. of specified CNC lathe / machining centres

2.5% 7.5%

C-Block, Overload Protector, Positive thermal co-efficient, Crank Shaft used in mfr. of Refrigerator compressors

5% 7.5%

Active Energy Controller used in mfr. of Renewable Power System Inverters 5% 10%

23

Indirect Tax Proposals – Excise Duty General rate of Central Excise Duty increased to

12.50% from 12% Ed. Cess & Sec. & Higher Sec. Ed. Cess is fully

exempted. Time limit for taking CENVAT credit on inputs and

input services increased from 6 months to 1 year as a measure of business facilitation.

Proposal for online registration of Central Excise and Service Tax in 2 days.

Assesses allowed to use digitally signed invoices and maintain records electronically.

Lower excise duty of 6% on specified goods used in the manufacture of electrical / hybrid vehicles extended upto 31 Mar 2016.

Conversion of excise duty on petrol and diesel to the extent of ` 4 per litre into Road Cess to fund investment in roads

Full exemption from excise duty to captivelyconsumed intermediate compound coming into existence during the manufacture of Agarbattis.

Parts, sub-parts, components and accessories used in the manufacture of tablet computers fully exempted from ED, subject to actual user condition.

All goods falling under Chapter sub-heading 210120, including iced tea, condensed milk and goods such as lemonade and other beverages, are being notified under section 4A of the Central Excise Act for the purpose of assessment of Central Excise duty with reference to the Retail Sale Price with an abatement of 30% and 35% respectively. Such goods are also being included in the Third Schedule to the Central Excise Act, 1944.

Duty on cigarettes increased by 25% for cigarettes of length not exceeding 65 mm and by 15% for cigarettes of other lengths.

Schedule Rate of Clean Energy Cess, levied on coal, lignite and peat, increased from `100 per tonne to `300 per tonne.

24

Indirect Tax Proposals – Excise Duty (Contd….)

25

Particulars New OldWafers for use in the manufacture of integrated circuit (IC) modules for smart cards

6% 12%

Inputs for use in the manufacture of LED drivers and MCPCB for LED lights, fixtures and LED lamps

6% 12%

Excise duty on leather footwear of Retail Sale Price of more than Rs.1,000/- per pair

6% 12%

Chassis for Ambulance 12.5% 24%Sacks and bags of polymers of ethylene other than for industrial use

15% 12%

Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured-

Basic Excise DutyAdditional Excise Duty

18%Exempted

12%5%

Mobiles handsets, including cellular phones 1% without Cenvat Credit or 12.5% with Cenvat Credit

1% without Cenvat Credit or 6% with Cenvat Credit

Tablet computers 2% without CENVAT credit or 12.5% with CENVAT credit.

12%

Indirect Tax Proposals – Excise Duty (Contd….)Particulars New Old

Specified raw materials [battery, titanium, palladium wire, eutectic wire, silicone resins and rubbers, solder paste, reed switch, diodes, transistors, capacitors, controllers, coils (steel), tubing (silicone)] for use in the manufacture of pacemakers (Subject to actual user condition)

Nil 12%

Pig iron SG grade and Ferro-silicon-magnesium for use in the manufacture of cast components of wind operated electricity generators(Subject to certification by MNRE)

Nil 12%

Cut Tobacco ` 70 per Kg ` 60 per KgGoods falling under Chapter sub-heading 2523 29 relating to Portland Cement

`1,000/- per tonne `900/- per tonne

High Speed Diesel 14% + `15/- per litre 14% + `5/- per litreSolar water heater and system Nil without CENVAT credit or

12.5% with CENVAT credit.12%

26

Indirect Tax Proposals – Service TaxRate of Tax Service-tax rate increased from 12.36% to 14% to

facilitate transition to GST. New Swachh Bharat Cess of 2% on all or certain

services if need arises.Services which were earlier under Negative List now made taxable Access to amusement facility such as

rides, bowling alleys, amusement arcades, water parks, theme parks, etc.

Admission to entertainment event of concerts, non-recognized sporting events, pageants, music concerts and award functions, if the amount charged for admission is more than `500.

Services for carrying out any process for production or manufacture of alcoholic liquor for human consumption

All services provided by the Government or local authority to a business entity, except the services that are specifically exempted, or covered by any other entry in the Negative List.

Exempted Services now made taxable Services provided by a mutual fund agent to a

mutual fund or assets management company (AMC);

Services provided by a distributor to a mutual fund or AMC

Services provided by selling or marketing agent of lottery ticket to a distributor of lottery.

Services of making telephone calls from Departmentally run public telephone, Guaranteed public telephone operating only local calls

Service of making telephone calls from free telephone at airport and hospital where no bill is issued

27

Indirect Tax Proposals – Service Tax (Contd….)Exempted Services now made taxable (Contd…) Construction, erection, commissioning or

installation of original works pertaining to an airport or port

Services provided to the Government, a local authority or a governmental authority 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;

• a structure meant predominantly for use as(i) an educational, (ii) a clinical, or(iii) an art or cultural establishment;

• a residential complex predominantly meant for self-use or the use of their employees or other persons specified.

Services provided by a performing artist in folk or classical art form of

(i) music, or (ii) dance, or (iii) theatre,

where amount charged is in excess of `100,000 for a performance.

28

Indirect Tax Proposals – Service Tax (Contd….)New Exemptions/ Reliefs Services of pre-conditioning, pre-

cooling, ripening, waxing, retail packing, labelling of fruits and vegetables

Services by common effluent treatment plants Life insurance service provided by way of

Varishtha Pension Bima Yojana. All ambulance services provided to patients. Admission to museum, zoo, national park, wild life

sanctuary and tiger reserve. Transport of goods for export by road from factory

to land customs station. Service provided by way of exhibition of movie by

the exhibitor (theatre owner) to the distributor or association of persons consisting of such exhibitor as one of it’s members

Abatements Service tax payable on 30% (Abatement uniformly

capped at 70%) of the value of services of Goods Transport by road/ rail/vessel subject to condition of non availment of CENVAT credit

Abatement for service of Transport of Passenger by air – Higher than Economy Class is now 60%

Abatement for chit fund services removedOther Amendments Scope of valuation of taxable services has been

expanded to include all reimbursable expenditure or cost incurred and charged by the service provider.

Service Tax penalty not to exceed 10 % of service tax in cases not involving fraud or collusion or wilful misstatement or suppression of facts

Service Tax penalty not to exceed 100 % of service tax in cases involving fraud or collusion or wilful misstatement or suppression of facts

29

Indirect Tax Proposals – Service Tax (Contd….)Reverse Charge Mechanism (RCM) – 100% (with effect from 01.04.2015) Services provided or agreed to be provided by a

mutual fund agent or distributor, to a mutual fund or asset management company

Service provided or agreed to be provided by a selling or marketing agent of lottery tickets to a lottery distributor or selling agent

Service provided or agreed to be provided by a person involving an aggregator in any manner . Services provided under aggregator model is taxable w.e.f 01.03.15.

Manpower supply and security services when provided by an individual, HUF, or partnership firm to a body corporate (Earlier – 75%)

CENVAT Credit Rules, 2004(With effect from 01.04.2015) CENVAT credit of service tax paid under partial

reverse charge by the service receiver can be availed without linking it to the payment to the service provider.

30

Abbreviations AIF Alternative Investment FundsAIIMS All India Institute of Medical SciencesAMC Asset Management CompanyAMT Alternate Minimum TaxAOP Association of PersonsCBDT Central Board for Direct TaxesCENVAT Central Value Added TaxCVD Counter-Vailing DutyEPF Employee Provident FundESI Employee State InsuranceFII Foreign Institutional InvestorsGAAR General Anti Avoidance RulesGDP Gross Domestic ProductGST Goods and Services TaxIIT Indian Institute of TechnologyLED Light Emitting DiodeLTCG Long Term Capital Gain

MAT Minimum Alternate TaxMCPCB Metal Core Printed Circuit BoardMNRE Ministry of New and Renewable EnergyNABARD National Bank for Agriculture and Rural

DevelopmentPAN Permanent Account NumberPE Permanent EstablishmentPF Provident FundPPF Public Provident FundRBI Reserve Bank of IndiaRRB Regional Rural BanksSEBI Securities Exchange Board of IndiaSPV Special Purpose VehicleSTCG Short Term Capital GainSTT Securities Transaction TaxUSD US DollarYOY Year on Year

31

KOCHI (Central Office)"Arden Ivy Court"Building No.53/333 A, B, C & DOff. Subash Chandra Bose RoadVytilla, Kochi 682019kochi@varmaandvarma.com

BENGALURU#424, 4th C Main 6th Cross,OMBR Layout,Banaswadi,Bengaluru 560043bangalore@varmaandvarma.com

CHENNAISreela Terrace,Level-4,Unit-D,No.105,First Main Road, Gandhi Nagar, Adyar, Chennai-600 020chennai@varmaandvarma.com

HYDERABADNo.104, Metro Palmgrove Appts,Raj Bhavan Road, Somajiguda,Hyderabad-500 082hyderabad@varmaandvarma.com

MUMBAI303, Gokul Regency, J.B Nagar,Andheri East,Mumbai- 400 059mumbai@varmaandvarma.com

THIRUVANANTHAPURAMTC.4/647 H.No.17,Sreevilas Lane, Kowdiar.P.O,Thiruvananthapuram 695003trivandrum@varmaandvarma.com

THRISSURMarath Lane, M.G. Road,Thrissur - 680 001.thrissur@varmaandvarma.com

KOZHIKODE19/1996, G, Sunlay Building, First Floor,Opp: CSI English Medium School, Madhavan Nair Road,Chalappuram, Kozhikode – 673 002kozhikode@varmaandvarma.com

KANNURFort Road,Kannur - 670 001.kannur@varmaandvarma.com

Varma & VarmaChartered Accountants

32