tax heads up march 2015

1

Budget 2015

Contents

Direct tax proposals

Indirect tax proposals

HEADS UP

2

Direct Tax

Proposals

3

Important tax rates AY 2016-17

Particulars

Taxable

Income Less

Than INR 1

Crore

Taxable

Income Less

Than INR 10

Crore

Taxable

Income More

Than INR 10

Crore

Effective MMR 30.90% 34.61%

Effective Corporate Tax Rate (Domestic

Company) 30.90% 33.06% 34.61%

Effective Corporate Tax Rate (Foreign

Company) 41.2% 42.02% 43.26%

Effective MAT 19.06% 20.39% 21.34%

Effective DDT 20.36%

Effective Buy-back tax 23.07%

Basic rates for all assessees have remained the same. Only surcharge has increased by

2% for all assessees (where applicable), except Foreign companies.

4

Direct tax regime Rationalisation

Presently individual, HUF, companies are liable to pay wealth tax

@1% if the net wealth exceeds INR 30 Lakh

To decrease the compliance burden for assesse and administrative

burden for revenue, it is proposed to abolish Wealth tax

However, information relating to the assets covered under the

erstwhile Wealth-tax Act, will have to be mentioned in the Income

tax return to ensure that there is no escapement of income from tax

The FM has proposed in his speech a gradual reduction in

corporate tax rate from 30% to 25% over next four years. This shall

be counterbalanced by a reduction in exemptions

5

Indirect transfer Subjectivity curbed

Following amendments have been proposed w.r.t. taxability of

gains on transfer of shares / interest in a Foreign Entity:

Such gains to be taxable under domestic tax law, if FMV of

underlying Indian assets exceeds:

INR 10 cr., and

50% of all assets of the Foreign Entity

No tax on minority shareholders holding no control / management,

and upto 5% voting power, capital or interest

6

Indirect transfer Subjectivity curbed

When taxable in India, such gains should be computed by way of

reasonable attribution to Indian assets

Indian concern through / in which the Foreign Entity holds any

Indian assets (being the underlying assets from which value of

Foreign entitys shares is derived) made liable to furnish prescribed

information

These requirements can be onerous for some Indian corporates,

where the relationship with the foreign shareholder(s) is not

strategic

Penalty for failure: 2% of transaction value (minimum INR 5 Lacs)

Determination of FMV of assets and attribution of gains, is yet to be

notified

7

REIT and InviT Capital Gains

Presently, capital gains on sale of listed units of REIT/ InviT

acquired by a Sponsor through exchange of shares of unlisted

SPV, are not eligible for LTCG exemption / lower tax rate on STCG

(as available to other unit holders)

It is proposed to bring the Sponsor at par with other unitholders,

whereby units allotted in lieu of transfer of SPV to REIT / InviT shall

be eligible for LTCG exemption / lower tax rate on STCG

However, MAT will continue to apply

Also, if the Sponsor transfers the Real Estate asset to the REIT, the

aforementioned preferential regime will not be available

8

REIT and InviT Capital Gains

Presently, rental Income arising to REIT is taxable in its hands, and

is not eligible for pass-through status

It is proposed that rental income shall not be taxable in the hands of

REIT and no TDS shall apply to the same

Income distributed to unitholders (from the rental income) shall be

taxable in their hands

TDS on above, in case of resident unitholders shall be 10%, and for

non-resident unitholders it shall be 30% (40% in case of a

company)

9

AIF Tax pass through

New tax pass-through regime for SEBI registered Category 1 and 2

AIF

The new regime now covers AIFs organized as LLPs, partnerships,

etc. (earlier regime only covered trusts and companies)

All income (other than business income) shall be exempt in the

hands of the fund, and taxable in the hands of unit holder under

same heads of income

Tax shall be charged in the hands of unit-holders irrespective of

actual distribution of income from fund

10

AIF Tax pass through

Any loss incurred by the fund would be available for set-off against

its income (or to be carried forward to subsequent years). The

same shall no more be available to unit holders, against their

income

Funds would be required to withhold tax @10% on income

distributed / credited to unit holders. Non-resident unit holders

should be able to claim treaty benefits, if available

11

Company Deciding Residential Status

Earlier, situation of control and management of

affairs of a Company wholly in Indian was the

criteria for determining its residential status

The same has been amended to propose that

any company which at any time in the year has

its Place of effective management (POEM) in

India shall become an Indian resident

DTAAs and OECD have the concept of POEM for determining

residency of a company. However, usage of term any time in the

year significantly widens the scope in Indian context

Likely to cause jitters to foreign companies which undertake any

significant function in India. The memorandum however assures

laying down guiding principles in this regard to ensure clarity

12

Fund Managers of Offshore Funds

FM delivers his word from Budget

speech last year. Introduces concrete

proposal to encourage fund managers

to shift to India without constituting an

Indian 'Business Connection' of their

off-shore fund

This exception to general principle of

'Business Connection', is subject to

various conditions, some of which may

require a relook, such as:

5% cap on total participation by Indian residents

No 10 or fewer members should hold 50% or more participation

Fund manager should not be an employee / connected person, or

be entitled to more than 20% profits of the fund

13

Deferment of GAAR

GAAR provisions are currently proposed to

come into effect from FY 2015-2016

Budget 2015 proposes deferment of GAAR

provisions by further two years and the same

shall apply to investments made on or after 01

April 2017(application to prospective investment

is mentioned in speech but missing in Finance

Bill)

The deferment has been attributed to the awaited report on BEPS

project currently being undertaken by OECD with Indias active

participation. The same may require structural changes to be made

in current GAAR proposals

14

Domestic TP Limit Enhanced

To determine reasonableness of expenditure between related

parties or group companies, Transfer Pricing provisions on

domestic transactions were introduced in Finance Act 2012

Currently, Transfer Pricing provisions are applicable to taxpayer, if

aggregate value of specified transactions exceeds INR 5 Crores, in

which case they constitute specified domestic transactions

To reduce the compliance burden on mid-sized assessee, the limit

for applicability of Transfer Pricing provisions is proposed to be

raised to INR 20 Crores

15

Investment Incentives

Allowance of additional depreciation

Additional depreciation @ 20% is allowed to the manufacturing and

power sector, on purchase and installation of new plant and

machinery in first year. However, if such assets are acquired and

put to use for less than 180 days then the depreciation is restricted

to 10% and the balance 10% cannot be availed

Non availability of balance 10% depreciation may motivate assesse

to defer the investment in plant and machinery to next year

To remove this lacunae, it has been proposed that the balance

depreciation of 10% shall be allowed in the immediately succeeding

year

16

Investment Incentives

Tax incentives for Andhra / Telangana

Additional investment allowance @ 15% (over and above

existing investment allowance @ 15%) of cost of new assets

acquired and installed is proposed to be allowed if:

The taxpayer sets up a manufacturing undertaking in the

notified backward areas of these states on or after 01 April

2015

New asset are acquired or installed between 01 April 2015 to

31 March 2020

Additional depreciation @ 35% is proposed to be allowed

(instead of 20% in other cases) on new plant and machinery

purchased and installed in notified backward areas of these states

between 01 April 2015 and 31 March 2020

17

Employment Generation Incentivized

Currently, an Indian company engaged in manufacture of goods in

a factory is allowed (for 3 financial years) a deduction of 30% of

additional wages paid to new regular workmen employed by it

Wages currently imply wages to workmen exceeding 100 employed

in a year, subject to some conditions

To encourage new employment opportunities, it is proposed to

amend the section, as under:

- The benefit is being extended to non company assessee's

having manufacturing units fulfilling the prescribed conditions

- For benefit of smaller units the limit of new workmen is being

reduced from 100 to 50 in a year for allowance of the deduction

18

Reduced tax rate Royalty / FTS

Royalty / FTS income of Non

Residents is currently taxable @ 25%.

Although tax treaties prescribe a lower

rate, obtaining TRC from revenue

authorities of payees country (for

taking treaty benefit) is a challenge

faced by various entities

In order to reduce this hardship and

encourage technology transfers, it has

been proposed to reduce the rate to

10%

19

Rationalization of MAT provisions

To promote investment climate in India, it is proposed that MAT

provisions shall not apply to Net Income of FIIs, other than Short

Term Capital Gain on which STT has not been paid

The amendment however fall short of industry expectation of

clarification that no MAT is payable by a foreign company. This

would have come as a relief to Private Equity investors as well

Further, it is proposed that share of a company (being member of

an AOP) in the income of AOP and relatable expenditure thereon

shall not be considered while computing MAT liability of the

company

20

Indian Branch of Foreign Banks

There has been considerable litigation in past, as regards taxability

in India, of interest paid by Indian branches of Foreign Banks, to

their Head Office or other branches

Henceforth, such branches

shall be treated as tax entities

separate and independent of

their HO

Further, interest paid by them

to their HO / other branches

outside India, will be taxable in

India

21

Demerged asset Capital Gains

There were certain gray areas in computation of capital gain on

subsequent sale by a Resulting Company, of assets acquired

previously by it upon demerger

The same have been now been rationalized by providing that such

gains shall be computed with reference to the cost of acquisition

(and improvement) of the said assets to the Demerged company

To determine the nature of the capital gain (Long-term vs. Short-

term), the period for which the Demerged company held the asset,

shall also be taken into account

22

MF Schemes Tax Neutral Merger

Various Mutual Funds currently run parallel schemes having

essentially similar features. Non existence of tax neutrality

provisions is a hindrance to merger of these schemes

The Finance Bill 2015 proposes to introduce provisions to make

such mergers tax neutral wherein:

- The period of holding of consolidating scheme will be added for

calculating holding period of consolidated scheme

- The cost of acquisition of consolidating scheme will be

considered acquisition cost of consolidated scheme

These provisions shall only apply to merger of similar schemes

(Equity-Equity & Non Equity - Non Equity)

23

GDRs

Pursuant to the notification of Depository

Receipt Scheme, 2014 the Depository

Receipts (DRs) have replaced the erstwhile

GDRs

While the GDRs could only be issued based

on underlying shares / FCCBs of a listed

company, the DRs in the current scheme

represent a much broader spectrum,

including shares / debts instruments issued

by unlisted companies, and unsponsored

DRs

24

GDRs

Capital markets were expecting a tax-friendly liberalised depository

regime, in line with Sahoo committee recommendations, such as:

Conversion of DRs into permissible securities and vice versa,

and NR-to-NR transfer of DRs to be tax neutral

Beneficial tax treatment to apply to DRs based on all permissible

securities

Alignment of tax treatment of sponsored GDRs with that of sale

of shares in listed company

However, the proposed amendment falls short of this expectation,

as the definition of DRs is restricted to the ones based on shares

issued and FCCBs

25

CSR vs. Income-tax deduction

CSR activities were made mandatory for specified Companies by

Companies Act, 2013. Under IT Act, although expenditure on CSR

is disallowed, a benefit is separately allowed by way of specific

deductions (e.g. CSR expenditure on payments to Prime

Ministers National Relief Fund)

To encourage the schemes of Swachchh Bharat, it has been

proposed to provide 100% deduction from income. However, this

deduction would not be allowed if expenditure is done in pursuance

of CSR regulations

Co-relation of allowability of deduction under IT Act vis--vis

recognition as CSR activity in Company Law reflects a negative

approach. Further, it also raises uncertainty on future approach of

government on some cases, where deduction from income on CSR

spent is presently allowed

26

Withholding tax on transporters

In case of payments made to transporters,

there exists a beneficial provision which

allows non deduction of tax, provided the

transporter furnishes PAN

It is proposed to apply this beneficial

provision only to small transporters (those

who do not own more than 10 goods

carriages at any time during the previous

year)

To avail benefit of this provision the transporter should furnish

declaration of not owning more than10 goods carriages along with

its PAN

27

All payment to NRs Form 15CA/CB

Presently, in case of payments to NRs, prescribed from (i.e. form

15CA/CB) is to be furnished only if the amounts are chargeable to

tax under the IT Act. Further, no penalty is leviable if such form is

not furnished

In order to increase scrutiny of all payments to NRs, it has been

proposed that the prescribed form will be required to be furnished

for all payment to non residents, whether taxable or not

Furthermore, penalty of INR 1 lakh has been proposed to be levied

on failure to furnish / furnishing inaccurate information in the

aforesaid prescribed form

28

Penalty for Concealment MAT

Taxpayers to which MAT / AMT is applicable, to be subjected to a

higher penalty for concealment of income, with reference to the tax

effect of such concealment on their MAT / AMT liability

Such incremental liability will be in addition to penalty on

concealment of income computed under normal provisions

29

Personal Tax Raining Deductions

It is proposed to allow following tax benefits

on investments made in Sukanya Samriddhi

Account Scheme, introduced in 2014:

- Investments made in the scheme will be

eligible for deduction u/s 80C of the Act

- Interest accrued on deposits made will be

exempt from tax

- Withdrawal from such account shall be

exempt from tax

The memorandum to Finance Bill / Notes to clauses specifies that

the said amendment is effective retrospectively from financial year

2014-15, the Finance Bill is however silent in this regard

30


The limit of deduction u/s 80 D for medical insurance premium has

been increased to INR 25,000 and for senior citizens to INR 30,000

Increase in limit to INR 25,000 for non senior citizens is mentioned

in the memorandum, however the Finance Bill inadvertently misses

the required amendment in this regard

Scope of section 80D has been widened to include medical

expenditure by or for very senior citizen (age exceeding 80 years).

The aggregate deduction would however not exceed INR 30,000

Annual ceiling for investment in annuity plan of LIC or any other

insurer for receiving pension from fund set up under a pension

scheme has been increased to INR 1,50,000 under section 80CCC

31


Under section 80CCD, restriction on deduction to INR 1,00,000 for

contribution in Notified Pension Scheme of Central Government is

proposed to be deleted

Further, an additional deduction up to INR 50,000 is proposed to be

provided to individual assessee for contribution to such scheme

32

PF payments Withholding tax

Under the existing provisions, in case of payments by Recognised

Provident Fund (RPF) to employees on account of pre-mature

withdrawal (i.e. before 5 years or transfer to new employer), tax is

to be deducted by computing year-wise amount of taxable income

In order to remove difficulties faced in calculation of tax, it has been

proposed to fix the rate of withholding tax @10% in case of pre-

mature withdrawal, if the amount exceeds INR 30,000. In the

absence of PAN, tax is to be deducted at Maximum Marginal Rate

This amendment is proposed to be effective from 01 June 2015

33

Foreign Tax Credit

To bring more clarity in availing credit of taxes paid outside India, it

is proposed that CBDT may make and notify rules containing the

procedure for granting credit of taxes paid by an Indian resident

outside India

This amendment will take effect from 01 June 2015

34

Tax Administration Revision of orders

Income tax provisions relating to revision

of order passed by assessing officer under

section 263 have been amended to include

situations in which such order shall be

deemed to be prejudicial to the interest of

revenue

This Amendment will take effect from 01 June 2015

These deeming provisions are extensively wide and provide

arbitrary powers to revenue authorities to revisit closed

assessments

Clarification is required on these provisions to prevent misuse

35

Tax Administration Reduced litigation

Presently, the assesse has the option of not filing an appeal against

an unfavorable order if the identical question of law in pending in

his own case at HC or SC level (subject to specified conditions).

Instead, the assessing officer will apply the ratio of HC or SC as

and when its finalized mutatis mutandis to the present case

However, no parallel provision is available to revenue which has

lead to multiplicity of litigation

To avoid multiplicity of litigation, similar provisions have been

proposed to be introduced for revenue wherein in such cases, after

the order of CIT(A), the revenue can move to ITAT informing about

pendency of the issue - To be effective from 01 June 2015

36

Black Money Proposals

In his speech, the FM also referred to a proposed new law on black

money

Incentivizing credit / debit card transactions, and disincentivizing

cash transactions

Concealment of income / assets w.r.t. foreign assets to be

prosecutable with R.I. upto 10 years. The same shall be non-

compoundable, and without an option to approach the Settlement

Commission

Penalty for concealment in such a case shall be levied @ 300% of

tax sought to be evaded

37

Black Money Proposals (Cont.)

Non-disclosure / inadequate disclosure of foreign assets in return of

income to be liable for rigorous imprisonment up to 7 years

Income w.r.t. any undisclosed foreign asset / income therefrom to

be taxable at the maximum marginal rate, without any exemptions /

deductions

Beneficial owner / beneficiary of foreign assets to be mandatorily

required to file return, even if there is no taxable income

Abettors of above offences to be liable for prosecution and penalty

Concealment in relation to a foreign asset to be made a predicate

offence under PMLA, 2002

This would attachment and confiscation of unaccounted assets held

abroad

38


Amendment also made to enable attachment and confiscation of

equivalent asset in India where foreign asset cannot be forfeited

FEMA to be amended to the effect that if any foreign exchange /

security / immovable property is held in contravention of FEMA,

then action may be taken for seizure and eventual confiscation of

assets of equivalent value situated in India

For curbing domestic black money, Benami Transactions

(Prohibition) Bill to be introduced to enable confiscation of benami

property and provide for prosecution

39

Acceptance / repayment of loan or

deposit for amount exceeding INR

20,000 is currently not allowed in cash

However, there was no specific

restriction relating to money received as

advance for transfer of immovable

property, and hence shelter was taken

by assesses to defeat the existing

provision, leading to generation of black

money

To curb generation of black money, the existing restriction on amount

exceeding INR 20,000 is also proposed to be applied to advance for

transfer of immovable property with effect from 01 June 2015


40

Indirect Tax

Proposals

41

GST- Way Forward

The Goods and Service Tax (GST) is one of the

biggest taxation reforms in India. The Honble

Finance Minister in his Budget speech show

cased the Union Governments commitment to

implement Goods and Service Tax laws

The draft provisions of GST law would be made

available shortly on the public domain after the

Constitutional Amendment Bill is passed by the

Upper House and the President of India

assenting the same

India is expected to move to the new tax regime

from 01 April 2016

42

Service Tax

43

Change of Rate

Effective rate of Service tax increased from 12.36% (inclusive of cess)

to 14%. Education Cess and Secondary and Higher Education Cess

to be subsumed in the revised rate

Alternative tax rate applicable in case of Air Travel Agent, Insurer of

Life Insurance Business, Forex Conversion Agency and Distributor or

Selling Agent of Lottery, also changed

The above provision shall come into effect from the date to be Notified

after the enactment of the Finance Bill, 2015

An enabling provision to levy Swachchh Bharat Cess @ 2% or less

on all or certain services introduced

44

Negative List

Following services are taken out from the negative list and are brought

under the service tax net:

Services provided by Government / local authority to a business entity

Access to amusement facility such as rides, bowling alleys,

amusement arcades, water 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 Rs 500

Carrying out any processes as job work for production or manufacture

of alcoholic liquor for human consumption

The above provisions will come into effect from the date to be notified

after the enactment of the Finance Bill, 2015

45

Exemptions Withdrawn

Exemption in respect of following services is withdrawn:

Services of construction, repair of civil structures, etc. when provided

to Government in respect of:

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 an educational,

clinical, or an art / cultural establishment

A residential complex predominantly meant for self-use or the use

of their employees or other specified persons

Construction, erection, commissioning or installation of original works

pertaining to an airport or port

46


Transportation of food stuff by rail / vessels / road will be limited to

transportation of food grains including rice and pulses, flours, milk

and salt

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

of music, dance or theater, will be limited only to such cases where

amount charged is upto Rs 1,00,000 for a performance (except

Brand ambassador)

Services provided by departmentally run public telephone,

guaranteed public telephone operating only local calls

Service by way of making telephone calls from free telephone at

airport and hospital where no bill is issued

47


Services provided by a mutual fund agent to a mutual fund or assets

management company

Services provided by distributor to a mutual fund or AMC

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

distributor of lottery

The above provisions will come into effect from the 01 April 2015

48

Exemptions

Exemption is extended to following services :

Ambulance services provided to patients

Services provided by Common Effluent Treatment Plant operator for

treatment of effluent

Services of pre-conditioning, pre-cooling, ripening, waxing, retail

packing, labeling of fruits and vegetables

Life insurance service provided by way of Varishtha Pension Bima

Yojna

Service provided by way of exhibition of movie by the exhibitor/

theatre owner to the distributor or association of persons consisting

of exhibitor as one of its member

49

Exemptions

Service provided by way of

admission to a museum, zoo,

national park, wild life sanctuary

and a tiger reserve

Transport of goods for export by

road from the factory/ place of

removal to a Land Customs

Station (LCS)


50

Abatement

A uniform abatement has been proposed for transport by rail, road

and vessel to bring parity in these sectors. Service Tax shall be

payable on 30% of the value of such services subject to condition of

non-availment of Cenvat Credit on inputs, capital goods and input

services

The abatement for executive (business/first class) air travel, wherein

the service element is higher, has been reduced from 60% to 40%

Abatement is being withdrawn on chit fund services


51

Changes in Service Tax Rules

Simplification of registration process. Registration shall now be

granted within two days

A provision for issuing digitally signed invoices is being added along

with an option of maintaining records in electronic form and their

authentication by means of digital signatures


52

Reverse Charge

Manpower supply and security services when provided by individual,

HUF, partnership firm to a body corporate are being brought to full

reverse charge. Presently, these are taxed under partial reverse

charge mechanism

Following services are brought under reverse charge mechanism (full

reverse charge):

Services provided by mutual fund agents and mutual fund

distributors

Services provided by agents of lottery distributor

Services provided by a person involving an aggregator (applicable

from 01.03.2015)


53

Penalty

Penalty provisions substituted to rationalize penalties as follows:

In cases not involving fraud / collusion / wilful mis-statement /

suppression of facts or contravention of any provision of the Act or

rules with the intent to evade payment of service tax:

In addition to the service tax determined, a penalty not

exceeding 10% of the service tax so determined shall be

payable

if service tax and interest payable thereon is paid within 30 days

of issue of show cause notice, no penalty shall be payable


of the date of communication of order, the amount of penalty

shall be equal to 25% of the penalty so imposed

54

Penalty

In cases involving fraud / collusion / wilful mis-statement of

suppression of facts or contravention of any provision of the Act or

rules with the intent to evade payment of service tax:

a penalty equal to the service tax shall be payable


of communication of show cause notice, the amount of penalty

payable shall be 15% of the service tax


of the date of communication of order of the Central Excise

Officer, the amount of penalty shall be equal to 25% of the

service tax so determined

The above provisions will come into effect from the date of

enactment of Finance Bill, 2015

55

Others

The value of reimbursable expenditure is now included as

consideration for services provided subject to certain exceptions

The option of advance ruling is now extended to all resident firms

as defined

Matters pertaining to rebate of export of services shall now lie with

Government after the adjudication of matters by Commissioner

(Appeals) i.e. review of orders by Central Government

Service definition amended to clarify inclusion of services

provided by chit foremen and agents of lottery tickets

56

Central Excise

57

Central Excise

Standard ad valorem rate of central excise duty increased from existing

12% to 12.5%

Rate of excise duty applicable to goods covered by the Medicinal and

Toilet Preparations Act, 1955 is also increased from 12% to 12.5% ad

valorem

Education Cess (2%) and Secondary and Higher Education Cess (1%)

leviable on excisable goods as a duty of excise is fully exempted

Other Basic Excise Duty rates (ad valorem as well as specific) with a few

exceptions are not being changed

58

Central Excise

Existing excise duty exemption on solar water heater and system replaced

by optional excise duty of Nil without CENVAT credit / 12.5% with CENVAT

credit

Excise duty of 2% without CENVAT credit / 12.5% with CENVAT credit

provided to tablet computer. Full exemption granted to parts & components

for use in manufacture of tablet computer

Excise duty on mobile handsets including cellular phone is changed from

1% without CENVAT credit/ 6% with CENVAT credit to 1% without

CENVAT credit/ 12.5% with CENVAT credit

59

Central Excise

Excise duty exempted on specified raw materials for use in manufacture of

pacemakers, subject to actual user condition

Goods manufactured domestically and supplied against International

Competitive Bidding exempted from excise duty subject to condition that

such goods when imported attract Nil Basic Customs Duty and Nil CVD

if imported goods are eligible for Nil Basic Customs Duty and Nil CVD

subject to certain conditions, then the said conditions shall also apply

mutatis mutandis to such goods when manufactured domestically and

supplied against International Competitive Bidding

The above provisions will come into effect from 1st day of March 2015

60

Change in Rates

Item/ Products Increase/

Decrease

Existing

Rate

New Rate

Peanut Butter NIL 2% without Credit

6% with Credit

Waters, including mineral waters and aerated

waters, containing added sugar or other sweetening

matter or flavoured1

12% 18%

Goods falling under Chapter sub-heading 2523 29 900

per tonne

1000

per tonne

Goods falling under tariff item 3923 21 00 and

Chapter sub-heading 3923 29

12%

18%

Leather footwear of Retail Sale Price exceeding

Rs.10002

12%

6%

1 Additional duty of excise levied @ 5% on the said products under seventh schedule to CETA exempted

2 Exemption not available to footwear of leather sole with textile upper

61

Change in Rates

Item/ Products Increase/

Decrease

Existing

Rate

New Rate

Pig iron SG grade (7201 1000) and ferro-silicon-

magnesium (7202 2900) for manufacture of cast

components of wind operated electricity generators

12%

NIL

Round copper wire and tine alloys for use in the

manufacture of PV ribbon (tinned copper

interconnect) for manufacture of solar PV cells and

modules

12% NIL

Wafers for use in the manufacture of IC modules for

smart cards

12% 6%#

Inputs for use in manufacture of LED driver and

MCPCB for LED lights and Fixtures & LED Lamps

12% 6%#

Chassis for ambulance

24% 12.5%#

# Subject to actual user condition

The above provisions will come into effect from 1st day of March 2015

62

Condensed milk put in unit containers are liable for MRP Valuation with an

abatement of 30%

Extracts, essences and concentrates of tea or mate including iced tea are

now notified for MRP Valuation with an abatement of 30%

Lemonade, Soya milk drinks, fruit pulp based drinks and beverages

containing milk are now liable for MRP Valuation with an abatement of 35%

The abatement percentage has been reduced from 35% to 25% for all kind

of footwear

MRP based assessment is being prescribed expressly for LED Lights or

fixtures including LED lamps with an abatement of 35%

MRP Valuation

63

Penalty

Penalty provisions substituted to rationalize the penalty as follows:

In cases not involving fraud or collusion or wilful mis-statement or

suppression of facts or contravention of any provision or rules with the

intent to evade payment of excise duty:

in addition to the duty determined, a penalty not exceeding 10% of the

duty so determined, or, Rs 5,000 whichever is higher shall be payable

if duty and interest payable thereon is paid either before issue of show

cause notice or within 30 days of issue of show cause notice, no

penalty shall be payable and all proceedings shall be deemed to be

concluded

if duty and interest payable thereon is paid within 30 days of the date of

communication of order, the amount of penalty shall be equal to 25% of

the penalty so imposed

64

In cases involving fraud or collusion or wilful mis-statement of suppression

of facts or contravention of any provision or rules with the intent to evade

payment of excise duty:

a penalty equal to the duty shall be payable. In respect of cases where

the details relating to such transactions are recorded in the specified

record, penalty payable shall be 50% of the duty so determined

if duty and interest payable thereon is paid within 30 days of

communication of show cause notice, the amount of penalty payable

shall be 15% of the duty

if duty and interest payable thereon is paid within 30 days of the date of

communication of order of the Central Excise Officer, the amount of

penalty shall be equal to 25% of the duty so determined

Above provisions will be effective from date of enactment of Finance Bill 2015

Penalty

65

Central Excise Rules

Manufacturer allowed to issue invoice authenticated by means of

a digital signature

Manufacturer allowed to maintain and preserve the daily stock

account in electronic form provided each page of the record

shall be authenticated by means of digital signatures

Registration to be granted within 2 days. Process simplified to

benefit manufacturers and dealers

66

Central Excise Rules

Rules amended to specifically allow:

goods to be dispatched directly to the job-worker on the

direction of the manufacturer or service provider, subject to the

condition that the invoice shall contain the specified particulars

goods to be sent directly to any person on the direction of the

registered dealer, subject to the condition that the invoice shall

contain the detail of the dealer as buyer and such person as

consignee

goods imported can be sent directly to buyer, provided the

invoice issued by importer mention that goods are sent directly

to buyer

The above provisions will come into effect from 01 March 2015

67

Cenvat Credit Rules

The period for taking Cenvat Credit is extended from six months

to one year from the date of invoice

Cenvat Credit of Service Tax paid under partial reverse charge

was available on making payment to the services provider. The

said provision has been amended to allow the credit after such

service tax is paid by the service recipient


68

Petrol & Diesel- Change in duty structure


Duty Rates applicable upto 28.02.2015 Duty Rates applicable with effect from 01.03.2015

CENVAT

Rs. / Ltr

SAED

Rs/ Ltr

AED

Rs/ Ltr

Edu

Cess

Total

Rs / Ltr

CENVAT

Rs. / Ltr

SAED

Rs. / Ltr

AED

Rs. / Ltr

Ed. Cess

Rs. / Ltr

Total

Rs. / Ltr

Unbranded Petrol

8.95 6 2 3% 17.46 5.46 6 6 NIL 17.46

Branded Petrol

10.10 6 2 3% 18.64 6.64 6 6 NIL 18.64

Unbranded Diesel

7.96 NIL 2 3% 10.26 4.26 NIL 6 NIL 10.26

Branded Diesel

14% + Rs

5/ltr or Rs

10.25/Ltr

whichever is

lower

NIL 2 3% 12.62 6.62 NIL 6 NIL 12.62

69

Others Changes

Excise Duty on cut tobacco is being increased from Rs.60 per kg to

Rs.70 per kg

With respect to Pan Masala, Gutkha and Chewing Tobacco, the

maximum speed of packing machines has been specified as a

relevant factor for determining the duty under Compounded Levy

Scheme

There has been a change in the mechanism for levy of duty on

cigarettes and other products

Clean Energy Cess on coal, ignite and peat increased from Rs.100

per tonne to Rs.300 per tonne

70

Customs

71

Exemption

CVD and SAD fully exempted on specified raw materials namely

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

In order to address the issue of Cenvat Credit accumulation of SAD

Exemption granted to all goods (except PCBs) required for use

in the manufacture of specified goods (IT Agreement products)

Exemption granted to inputs for use in the manufacture of LED

drivers and MCPCB for LED lights, fixtures and LED lamps


72

Exemption

Exemption from BCD is granted to following items:

Parts and components of Cash Dispenser and automatic bank note dispensers

Evacuated Tubes with three layers of solar selective coating for use in the

manufacture of solar water heater and system

High Density Polyethylene for manufacture of telecommunication grade optical

fibres or optical fibres cables

Digital Still Image Video Camera of specified configuration and Parts and

Components of these cameras

Organic LED TV panels

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

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

Parts, components and accessories for use in the manufacture of tablet computers

exempted from BCD, CVD and SAD


73

Rate Change

Items / products Existing Rate New Rate

Ulexite ore 2.5% NIL

Liquefied butanes 5% 2.5%

Sulphuric acid for the manufacture of fertilizer 7.5% 5%

Isoprene 5% 2.5%

Styrine, Ethylene Dichloride (EDC) and Vinly Chloride

Monomer (VCM)

2.5% 2%

Anthraquinone 7.5% 2.5%

Butyl Acrylate 7.5% 5%

Antimony Metal and Antinomy Waste & Scrap 5% 2.5%

Rate of BCD reduced in respect of following items:


74

Rate Change

Items/ products Existing

Rate

New

Rate

C-Block Compressor, Over Load Protector (OLP) &

Positive thermal co-efficient and Crank Shaft for

compressor, for use in the manufacture of Refrigerator

compressors

7.5% 5%

Specified Components of CNC lathe machines and

machining centers, namely Ball screws, linear Motion

Guides and CNC Systems

7.5% 2.5%

Zeolite, ceria zirconia compounds and cerium

compounds for use in the manufacture of wash coats,

which are further used in manufacture of catalytic

converters

7.5% 5%


75

Rate Change

Items/ products Existing

Rate

New

Rate

Water blocking tape, Ethylene-Propylene-non-

conjugated-Diene Rubber (EPDM) and Mica glass

tape for use in the manufacture of insulated wires and

cables

10% 7.5%

Metal parts for use in the manufacture of electrical

insulators subject to actual user condition

10% 7.5%

Certain specified inputs for use in the manufacture of

flexible medical video endoscopes

5% 2.5%

Artificial heart (left ventricular assist device) 5% NIL


76

Rate Change

Rate of duty increased in respect of following items:

BCD on Metallurgical coke (2701 12 00) is increased from 2.5% to 5%

Tariff rate on iron & steel and articles of iron or steel, falling under Chapters 72

and 73 of the Customs Tariff, increased from 10% to 15% - However, there is no

change in the effective rates of basic customs duty on these goods

Tariff rate on Commercial Vehicles increased from 10% to 40% and effective

rate from 10% to 20%. Customs duty on commercial vehicles in Completely

Knocked Down (CKD) kits and electrically operated vehicles including those in

CKD condition will continue to be at 10%

Additional Duty of Customs on imported Motor Spirit (Petrol) and High Speed

Diesel Oil (commonly known as Road Cess) is being reduced from Rs. 2 to Rs.

8 litre. However, effective rate of Additional Duty of Customs levied on imported

petrol and diesel is increased from Rs. 2 to Rs. 6 per litre


77

Others

Concessional BCD is extended to Active Energy Controller for

manufacture of renewable power system inverters subject to

conditions

SAD on Naphtha (2710) , Styrine, Ethylene Dichloride (EDC) and

Vinyl Chloride Monomer (VCM) for use in manufacture of excisable

goods reduced from 4% to 2%

SAD on melting scrap of iron or steel, scrap for the purpose of

melting, copper scrap, brass scrap and aluminium scrap reduced to

2%


78

Gaurav Singhal,

Chartered Accountant

Manish Khurana,


Malav Shah


Pawan Kumar Pahwa

Advocate

Anuj Mahajan,


tax heads up march 2015

Documents

wealth tax

income tax return

domestic tax law

important tax rates

erstwhile wealthtax

crore taxable income

ltcg exemption lower

particulars taxable